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Medicare Changes in Obama Budget May Mirror Those in December Proposal

By Emily Ethridge, CQ Roll Call

April 5, 2013 -- The health savings in President Barack Obama's fiscal 2014 budget request may largely be repeats from an earlier deficit-reduction proposal, including asking wealthier Medicare beneficiaries to pay more for services.

A senior administration official said the budget proposal incorporates an offer that Obama made to House Speaker John A. Boehner late last year. That plan included $400 billion in savings from health care programs, most of which came from cutting payments to drug companies and hospitals.

Additional details about changes to federal health programs beyond what was included in that offer were not available at the close of last week. The White House plans to release the full budget April 10.

Boehner, R-Ohio, never accepted Obama's proposal and rejected it again last week, noting that changes to the entitlement programs were dependent on Republicans accepting increased revenues.

"If the president believes these modest entitlement savings are needed to help shore up these programs, there's no reason they should be held hostage for more tax hikes," Boehner said in a statement. "That's no way to lead and move the country forward."

He said Obama "has moved in the wrong direction, routinely taking off the table entitlement reforms he's previously told me he could support."

Of the $400 billion in health program savings from Obama's proposal, $35 billion would come from charging wealthier Medicare beneficiaries higher premiums for services. Although Medicare already does this to an extent, the budget could ask some beneficiaries to pay even higher premiums, or increase the number of people paying the higher level.

Top Democrats including Senate Finance Chairman Max Baucus of Montana and Majority Whip Richard J. Durbin of Illinois have said they could support such moves. But beneficiary advocate groups oppose additional means testing, noting that wealthier beneficiaries already pay higher premiums for Medicare services and have paid higher payroll taxes that help fund Medicare.

"We already do a significant amount of income-relating in Medicare, so we don't need to do any more," said David Certner, legislative policy director at AARP.

Certner said the move would not help lower the cost of health care, but would instead shift more costs onto beneficiaries.

Max Richtman, president and CEO of the National Committee to Preserve Social Security and Medicare, also criticized the additional means testing provision.

"This budget is not the balanced plan promised to Americans before November's election and will leave millions of middle-class families in even worse shape than they are today," he said in a statement.

The Obama proposal also includes $140 billion from reducing Medicare payments to drug companies, and $30 billion from cutting hospital payments. Some of that would come from lowering reimbursements to compensate hospitals when Medicare patients don't pay their costs.

Efforts to reduce hospital readmissions for Medicare beneficiaries would account for $50 billion in savings in the proposal.

In addition, Obama's proposal called for $25 billion in savings from Medicaid, program integrity activities, payment reductions suggested by the Independent Payment Advisory Board, and a ban on financial agreements between drug companies that delay the entry of generic drugs to the marketplace. The Supreme Court is currently considering a challenge of those agreements, known as "pay-for-delay" deals.

Sources said the offer made in December also included a path to permanently repeal the formula that dictates cuts to Medicare payments to physicians. The current patch (PL 112-240) expires Dec. 31, after which physicians would see a 24 percent cut in their reimbursement rates.

The budget proposal does not seem to include other Medicare changes that have been previously discussed, such as raising the program's eligibility age. Modifying the program's benefit structure to include a combined deductible for inpatient hospital and physician services has also been suggested as common ground between the parties, but it looks like Obama is not yet putting it on the table.

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