President Obama is asking Congress to enact a budget that would cut more than $360 billion from Medicare, Medicaid, and other federal health programs over the next decade.

The president’s fiscal year 2013 budget proposal seeks to shrink the growth in federal spending in the Medicare and Medicaid programs, in part by reducing payments to providers to cover patients’ unpaid copayments and deductibles, by requiring drug manufacturers to provide the same drug rebates for Medicare Part D as they do for Medicaid, and by reducing payments to inpatient rehabilitation facilities for conditions that can be treated in skilled nursing facilities. The proposal also seeks to cut payments for certain advanced imaging modalities.

Official White House Photo by Pete Souza President Obama met with Congressional leaders at the White House back in July to try to hammer out a deficit reduction plan.

Through a package of reductions in provider payments, the Health and Human Services department estimates that the federal government would save more than $5 billion in fiscal year 2013 and about $267 billion by 2022, according to budget documents.

"Our budget helps reduce the deficit by $366 billion over 10 years, almost all of which comes from reforms to Medicare and Medicaid," HHS Deputy Secretary Bill Corr said during a news conference. "These are significant, but they are carefully crafted to protect beneficiaries."

The 2013 budget proposal includes many of the same health care policies President Obama presented to Congress last September as part of his deficit reduction plan. That plan called for $320 billion in cuts to federal health programs. This time around, the proposed savings projections are higher in part because the budget forecast has shifted forward by 1 year and in part due to increased fraud prevention activities, Mr. Corr said.

Graduate medical education also would take a hit under the president’s budget proposal. Specifically, the proposal would cut about two-thirds of the current funding – from $265 million in 2011 to $88 million in 2013 – for the Children’s Hospitals Graduate Medical Education Payment Program, which supports residency training in freestanding children’s hospitals. While the reduced spending is expected to fund the same number of residencies as in previous years, the money would only be used to pay for the direct costs of residency training, such as salaries and benefits of supervising faculty members. The proposed budget would cut about $177 million from the program in indirect costs, which include subsidizing the reduced productivity of hospital staff involved in training residents.

The 2013 budget proposal also continues implementation of the Affordable Care Act. Officials at the Centers for Medicare and Medicaid Services are asking Congress for $574 million in new funds to begin certifying state-based insurance exchanges and begin work on the exchanges that will be run by the federal government. The proposal also would cut about $4 billion from the health law’s Prevention and Public Health Fund over 10 years, starting in 2014.

02/13/12