Healthcare Business News

Obama willing to deal on Medicare, sequester

By Jessica Zigmond
Posted: February 5, 2013 - 7:00 pm ET

The Obama administration on Tuesday signaled its willingness to make changes in Medicare and other entitlement programs as it urged Congress to delay automatic federal spending cuts scheduled for March 1.

In a White House briefing, President Barack Obama said the threat of automatic federal spending cuts through sequestration—which Congress delayed until early March in its New Year's Day deal to avert the fiscal cliff—has already begun to affect business decisions. The president reiterated his view that the ideal way to reduce the deficit is through a deal that includes both spending cuts and tax reform. And if Congress can't agree on a larger deal by March 1, Obama added, lawmakers should pass a smaller package of spending cuts and tax reforms that would also further delay the sequester for a few more months.

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“I've offered sensible reforms to Medicare and other entitlements, and my healthcare proposals achieve the same amount of savings by the beginning of the next decade as the reforms that have been proposed by the bipartisan Bowles-Simpson fiscal commission,” the president said.

The sequestration cuts include an across-the-board reduction in Medicare reimbursement of up to 2%.

During the fiscal cliff talks, the White House called for a permanent repeal of Medicare's sustainable growth rate formula for physician pay and about $400 billion in healthcare cuts. The president did not mention a specific policy on what those reforms would be, and his remarks reflect a tactical posture that shows the president will agree to entitlement cuts if his opponents will agree to more revenue, said Don Moran, president of the consulting firm The Moran Company and former executive associate director of budget and legislation at the Office of Management and Budget during the Reagan administration.

Obama's comments came on the same day the non-partisan Congressional Budget Office projected a federal budget deficit (PDF) of $845 billion in 2013, the first deficit in five years to fall below $1 trillion.

Meanwhile, the CBO projected Medicare's outlays will increase by 4%, or $21 billion, in 2013 and Medicaid spending will increase by about 6%, or about $15 billion, this year, according to the report. Sen. Orrin Hatch (R-Utah), ranking member on the influential Senate Finance Committee, noted these projections as he chastised the president's plan to delay the looming sequester.

“When it comes to our debt, we need to focus on structural entitlement reforms,” Hatch said in a statement. “Medicare and Medicaid are growing at an unsustainable rate--growing larger than the economies of Germany, France, the United Kingdom, Italy and Spain combined,” he said.

The new report from the CBO also projected that about 26 million people will be covered in the state health insurance exchanges by 2022, about 1 million more people than the CBO projected last August.

About 7 million people will lose employer-based coverage in the next decade, according to the report, compared with the 4 million people projected last August. That change is attributed to refined income projections that would allow more people to qualify for Medicaid and subsidies for coverage purchased in the exchanges.

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