White House finds $313 billion more in savings—mostly from Medicare

The Obama administration said it has identified an additional $313 billion in savings, primarily from Medicare, which will translate into lower federal payments to hospitals.

The lion’s share of the cuts will come from measures that would pay hospitals less as they become more efficient, reductions in federal subsidies that they receive for treating uninsured patients and better prescription drug pricing.

In a conference call with reporters, White House budget chief Peter Orszag detailed the savings: $110 billion by incorporating productivity adjustments into the way Medicare pays providers; $106 billion from disproportionate-share hospital payments; and $75 billion by better Part D pricing. All numbers are projected over a 10-year window.

According to an advance transcript of President Barack Obama’s June 13 weekly address, “These savings will come from commonsense changes.

“For example—if more Americans are insured, we can cut payments that help hospitals treat patients without health insurance. If the drugmakers pay their fair share, we can cut government spending on prescription drugs. And if doctors have incentives to provide the best care instead of more care, we can help Americans avoid the unnecessary hospital stays, treatments and tests that drive up costs.”

The $313 billion in projected savings is on top of the $635 billion the administration has already carved out as part of a “down payment” to pay for healthcare reform this year, Orszag said, adding that the combined dollar amount “is in the ballpark” of what Congress expects to pay for legislation.

“I think the provider groups have acknowledged in the discussions that they’ve had with the president that efficiencies are possible,” Orszag said.

Orszag said that the proposals would save Medicare beneficiaries some $43 billion in Part B premiums.

Additional savings would also come from implementing payment adjustments recommended by the Medicare Payment Advisory Commission, including those for skilled-nursing facilities, inpatient-rehabilitation facilities and long-term acute-care facilities. In its most recent report, MedPAC recommended freezing payments for SNFs and IRFs, and would give long-term acute-care facilities an increase of 1.6% next year.

Measures to cut back fraud and abuse in Medicare and Medicaid and lower physician payment rates for imaging services are also part of the plan.

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