Specifically, Obama's vaguely worded framework aims to save $4 trillion over 12 years, which includes $480 billion in reduced healthcare spending. But his plan omits specific descriptions of how he would arrive at those savings.
Ryan's more detailed 73-page plan—which the House passed April 15 with no Democrats supporting it—would cut $6 trillion in federal spending over 10 years while lowering the debt by $4.4 trillion. Those reductions include $1.4 trillion from eliminating the spending for the Patient Protection and Affordable Care Act, $771 billion through changing Medicaid to state block grants and $30 billion by moving future Medicare beneficiaries to a “premium support model.”
The two proposals “start to illustrate that there's serious discussion about deficit reduction and having entitlement reform as part of that,” Richard Umbdenstock, president and CEO of the American Hospital Association, said in an interview. “People were questioning whether that would be the case leading up to the 2012 elections. There will certainly be a debate. Who knows whether or not something will come of it.”
The early debate over the president's plan among providers has focused on his proposal to expand the authority of the controversial Independent Payment Advisory Board created by the 2010 healthcare law to begin recommending Medicare cuts when healthcare spending growth exceeds general inflation measures, starting in 2014. Obama's debt proposal would change IPAB starting in 2018 to have it mandate Medicare cuts whenever the program's growth is a mere 0.5% more than the growth of gross domestic product, instead of the existing cutoff of 1% over GDP.
“I'm not one in favor of outsourcing Congress' responsibility,” Umbdenstock said.
Instead of supporting an expansion in the power of IPAB, the AHA and other provider groups have rallied around various legislative proposals that members of Congress have introduced to scrap the 15-member panel.
Additionally, providers have raised concerns about Obama's proposal for a new debt “fail-safe” that would trigger across-the-board spending reductions after 2013 if the ratio of debt-to-GDP is projected not to at least stabilize by the end of the decade. The fail-safe explicitly excludes Medicare but appears to include Medicaid. White House officials were generally vague about this provision and many others in the president's framework, with one senior administration official telling reporters earlier last week that “we're putting together a framework and not trying to lock down every detail.”
Cameron Krier, senior director of policy at the Texas Hospital Association, said any across-the-board cuts to Medicaid could have major impacts on safety net hospitals. Those facilities are trapped between federal debt reduction plans focused on healthcare cuts and the ongoing efforts of states to trim recession-related budget gaps that have opened up as tax revenue has shrunk. “We have the perfect storm of a huge state deficit, as well,” Krier said about the $27 billion budget shortfall in Texas.
Obama's plan also would restrict the states' use of so-called provider taxes, which most states use to increase the amount of Medicaid spending the federal government must match, and then distribute the proceeds to providers. Although the president's debt commission derided such provider taxes as a “gimmick,” many Medicaid providers counter that they are critical to financing those programs.
“Given that Medi-Cal pays hospitals significantly less than the cost of providing care, this supplemental funding has been vital to many of our state's safety net hospitals,” C. Duane Dauner, president and CEO of the California Hospital Association, said in a written statement about the provider tax funding.
And yet another provision in the president's plan could have a big impact on Medicaid providers: a uniform federal contribution rate for Medicaid and the Children's Health Insurance Program, replacing rates that vary by state.
That change, which would help cut Medicaid spending by over $100 billion over 10 years, could significantly reduce federal funds flowing to states with high matching rates.
The concerns with Obama's plan echo ones providers have raised about the very different approaches the Ryan plan would take to achieve significantly more healthcare savings. With the president setting the goal of reaching a final agreement with congressional leaders on a long-term debt agreement by the end of June, elements of the two leading and dueling approaches are expected to dominate budget discussions for weeks.