“It's the president reiterating his commitment to $4.3 trillion in deficit reduction, supported by the $400 billion in healthcare savings and the increasing likelihood that we will have a grand bargain that substantially cuts Medicare,” said Eric Zimmerman, a partner with the law firm McDermott Will & Emery in Washington. “$400 billion right now, because of this proposal, is the starting point.”
Much of the Medicare savings in the near and long term would come from an earlier proposal that would allow all Medicare beneficiaries to benefit from the same rebates that Medicaid gets for brand name and generic drugs. Responding to the White House estimate, this could save the Medicare program $3.1 billion in 2014 and $123 billion over 10 years, an analysis by the trade group Pharmaceutical Research and Manufacturers of America noted that Part D rebates could harm patients by leading to more-expensive beneficiary premiums and copayments as well as more restrictive access to medicines.
The general consensus among healthcare providers and analysts last week was that although general acute-care providers face cuts in the president's most recent budget proposal (see chart), post-acute-care providers, clinical laboratories and home health agencies took the harder hit. “If you look at who has been cut over the last four to five years, this budget goes to those who have not paid at the office lately,” said Don Moran, founder and president of the Moran Co., a healthcare consulting firm.
For instance, the budget would introduce a home health copayment for new beneficiaries in 2017 that could save about $730 million over 10 years.
Val Halamandaris, president of the National Association for Home Care & Hospice, said in a statement that proposals to reduce the deficit should not include a “sick tax on the nation's poorest and sickest Americans.” He also said the budget's proposal to cut inflation updates for all post-acute providers every year for 10 years would come on top of already enacted Medicare cuts to home health that total $77 billion over 10 years.
Clinical laboratories, meanwhile, would see a 1.75% cut in payments every year for 10 years that the administration estimates would save $9.46 billion between 2014 and 2023. The Patient Protection and Affordable Care Act included that percentage cut for five years, and this new proposal would add another 10, according to Julie Scott Allen, government relations director at Drinker, Biddle & Reath.
Clinical labs made up 1.6% of total Medicare spending in 2011. Meanwhile, this segment has faced a 20% reduction over five years in the Affordable Care Act, a 2% cut in 2012 to pay for changes in the physician payment formula, and another 2% this year through sequestration while most operate at profit margins between 0% and 3%. Consequently, Allen explained, some of these operators have stopped working with nursing homes (where they often send phlebotomists to test on-site), laid off workers, or considered selling their business.
Similarly, inpatient rehabilitation facilities take up less than 2% of Medicare's overall budget, said Justin Hunter, senior vice president of public policy, legislation and regulations at rehabilitation provider HealthSouth Corp. That segment stands to lose billions through a proposal to equalize payments between skilled-nursing facilities and inpatient rehabilitation facilities and another that would encourage more appropriate use of inpatient rehabilitation facilities. If either proposal is made into law, Hunter said, it would force patients who need services that only rehab hospitals can provide into nursing homes.
Now that the White House, Senate and House have released their respective budgets, it's unclear exactly how the lawmakers will reach an agreement. In a joint statement last week, House Budget Committee Chairman Paul Ryan (R-Wis.) and Senate Budget Committee Chairman Patty Murray (D-Wash.) indicated their interest in working through a conference committee to resolve the differences. Obama's budget is significant in that discussion because it outlines what the administration will agree to in any final deal.
“On balance, it's a constructive contribution to the debate,” said Moran, a former executive associate director of the Office of Management and Budget during the Reagan administration. “It's not going to be what we wind up with, but it raises a lot of good points and may kick things into motion.”
Follow Jessica Zigmond on Twitter: @MHjzigmond