Payroll tax deal would take first real bite from Obama's health law

The payroll tax cut package under discussion in Congress would take the first real bite out of President Obama's healthcare reform law, according to congressional aides and lobbyists. 

A tentative deal struck late Tuesday between House Ways and Means Committee Chairman Dave Camp (R-Mich.) and Senate Finance Committee Chairman Max Baucus (D-Mont.) would cut federal healthcare spending by $21.1 billion. 

The savings would be used to pay for a "doc fix" that would eliminate a scheduled 27.4 percent reduction in Medicare physician payment rates for 10 months. 

• A $5 billion cut to the health law's $15 billion prevention trust fund; 

• The elimination of $2.5 billion in enhanced Medicaid payments to Louisiana in the wake of Hurricane Katrina;

• A $4 billion reduction in so-called Medicaid Disproportionate Share Hospital (DSH) payments to hospitals that take care of people without insurance;

• A $6.8 billion reduction in federal payments to hospitals that collect "bad debt" from insolvent patients, down to 60 percent; and 

• Cuts to how much Medicare pays for clinical laboratory tests.

The savings would pay to keep physicians' payment rates flat through the end of the year. 

The tentative deal also offers a 10-month extension of other, more targeted Medicare payments (ambulance add-on payments, the physician work floor and outpatient hospital hold harmless payments) but eliminates two programs Senate Democrats wanted extended (mental health add-on payments and a provision of the health law that increased payments for bone density scans). Two other programs — Section 508 hospitals and special pathology payments — would be phased out.

The specific saving targets aren't set in stone, however. 

Sen. Tom Harkin (D-Iowa) is expected to object to the $5 billion cut to the prevention fund he championed, but might settle for a $4 billion cut, as called for in the president's budget released Monday. The health cuts might also be toned down, according to lobbyists, opening the way for other pay-fors such as Medicare cuts to home health payments and Graduate Medical Education payments to teaching hospitals.

"The devil's in the details," Rep. Xavier Becerra (D-Calif.), one of the 20 members on the bicameral conference committee, said Wednesday morning. "We're still a long ways from getting there."

And House Speaker John Boehner (R-Ohio) said lawmakers have "an agreement in principle" but cautioned that "there are a lot of details that have yet to be worked out."