Obama offers more cuts to pay for health reform

President Obama has doubled down on cuts to federal healthcare spending that the White House says would cover the lion’s share of the cost of healthcare reform. (VIDEO)

The newly announced cuts increase the size of his healthcare reform “down payment” to nearly $1 trillion over 10 years, or close to the expected price tag for the initiative, Obama said in his radio address Saturday.

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Obama has taken on a more direct role in shaping the healthcare reform legislation being written on Capitol Hill as well as trying to shape public opinion in his favor.

To that point, Obama positioned his latest proposals as a sign that he is committed to paying for healthcare reform, which he argues must be enacted this year.

“When it comes to the cost of health care, this much is clear: the status quo is unsustainable for families, businesses, and government,” he said. “This is the moment when we must reform healthcare.”

How to pay for the massive overhaul of the healthcare system Obama seeks stands as one of the greatest unanswered questions of the effort. By offering a concrete set of proposals Obama hopes to head off critics who would label the reform effort fiscally irresponsible.

“I have made a firm commitment that healthcare reform will not add to the federal deficit over the next decade,” Obama said. “Let me be clear: healthcare reform is not part of the problem when it comes to our fiscal future, it is a fundamental part of the solution.”

Obama’s new proposals would reduce Medicare and Medicaid spending on hospitals, pharmaceutical companies, nursing homes and virtually every type of medical provider by $313 billion.

In the budget the White House issued in February, Obama proposed $309 billion in Medicare and Medicaid cuts and $326 billion in tax increases to pay for healthcare reform.

Taken together, these Medicare and Medicaid cuts potentially set up clashes with key special interests the president has courted to support his version of healthcare reform.

But the White House maintains those same providers would be able to tap into the huge new market created by covering tens of millions of uninsured people. “That expanded coverage will generate benefit for some of those industry groups,” White House Office of Management and Budget Director Peter Orszag said during a conference call with reporters Friday.

The second set of cuts “will rein in unnecessary spending, and increase efficiency and the quality of care – savings that will ensure that we have nearly $950 billion set aside to offset the cost of healthcare reform over the next 10 years,” Obama said.

The new set of Medicare and Medicaid cuts underscores the White House’s recognitions that some of its favorite healthcare reforms – such as promoting preventive medicine and electronic medical records and studying the comparative effectiveness of medical treatments -- will ring up as costing money, not saving it, as Democrats hoped.

The president also sends a signal to Democratic lawmakers that he favors the cost-cutting and tax-increasing measures he has proposed over some of those under consideration on Capitol Hill, especially a new tax on workplace health insurance benefits.

All of the Medicare and Medicaid cuts, which Obama called “common-sense changes,” are sure to provoke the ire of medical providers – meaning none would be politically easy to enact.

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In the budget the White House issued in February, Obama proposed $309 billion in cuts to Medicare and Medicaid expenditures, more than half of which would come from slashing spending on private Medicare Advantage insurance plans.

In addition to these two sets of Medicare and Medicaid payment cuts, Obama also proposed a cap on itemized tax deductions that the White House says would generate $317.6 billion over 10 years.

After calling for $176.6 billion in cuts to the Medicare Advantage program in his budget, the White House now targets hospitals for a $106 billion cut on top of the tens of billions of hospital-related spending cuts included in Obama’s budget.

Currently, hospitals that treat high numbers of indigent patients get bonuses added to their Medicare payments to help cover unpaid bills. According to the White House, those bonuses will be less relevant when all Americans have access to health coverage.

In another of its new proposals, the White House wants to cull $110 billion from Medicare by reducing yearly payment increases to every medical provider except physicians by the half of the annual economic productivity factor calculated by the Labor Department. In 2008, the productivity factor was 1.2 percent.

The White House also proposes $22 billion in various cuts to spending on nursing homes, inpatient rehabilitation facilities, long-term-care hospitals and imaging services provided in doctors’ offices and by targeting waste, fraud and abuse in Medicare and Medicaid.

Pharmaceutical companies would be asked to cough up $75 billion in Medicare dollars under the White House plan, though Orszag would not say how. “The details of the $75 billion for prescription drugs will be forthcoming in the near future,” he said.