Obama health cuts to spark fights with states, GOP, industry groups

The healthcare savings in President Obama’s $3 trillion deficit-reduction plan include proposals that are sure to spark fights with states, Republicans and several healthcare industries.

The plan calls for strengthening a controversial piece of the healthcare reform law, and it includes proposals state governments have strongly opposed. It also would require seniors to pay more for certain Medicare benefits, according to a summary of the proposal, which would cut $248 billion in Medicare funding and $73 billion to Medicaid and other health programs.

The plan proposes strengthening the Independent Payment Advisory Board (IPAB) — a cost-cutting panel created by the healthcare reform law that Republicans have said will “ration” care. Obama’s proposal would allow the IPAB to start its work earlier.

The bipartisan Simpson-Bowles deficit commission, named after co-chairmen Erskine Bowles, a Democratic businessman, and former Sen. Alan Simpson (R-Wyo.), also suggested beefing up the IPAB, but Republicans have remained insistent that the panel will ultimately deny seniors the care they need.

The panel is legally prohibited from restricting benefits.

Obama’s proposal also includes a “blended” rate for federal Medicaid payments, which states strongly oppose. The federal government pays its share of Medicaid and the Children’s Health Insurance Program funding based on a series of complicated formulas. The plan would combine those rates into a single blended rate.

Although the move would save the federal government money, states say it would simply shift costs to them — and they’re not allowed to cut their eligibility levels, thanks to provisions of the stimulus and healthcare reform laws.

It also would limit states’ ability to tax Medicaid providers — a convoluted way to increase federal matching funds that state Medicaid directors say is essential.

Obama’s proposal includes some provisions to give states more flexibility; it would accelerate waivers from the healthcare law, as the president has previously proposed. The reform law allows for “innovation waivers” that let states take their own approach as long as they can prove that they’ll cover the same number of people. Those waivers are slated for 2017, but Obama’s plan would move them up to 2014.

It also would let states use a “benchmark” plan design for some Medicaid recipients

The bulk of the Medicare savings, as promised, come from cuts to doctors and other healthcare providers. Obama’s proposal would extend Medicaid drug rebates into Medicare — a policy the drug industry strongly opposes. A summary of the proposal says the increased rebates would save the government $135 billion over 10 years.

But the proposal also would raise costs for some seniors, charging wealthy seniors higher premiums for Medicare drug benefits, raising the deductible for Medicare Part B and instituting cost-sharing for home healthcare services.