Obama-backed Medicaid cuts would weaken healthcare law, liberals argue

President Obama needs to walk away from some of the Medicare and Medicaid cuts he endorsed in earlier budget-cutting talks, a group of liberal healthcare experts said Wednesday.

Experts at the Center for American Progress (CAP) said Medicaid cuts that Obama has previously endorsed would undermine the success of his signature healthcare law.

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Ezekiel Emanuel, who advised the White House budget office during the healthcare debate, said real entitlement reform — an effort to genuinely control costs, not "simply code for dismantling Medicare and Social Security" — is essential, both to the country's economic health and Obama's political future.

Emanuel is now a senior fellow at CAP, which released a plan Wednesday that it says would cut $385 billion in healthcare spending without affecting benefits.

The coverage expansion from Obama's signature healthcare law is assured, he said, but controlling costs will be key in the coming decades.

"I think this is the legacy for the president because if he can get healthcare costs under control, everything changes," Emanuel said. "This really is the big kahuna for his legacy going forward."

But Emanuel and other CAP experts said Obama's proposed Medicaid cuts would threaten that legacy.

"We think it would be a mistake if the debt talks or the fiscal cliff negotiations start off where they left off. That makes very little sense to us," CAP President Neera Tanden told reporters.

As the debate over the looming "fiscal cliff" of automatic spending cuts and tax increases intensifies, stakeholders are looking back to proposals that were on the table in previous budget-cutting rounds. Congressional Republicans have said they won't accept new revenues without entitlement reform, and Obama had backed significant healthcare cuts in earlier talks.

But Tanden and her colleagues said things have changed since Congress last looked for entitlement savings — notably the Supreme Court's decision upholding the Affordable Care Act but making its Medicaid expansion optional for the states.

Don Berwick, a CAP senior fellow who ran the Medicare and Medicaid agency for Obama, said cuts to Medicaid would send the wrong message to states just as the White House is trying to convince them to participate in the expansion.

The federal government will cover the entire cost of the Medicaid expansion for the first few years, and states can drop out as the federal share drops. But some states are nervous about signing up for the expansion only to have Congress roll back its contribution.

"The states are watching to see if they can count on the federal share of Medicaid," Berwick said. "To signal to states now that that could be vulnerable would be a mistake."

Obama had endorsed roughly $100 billion in Medicaid cuts, including a streamlined system for federal payments that would result in state governments taking on more of the funding burden.

Cutting that much from Medicaid "has always been ill-advised, but it is more ill-advised today than it was a year ago," Tanden said.

CAP said the debate over healthcare spending has been misguided so far, and they cast their new proposal Wednesday as a more reasonable alternative to plans advanced by congressional Republicans as well as Obama. The liberal think tank said the outline it released Wednesday would save $385 billion for federal healthcare programs, without touching benefits.

CAP's proposal mostly pieces together ideas that Democrats have suggested before, including lower-cost prescription drugs and setting Medicare payments through a competitive bidding process. It calls for reforming the healthcare delivery system so that doctors will have a financial incentive to offer better care, not simply more treatments.

CAP also endorsed a version of medical malpractice reform — traditionally a GOP priority.

"These are not easy proposals; they're definitely not easy proposals for the progressive side," Tanden said. "And I hope they're taken in the spirit of: this is the most we can do, not the least."