On September 19, 2011, President Obama announced proposals to create more than $320 billion in health savings over the next 10 years as part of the White House’s deficit reduction plan entitled “Living Within Our Means and Investing in the Future” (the President’s Plan).  The Office of Management and Budget also estimated that the health savings from these proposals would grow to over $1 trillion in the second decade.  These savings are in addition to savings that are anticipated to occur through implementation of the Affordable Care Act.

The following are several of the President’s proposals along with the estimated cumulative savings over a ten-year period:

  • Allowing Medicare to receive the same rebates and prices as Medicaid for brand name and generic prescription drugs ($135 billion);
  • Limiting the use of provider taxes by states to draw federal matching funds for Medicaid ($26.3 billion);
  • Streamlining current multiple Medicaid and Children’s Health Insurance Program federal payment formulas into a single blended rate starting in 2017 ($14.9 billion);
  • Reducing waste, fraud, abuse and improper payments in Medicare and Medicaid, including adjustments to payments for advanced imaging services, strengthening third-party liability in Medicaid, and making changes related to Medicaid prescription drug coverage ($6.4 billion);
  • Incentivizing “high-value services” for new Medicare beneficiaries starting in FY 2017, including changes to Part B and Medigap deductibles and premiums and additional cost-sharing for home health services ($3.9 billion);
  • Reducing special payments in the Medicare program for bad debts, rural providers, and implementing a 10 percent cut in Indirect Medical Education add-on payments ($35 billion);
  • Changing payments to encourage more efficient post-acute care, including adjusting payments for inpatient rehabilitation facilities, skilled nursing facilities, and other post-acute care providers ($42 billion); and
  • Increasing means-tested Medicare Parts B and D premiums for higher-income beneficiaries ($20 billion).

In addition, the President’s Plan proposes to make further adjustments to health system reforms enacted through the Affordable Care Act, including:

  • Reducing the health expenditure growth rate target of the Independent Payment Advisory Board to GDP plus 0.5 percent (from GDP plus 1 percent); and
  • Cutting the Prevention and Public Health Fund by $3.5 billion.

The President’s Plan contains numerous other proposed reforms related to the health care sector and federal health care programs.  The complete President’s Plan is available by clicking here.