Progressive Group Recommends $385 Billion In Health Cuts

Photo by Horst Frank

Hospitals, drug companies, nursing homes and health plans would lose billions in Medicare funding over the next decade under a budget deficit cutting plan recommended by the Center for American Progress, a left-leaning think tank which has close ties to President Barack Obama and former President Bill Clinton.

But officials at the center say their 10-year plan to cut $385 billion in health costs, mostly from Medicare, would be a better deal than many health industry groups would face as a result of the automatic spending reductions that are set to begin in January. “If your baseline is falling off a cliff in sequestration, then this should be welcome news,” said Ezekiel Emanuel, senior fellow at the center who served as an adviser in the Obama administration during the drafting of the health law.

Most Medicare beneficiaries would be spared from losing benefits or paying higher costs under the plan.

Unlike the Republican budget blueprint promoted during the presidential election campaign, the center’s plan makes few cuts to Medicaid. “Medicaid is already lean,” said Neera Tanden,  president of the center and a former Clinton health official.

Among the biggest cuts listed in the report are:

  • Requiring drug manufacturers to extend drug rebates for low income Medicare beneficiaries. That would save $137 billion.
  • Lower Medicare fees to hospitals, $26 billion.
  • Lower Medicare payments to nursing homes and home health providers, $30 billion.
  • Extend the higher premiums for wealthy people on Medicare beyond 2019, $25 billion.
  • Reduce Medicare payments for graduate medical education, $28 billion.

The report also recommends that the federal government turn Medicare Advantage — which offers private health plans  for beneficiaries — into a competitive bidding arrangement so the government can get better rates. The report says that would save $10 billion.

CAP officials say their aim was not just to cut Medicare but to find ways to slow the rate of rising health costs. To that end, the group recommends moving away from the fee-for-service payment system and shifting to a system that rewards higher quality care.

“We believe this is serious entitlement reform,” Tanden said.