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Medicaid, Medicare Savings Unveiled
By Andrew Taylor, Seattle Post Intelligencer
October 20. 2005
An effort to wring $10 billion in savings from the Medicaid and Medicare programs as part of a GOP budget proposal would actually increase the deficit by $4 billion during the current budget year.
Higher Medicare payments to doctors and new Medicaid money for victims of Hurricane Katrina exceed the savings that would come from lower Medicaid drug reimbursements to pharmacies and other cost-cutting steps in the two federal health care programs.
Medicaid serves the poor and disabled, Medicare the elderly.
Doctors would be big winners under the bill. It would set aside $11 billion to forestall a 4.4 percent cut in Medicare payments to physicians that it is scheduled to take effect Jan. 1. Instead, they would get a 1 percent increase, a reprieve that would last only one year. But Congress is generally regarded as unlikely to let future payment cuts take effect, a stand that promises to cost upward of $150 billion over the next decade.
The plan released by the chairman of the Senate Finance Committee would become part of a $35 billion measure of spending curbs that is headed for debate in the full Senate next month.
Despite the short-term increase in the deficit, the proposal announced by Sen. Charles Grassley, R-Iowa, was a big step forward for Senate GOP leaders. For them, putting in place the budget blueprint that passed in April is a central piece of their fall agenda.
Grassley has been caught between the moderate and conservative wings of his committee over the plan.
Earlier this year, moderates such as Sen. Gordon Smith, R-Ore., rebelled over a $10 billion proposal to curb Medicaid costs. In recent days, conservatives protested a plan to provide Katrina victims with expanded Medicaid coverage.
Grassley predicted his committee would pass the measure on a party-line vote even though Democrats back many of its changes to the health care programs.
But Democrats are withholding support, unhappy that conservative Republicans have delayed a separate bill to provide more generous Medicaid benefits to Katrina victims.
Democrats also object to Republican budget plans to use fast-track budget rules to advance $70 billion in tax cuts but only cut entitlement spending by $35 billion.
Grassley's plan would trim Medicaid by $7.6 billion over five years but add $3.3 billion, including $1.9 billion for Medicaid coverage for hurricane victims. An additional $800 million would help parents with severely disabled children retain Medicaid coverage and still earn wages above the poverty line.
Much of the Medicaid savings, about $5 billion, would come from changing the payment formula for pharmacies to take into account rebates and discounts.
The bill would tighten Medicaid rules to limit the ability of people to shed assets to qualify for Medicaid nursing home coverage.
On Medicare, the measure would save $5.8 billion. More than $6 billion would come from providing lower payments to insurers whose pool of patients contains fewer very sick patients.
Despite White House opposition, the bill would save $5.4 billion by eliminating a fund created under the 2003 Medicare prescription drug bill to give regional insurance companies incentives to offer the new drug benefit.
Insurance companies are among those unhappy with the Grassley plan. They say Congress is changing the rules even before the drug benefit goes into effect.
"You have three weeks before people are starting to choose" their Medicare drug plans, said Karen Ignagni, president of America's Health Insurance Plans. "They're going back on the decisions they made less than two years ago."
In a contribution to the budget bill, the Senate Judiciary Committee approved a plan to issue 30,000 more visas to high-tech and other skilled foreign workers each year and increase fees for those visas to trim $300 million from the budget deficit over the next five years.
The Senate Commerce, Science and Transportation Committee approved a plan to take in $10 billion from auctioning television spectrum that will be freed by requiring broadcasters to switch from analog signals to digital. But net deficit savings would be about $5 billion because of several spending initiatives.
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