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Obama's cuts largely in health-care spending

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President Obama wants the supercommittee to cut payments to drug companies, long-term care facilities and, eventually, beneficiaries, as part of his $3 trillion recommendation to reduce the federal deficit.

Mr. Obama’s proposal lays out his position on a key question — how the bipartisan committee charged with finding $1.5 trillion in savings will treat Medicare and Medicaid, which together comprise the largest slice of federal spending.

The president steered clear of recommending an increase in the Medicare eligibility age from 65 to 67, an idea likely to be opposed by many members of his own party. Instead, his plan finds its largest pool of savings in requiring drug providers to lower their rates for Medicare, as is currently done for Medicaid. Under the change, the federal government would receive the same brand name and generic rebates for low-income Medicare patients, saving $135 billion over 10 years.

Mr. Obama’s second-largest money-saving idea is to reduce Medicare payments to long-term care providers like nursing homes and inpatient rehabilitation facilities beginning in 2014, a proposal that would save $42 billion.

His plan also calls for raising some deductibles, co-payments and premiums on future beneficiaries and changes the way the federal government splits the cost of Medicaid with the states.

Altogether, it trims $248 billion in spending from Medicare and $73 billion from Medicaid for a total of $320 billion in cuts to health care spending over the next decade.

Some of the smaller-ticket items in his plan include:

• Reducing Medicare reimbursements from 70 percent to 25 percent for “bad debt” created by beneficiaries who fail to pay deductibles or co-payments. Savings: $20 billion.

• Increasing income-related premiums for Medicare Part B and Part D, beginning in 2017. Savings: $20 billion.

• Reducing extra Medicare payments to rural providers. Savings: $6 billion.

• Reducing Medicare waste and fraud. Savings: $5 billion.

• Raising the deductible for Medicare Part B by $25 in 2017, 2019 and 2021. Savings: $1 billion.

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