President Obama proposed enough health care savings in his debt plan last week to delay Medicare’s looming insolvency by three years, but stopped short of the major reforms all sides say are needed to shore up the program for the long term — and mostly ignored the changes his own deficit commission suggested last year.
Instead, he proposed limits to reimbursements for drug companies and long-term-care providers as a way of sweating more savings out of the bureaucracy, while hinting at the outlines of a broader deal to cut benefits themselves if Republicans in exchange would embrace tax increases.
“What was surprising was the rhetoric he laid out,” said Igor Volskey, a health care specialist at the Center for American Progress. “Saying he’s not going to support any cuts without tax revenues. That’s a line in the sand, and that’s significant.”
But by not suggesting changes that could tackle the underlying drivers of increasing health care costs, Mr. Obama opened himself up to attacks that he was trying to placate his political base, which has rejected changing any benefits seniors now receive
“To just stick your head in the sand, ostrich-style, and say, ‘No, it’s fine,’ is not acceptable,” said Rep. James Lankford, Oklahoma Republican, a freshman on the House Budget Committee. “I think he’s trying to say, ‘Let’s make a big proposal,’ but the big proposal is just to find savings and cut down on reimbursements to providers.”
The president’s plan is his latest effort to propose a framework for near-term spending and longer-term deficit reduction. Overall, he called for $1.5 trillion in new tax increases over the next decade, to be coupled with about $580 billion in new changes to future spending.
Of the $580 billion, $248 billion would come from Medicare and an additional $73 billion from Medicaid.
The actuaries for the Centers for Medicare and Medicaid Services agreed it would add another three years onto the life of the Medicare Trust Fund, which currently will reach insolvency in 2024.
And he proposed saving $23.9 billion by extracting greater contributions from seniors. Higher-income beneficiaries would pay more in monthly premiums, and new enrollees would pay a $100 co-payment for home health services and higher Part B deductibles for outpatient services.
For his largest bundle of savings, Mr. Obama did borrow an idea from his fiscal commission, chaired by former Sen. Alan Simpson, Wyoming Republican, and Erskine Bowles, a White House chief of staff under President Clinton. As with Medicaid, drug companies would have to lower the rates the federal government pays for pharmaceuticals for low-income Medicare patients, saving $135 billion over 10 years.
He also drew from the Bowles-Simpson plan by suggesting changes to Medigap, a plan that supplements Medicare coverage. While the commission would have cut $38 billion by restricting coverage, Mr. Obama’s plan would save just $2.5 billion by adding a surcharge to some Medigap plans.
Still, the president did not adopt some of the biggest potential savings suggested by his deficit panel. He made no mention of revamping the 1997 formula that would force deep cuts in Medicare payments to doctors, which Congress has routinely ignored over the last decade. Nor did he repeal a new long-term-care insurance program.
However, the Obama administration last week began shutting down the office charged with carrying out the program, known as the CLASS Act, after the Senate Appropriations Committee zeroed out funding.
The president also steered clear of raising the Medicare eligibility age, a relief for Democrats after he had struck a tentative deal with House Speaker John A. Boehner during debt-ceiling negotiations in July that would have gradually raised the age from 65 to 67 over about two decades.