President Obama Proposes $320 Billion Reduction in Health Spending as Part of Deficit Deal

by Rebecca Farley on September 22, 2011

President Obama on Monday released a deficit reduction proposal that would cut federal spending by a sweeping $3 trillion, well in excess of the $1.2-1.5 trillion mandated under the Budget Control Act. This total includes about $320 billion in cuts to Medicaid and Medicare, plus additional cuts to other health programs.

The President’s proposal calls for nearly $66 billion in Medicaid cuts over ten years. Of greatest importance to behavioral health providers, his plan would implement a single, “blended” matching rate for Medicaid and CHIP starting in 2017. The enactment of a blended federal would result in an overall federal spending reduction of $14.9 billion by consolidating the multitude of federal matching rates for various Medicaid and CHIP populations within each state to a single, uniform rate for each state (rates would still vary between states). The net impact would be a reduction of federal Medicaid money for states, leaving them to substitute state funds or find ways to reduce Medicaid budgets.

The proposal also calls for increased state flexibility in the management of Medicaid benefits, including flexibility to require “benchmark” benefit plan coverage for non-elderly, non-disabled adults with incomes over 133% of poverty.

In regards to Medicare, the proposal would make cuts of about $248 billion. These include cuts to certain rural health providers starting in 2013, adjusting Medicare drug rebate policies to mirror Medicaid’s policies starting in 2013, and initiating Medicare premium increases for the wealthiest seniors beginning in 2017.

The President’s proposal also included a $3.5 billion cut to the Affordable Care Act’s Prevention and Public Health Fund over 10 years starting in 2014. This fund currently supports primary care and behavioral health integration activities, along with Screening, Brief Intervention, and Referral to Treatment (SBIRT) and other important prevention activities.

With slightly less than two months remaining in the Joint Select Committee on Deficit Reduction’s negotiations to find at least $1.2 trillion in spending cuts, the President’s proposal may influence the supercommittee’s discussions and strategy. Despite his proposed Medicaid cuts, the President has publicly stated that he would veto any deficit reduction plan that cuts federal funds to Medicare and Medicaid without raising revenues. The supercommittee has not yet given any public indication of whether they will seek to cut Medicaid or Medicare in their negotiations. However, Medicaid is protected from the automatic spending cuts that will take place should the supercommittee fail to reach an agreement. Find out how you can speak up to protect Medicaid today!

Image via The News Chronicle


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