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SOTU speech breaks no new ground on healthcare

Wednesday February 13, 2013
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President Obama touched on Medicare spending in the context of deficit reduction during Tuesday night’s State of the Union address, but stopped short of making any sort of landmark proposals.

While admitting the biggest driver of long-term debt is "the cost of healthcare for an aging population," Obama said asking senior citizens and working families "to shoulder the entire burden of deficit reduction" would be unfair. His administration has expressed opposition to the idea of incrementally raising the eligibility age for Medicare from 65 to 67.

In the Republican response to Obama’s address, Sen. Marco Rubio of Florida indicated drastic steps may be necessary. One version of the GOP budget, as proposed by Rep. Paul Ryan, R-Wis., would change Medicare into a premium-support program starting in 10 years, with seniors receiving subsidies to cover the second-least expensive of a pool of available insurance policies. In addition, the eligibility age would rise to 67 by 2034 and Medicaid would become a block-grant program with states controlling policy. "Anyone who is in favor of leaving Medicare exactly the way it is right now is in favor of bankrupting it," Rubio said.

Obama indicated a willingness to ask the nation’s "wealthiest seniors" to pay more, presumably in the form of higher Medicare premiums. He also touted measures in the Affordable Care Act that are designed to rein in Medicare spending by potentially trimming provider payments.

Penalties for excessive readmissions have begun to kick in, and hospitals can either be penalized or receive a bonus based on their performances relative to certain care quality measures. Initiatives such as accountable care organizations and bundled payments are designed to test methods of altering the traditional system, in which payments are connected to volume of services received.

"We’ll bring down costs by changing the way our government pays for Medicare," Obama said. "Our medical bills shouldn’t be based on the number of tests ordered or days spent in the hospital. They should be based on the quality of care that our seniors receive."

Obama said he is willing to enact Medicare reforms that would cut the same amount from the deficit by the beginning of the next decade as the Simpson-Bowles bipartisan deficit reduction committee proposed.

Some of those proposals would save money for Medicare while transferring costs to hospitals. For example, one proposal would end bad debt collection for patients with no copays or deductibles. Another would reduce subsidies to teaching hospitals for residency training.

Obama is set to release his 2014 budget proposal in March. Before that, the White House and Republicans in Congress will negotiate in an effort to avoid cuts scheduled to take effect March 1 as part of the budget sequester. Those cuts, which affect defense spending and various domestic programs, include a 2% reduction in payments to Medicare providers.

But the negotiations may be a double-edged sword for providers, since any agreement to avoid the sequester may include Medicare payment cuts of a significant amount.


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