What changes in health programs will Obama propose in his deficit reduction plan?

President Obama is preparing to make some deficit cutting suggestions to the supercommittee. I’ve heard they’ll be announced on Monday. The Wall Street Journal is reporting on what some insiders think they’ll be. Here’s what’s expected on health care:

  • Cuts to Medicare providers
  • Increased premiums for wealthier Medicare beneficiaries

Apparently raising the Medicare eligibility age will not be among Obama’s ideas. However, just because he doesn’t propose it (if he indeed does not), doesn’t mean the supercommittee won’t consider it.

Now, this is not a lot to go on. But I’m going to run with this for now. Here goes:

Medicare providers are among those that would face triggered cuts if the supercommittee fails in reducing the deficit by $1.2 trillion. One question is how big Obama’s proposed cuts are relative to those triggered cuts. If the triggered cuts are smaller, he won’t get much support from provider groups for his plan. Conversely, if he keeps them below the triggered cuts, 2% of Medicare payments or $123 billion of ten years, providers and beneficiary advocates may jump at the offer.

It’s worth noting that Medicare providers are already facing cuts from the ACA. If Obama is looking for support from them in implementing the law, further cuts won’t win him any favors. However, keeping them as small as possible might be viewed as an appreciated gesture. The question is, who is blamed for cuts? This is, after all, a bipartisan climate of austerity.

It’s also worth noting that cutting providers by whacking rates is not the policy wonks’ favorite way to save money in Medicare, which we must do long-term. There’s no guarantee that the consequences of rate cuts will not harm beneficiaries, despite the political rhetoric. A more sensible approach (without massive changes to the program’s structure) would be to make Medicare a smarter purchaser by using competitive bidding and not paying for services that are wasteful or unnecessary. Yes, we do know what some of those are already, and more research will reveal more in time.

What about increased premiums for wealthier beneficiaries? First of all, premiums are already tied to income, so this is not a qualitatively new idea. To the extent higher premiums offset what would otherwise be lower payments to providers, the health care industry should be in favor. Naturally, people asked to pay more generally don’t like it. But I’m less certain of the politics on this one. What does AARP think? I don’t know. Do you? (Links appreciated.)

If Obama puts together an offer that saves more from Medicare than the trigger would–an offer consisting of premium increases that permit sub-2% provider cuts–that might be a tempting package for the supercommittee. What may be tempting is not just the scored savings, but the limitation of political damage. The bottom line on all this, I’m afraid, is that it is far less about making wise cuts and far more about not suffering the political repercussions of them and/or forcing the opposition to get tarred with whatever repercussions might come.

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