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Deficit Panel Offers Partial Answer on Health Care Deficit Panel Offers Partial Answer on Health Care

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Deficit Panel Offers Partial Answer on Health Care

Advocacy groups concerned over recommendations on curbing rising costs.

Nothing matters more to cutting the federal budget deficit than the need to find a way to tame runaway health care costs. So ever since President Obama's deficit commission began work in February, representatives from the $2.5 trillion-a-year health care industry have watched closely to see where savings would be found outside of what was negotiated during the health care reform debates.

The commission's final report, released on Wednesday, answers some of those questions--while raising many more concerns from advocacy, provider, and consumer groups worried about potentially billions of dollars in cuts.


The bipartisan panel singled out two big-ticket issues on the health care side of the ledger, offering solutions on what has been a perennial thorn in the side of lawmakers, physicians, and patients, and on another some fear will quickly become one.

The report identified a path to deeply overhaul the way that Medicare pays physicians, in part by first holding off future cuts, then by freezing the current pay schedule, before finally reducing reimbursement by 1 percent. Ultimately, the commission wants the Centers for Medicare and Medicaid Services to refigure how—and how much—physicians should be paid.

The commission also proposed reshaping or fully repealing a new long-term care insurance program that was included in the new health care law but that critics charge is based on fuzzy math.


The voluntary Community Living Assistance Services and Supports Act, or CLASS, requires beneficiaries to pay modest premiums in exchange for a wide swath of often-expensive benefits. Many see the program as ill designed and fear it will become reliant on heavy federal assistance.

Taken together, scrapping the Sustainable Growth Rate—the current equation used to determine physician payment—and the CLASS act is costly, roughly $343 billion over a 10-year window that would need to be offset.

And that’s where it gets tricky. The panel sees nearly $400 billion in Medicare and Medicaid spending, on everything from provider payments, fraud prevention to medical-malpractice reform. Some are new ideas; others are rehashed from those of lawmakers, policy shops, and think tanks.

One recommendation, meant to garner around $110 billion, would combine how much seniors pay for both hospital and physician visits. Currently, Medicare treats the two differently, and seniors pay out two separate premiums: over $1,000 for hospital visits and $135 for outpatient.


The proposal would offer a single, combined annual deductible of $550 for the two combined, along with a 20 percent coinsurance on out-of-pocket spending. That move would be coupled with restrictions on first-dollar coverage in so-called Medigap plans. Under the arrangement, Medigap plans would be prohibited from covering the first $500 of a senor's cost-sharing responsibility.

“If you’re saving that money, that means that seniors are paying the amount out of pocket,” said Maria Freese, director of government relations and policy at the National Committee to Preserve Social Security and Medicare. “It’s a backdoor way of increasing their costs.”

Other recommendations will almost certainly be seen as hostile to the actual providers of care. A measure that would eliminate provider carve-outs from the soon-to-be-formed Independent Payment Advisory Board would hit hospitals the hardest, which gained an exemption from the group’s decisions for several years. And teaching hospitals have fought against another recommendation, which would cut some federal dollars used to offset the costs for residents who receive graduate medical education.

The panel also sets its sights on medicalliability reform, offering a design that would take other forms of compensation into account and, more dramatically, offer a statute of limitations, perhaps of one to three years, on malpractice suits.

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