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Obama to outline $313 billion in Medicare, Medicaid spending cuts

The president says his latest plan, which includes potential cuts to hospitals and pharmaceutical firms, will help curb costs as he seeks to expand healthcare coverage to the uninsured in the U.S.

June 14, 2009|Noam N. Levey

WASHINGTON — Under pressure to pay for his ambitious reshaping of the nation's healthcare system, President Obama on Saturday outlined $313 billion in Medicare and Medicaid spending cuts over the next decade to help cover the cost of expanding coverage to tens of millions of America's uninsured.

The proposal comes on top of more than $634 billion in new revenue Obama suggested reserving for healthcare in his February budget plan.

The president, who increasingly is focusing on his healthcare agenda as Congress struggles to craft legislation, said his latest plan would help control the country's skyrocketing healthcare tab.

"I know some question whether we can afford to act this year," Obama said in announcing the proposal in his weekly radio address. "But the unmistakable truth is that it would be irresponsible to not act. We can't keep shifting a growing burden to future generations."

Yet the proposal -- which includes potential cuts to hospitals, pharmaceutical companies and other providers -- also underscores the political delicacy of the administration's search for money for a massive healthcare overhaul that could cost more than $1.2 trillion over the next decade.

Among the proposed policy changes outlined by the president are:

* Reductions in payments to providers to reflect increased efficiencies in the system, which the White House estimates could save $110 billion over the next decade.

* Cuts in federal subsidies to hospitals that treat large populations of uninsured patients, estimated to save $106 billion in the next decade.

* Cuts in how much the federal government pays pharmaceutical companies to provide prescription drugs to seniors and others, estimated to save $75 billion over the next decade.

The president described the proposals as "common sense changes" that could make the system more efficient.

In briefing reporters, Peter R. Orszag, Obama's budget director and a leading architect of the president's healthcare policy, downplayed the potential lost revenue for healthcare providers, pointing to the millions of additional people who would get insurance under the plans being advanced by congressional Democrats.

"This money is dedicated to financing, in a fiscally responsible way, expanded coverage," Orszag said. "That expanded coverage will generate benefits for some of those industry groups, including for hospitals."

Orszag said the spending cuts also could extend the solvency of the primary Medicare trust fund by seven years to 2024.

But the effect of such changes on the healthcare industry remains unclear.

The nonpartisan Congressional Budget Office last year postulated that Medicare cuts could encourage hospitals and other providers to become more efficient.

But the office also concluded that the cuts could prompt some providers to lower the quality of the care they deliver.

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noam.levey@latimes.com

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