Obama Administration Releases Deficit-Reduction Recommendations

The Obama Administration released its recommendations this week to the Joint Select Committee on Deficit Reduction, also known as the supercommittee, to cut the deficit by approximately $3 trillion through a mix of revenue increases and spending cuts. The recommendations contain changes to Medicare benefits, but the president made a specific commitment to veto any package that did not contain meaningful revenues, such as elimination of tax breaks for corporations and for those with higher incomes.

The plan saves an estimated $224 billion from Medicare. The majority of proposals that affect Medicare generate savings through altering payments to Medicare providers and requiring drug companies to provide drugs at lower costs to the Medicare program. One proposal, modeled after the Medicaid program, would require drug manufacturers to provide rebates for drugs used by Medicare beneficiaries who qualify for the low-income subsidy program (LIS). According to the plan, enacting these Medicaid-style rebates would achieve $135 billion in savings.

However, some components of the plan are troublesome. About $24 billion in savings are the result of policies that would require people with Medicare, half of whom have incomes below $22,000 per year, to pay more out of pocket for coverage and care, which would not affect current beneficiaries but would affect new beneficiaries beginning in 2017. For example, the plan recommends a Part B premium surcharge of 15 percent of the average Medigap premium, for those with Medicare who purchase Medigap plans that offer comprehensive coverage of cost-sharing. In addition, the plan increases the Part B deductible in $25 dollar increments beginning in 2017, again in 2019, and lastly in 2021. Furthermore, while there is currently no cost-sharing for home health care, the plan proposes a $100 copay per episode of home care that is not preceded by a hospitalization. Lastly, the plan would further means-test Medicare Part B and Part D by increasing the premiums higher-income people with Medicare pay.

Read “The President’s Plan for Economic Growth and Deficit Reduction.” (For health savings, see pages 35 to 43.)

Read Medicare Rights Center President Joe Baker’s statement on President Obama’s deficit-reduction plan.