Competing deficit reduction plans

The House Proposal

The recently passed House Budget Resolution, authored by Budget Committee Chair Paul Ryan (R-WI), authorizes cuts of more than $6 trillion in government spending over the next 10 years, including $771 billion from the existing Medicaid program, largely by converting the federal share of the program to a block grant beginning in FY 2013. It also would repeal the coverage expansions included in the Patient Protection and Affordable Care Act (ACA), while at the same time, keeping the ACA cuts to health spending. The resolution would also restructure the Medicare program for future beneficiaries under age 55 to a premium support model rather than the traditional fee-for-service payment model.

The President’s Proposal

President Obama recently released a framework for reducing the federal deficit by $4 trillion over 12 years, including $480 billion in savings from Medicare and Medicaid. The framework builds on his initial FY 2012 budget request, which sought to reduce Medicaid funding by nearly $29 billion and to eliminate the $318 million Children's Hospital Graduate Medical Education program. A budget trigger would be established beginning in 2014 that could make across-the-board cuts to all programs, including Medicare and Medicaid, if budget targets are exceeded. Medicare reductions would also be made through expansion of the Independent Payment Advisory Board (IPAB), which includes fast-track procedures to ensure that the mandated level of reductions become law. While hospitals paid under the Medicare inpatient prospective payment system are not subject to the jurisdiction of IPAB until after 2019, it applies to critical access hospitals, other components of the health care system, and would impact all hospitals in the long-run.

In addition, the President’s proposal limits states' use of Medicaid provider taxes. President Obama has asked Vice President Biden to work with a bipartisan group of lawmakers from both the House and Senate to find agreement on a legislative framework for comprehensive deficit reduction.

The Gang of Six

We also expect the Senate’s so-called “Gang of Six” – Sens. Saxby Chambliss (R-GA), Tom Coburn (R-OK), Kent Conrad (D-ND), Mike Crapo (R-ID), Dick Durbin (D-IL), and Mark Warner (D-VA) – to soon release their bipartisan plan for FY 2012. Their proposal may form the basis of the budget resolution produced by Senate Budget Committee, of which Conrad is chair, and will likely contain aspects of the deficit reduction plan unveiled by the Simpson-Bowles Commission last December. All six members of this group served on the Simpson-Bowles Commission and voted for its recommendations.

04-20-2011 06:00 (EDT)