Debt Limit Negotiators Eyed $353B In Savings; FMAP, Cost-Sharing, Medigap Prime Targets

Editor’s Note:  The discussion of the potential impact on competitive bidding is found under the caption for Wheelchair Cuts.

From: Inside Health Policy

Medicare cuts that would impact nearly every sector of the health care industry, with the notable exception of proposals to extend Medicaid drug rebates to Medicare and decrease Medicaid provider taxes, were actively discussed before deficit reduction talks led by Vice President Joe Biden broke down, according to a chart prepared by GOP lawmakers for an internal White House meeting Monday (July 11). Democratic lawmakers circulated the chart Tuesday morning, touting it as a GOP proposal — a move that led to an outcry from House Majority Leader Eric Cantor (R-VA), who said it represented a “blueprint” of what was on the table before the talks ended, with some policies receiving bipartisan backing and others uncertain.

“The president asked me to come in and reflect where we thought where we were at the end of the Biden talks. So these were proposals by the Biden talks, and I presented them as such — that there was agreement on some areas, bipartisan, and others that were uncertain. But at least we had a blueprint identified of trillions of dollars of cuts,” Cantor said following a speech at a Chamber event Tuesday morning.

The spreadsheet of health policies includes 27 health care policies and estimated savings that would total from $334 billion to $353 billion over 10 years (see below for a full rundown). The largest chunk — $100 billion — would come from altering the federal Medicaid matching rate, although GOP leaders also propose gleaning up to $53 billion by reforming Medigap, up to $26 billion by phasing out hospital bad debt payments and $50 billion from “post-acute payments” and cost-sharing proposals for skilled nursing facilities and home health services. A majority of the proposals have been floated previously either by the president’s fiscal commission or other sources, and are already being heavily lobbied against.

At an internal GOP conference meeting Tuesday morning, Cantor also presented a slide show of the various debt reduction framework under discussion, including an apparent proposal by Senate Majority Leader Harry Reid (D-NV) that would include no changes Medicare/Medicaid, no taxes and would save less than $1 trillion via discretionary savings. The slides, obtained by Inside Health Policy, also discuss the Biden framework, and indicate that the large deal being proposed by the president would increase the Medicare eligibility age and reform the Social Security CPI, as well as $1 trillion in new revenue, “de-coupling Bush tax cuts,” and agreeing to address tax reform at a later date.

Cantor on Tuesday dodged a question on whether he supported raising the Medicare eligibility age, which has been floated by the Obama administration during the debt talks. Cantor said Obama has said he is willing to raise the eligibility age from 65 to 67 years old and has talked about his desire to adjust the Social Security inflator, which he said would reduce benefits in the out years for retirees. But specifics of a deal remain unknown and negotiators do not know the context in which Obama is proposing those ideas, Cantor said.

Cantor said that during the talks with the White House on Monday, Obama walked back from some of the cuts identified during the Biden negotiations, saying he could maybe live with $1.7 trillion in cuts but there was no ability to move beyond that without new taxes. “If he’s willing to do that, let’s see it. Because he keeps talking about it, but again it’s always a speech. We don’t have any indication where the details are,” Cantor said.

“I think it’s time for him to come out and say what he’s for,” he added.

A White House source did not respond to a query on the slides by press time.

Meanwhile, Reid said Tuesday that all cuts to Medicaid and Medicare are off the table unless they are part of the “grand bargain” that the president wants. “I’m only willing to take a look at Medicare and Medicaid if there is a grand bargain,” Reid said, referring to the $4 trillion figure that President Obama and Speaker John Boehner (R-OH) discussed before it hit a wall. “I will not touch Medicare and Medicaid for some simple little deal where we get nothing that’s beneficial to the country. Medicare and Medicaid should not be tampered with unless there’s a grand bargain.”

Sen. Chuck Schumer (D-NY) also on the Senate Floor Tuesday described the list of cuts as “very troubling” and not balanced or moral, to which Cantor’s office shot back that the cuts were identified and discussed during by the talk’s bipartisan participants. Schumer spokesman Brian Fallon said, “If Leader Cantor wants to disown the $250 billion in cuts to Medicare he outlined at the White House yesterday, that’s fine by us.”

The spreadsheet of health policies considered by the Biden group includes 27 health care policies, the largest chunk — $100 billion — would come from altering the federal Medicaid matching rate, although GOP leaders also propose gleaning up to $53 billion by reforming Medigap, up to $26 billion by phasing out hospital bad debt payments and $50 billion from “post-acute payments” and cost-sharing proposals for skilled nursing facilities and home health services.

A majority of the proposals are already being heavily lobbied against.

Medigap cuts. Insurers, for example, recently came out against banning Medigap first dollar coverage, which is being floated along with an alternate proposal that would establish a $530 supplemental premium for consumers who choose plans with first dollar coverage. Medicare advocates also oppose that idea.

FMAP. Long-term care providers are also aggressively lobbying against reforming the Medicaid payment structure, mainly focusing their current efforts arguing against the establishment of a “blended rate” for FMAP to states because it has the support of the administration, stakeholders say.

Hospital cuts. Hospitals have already taken to the airwaves and other venues to lobby against proposals that would impact payments. The GOP leadership is looking at a total of between $46 billion and $58 billion in cuts to hospitals. Policies include saving $14 billion to $26 billion by phasing out or eliminating bad debt payments, $14 billion by reducing direct and indirect graduate medical education Medicare payments to teaching hospitals, and $14 billion by “reforming rural hospital programs.” An additional $4 billion would be saved by rebasing disproportional share hospital payments.

Home health cuts. The home health industry has also tried to head off potential cuts by proposing an alternative to the idea of implementing a $150 co-pay for each home health episode. Industry says co-pays would be the equivalent of a “sick tax” on home health users and instead suggested that Congress go after home health companies in the five highest cost areas. According to the breakdown of policies, lawmakers and the administration discussed both savings from “co-pays” and payment reductions.

Means testing. Negotiations also discussed saving $38 billion by means-testing Medicare premiums by freezing brackets after 2019 and increasing current cost-sharing by 10 percent. Sens. Joe Lieberman (I-CT) and Tom Coburn (R-OK) had proposed increased means testing in a Medicare reform package discussed last month.

FEHB. Also on the table, according to the spreadsheet is a proposal to reform the Federal Employee Health Benefit Program by changing the subsidy from “first dollar coverage to Part B premium.” This would save $11 billion over 10 years.

Lab cuts. Negotiators suggested gleaning from $8.5 billion to $16 billion from the lab industry, and have discussed methods of achieving those savings including applying a $1 co-pay, the document says.

Imaging cuts. Imaging would get cut by nearly $2 billion, by requiring prior authorization for high-cost imaging services ($1.1 billion) and changing the utilization factor for advanced imaging payments ($800 million).

Wheelchair cuts. The Biden group also apparently discussed a policy that would save $200 million by applying a prepayment review for power wheelchairs. Last week, Government Accountability Office (GAO) found that up to 61 percent of Medicare-funded power wheelchairs were medically unnecessary or lacked documentation to establish medical necessity, which equaled $95 million in payments (see related story). Altering Medicaid durable medical equipment (DME) payments, which would save $5 billion — likely by capping payments at Medicare competitive bidding rates – and reforming pharmacy payments for diabetic test strips ($200 million) — are also on the menu.

Dual eligibles. The list also includes $5 billion in savings from coordinating care for dual eligibles, but does not present specific policies. Other smaller savings would come from electronic health record penalties ($1 billion), quality improvement organizations changes ($300 million), validating physician orders for high-cost/fraud risk services ($1.8 billion), reporting of items for Medicaid drug coverage ($100 million) and strengthening third-party liability ($1.4 billion).

Not on the list is a policy that would phase out or eliminate state’s ability to tax providers in order to get more federal funding under Medicaid. The president had previously supported this provision, which reports have said could save $44 billion over 10 years.

Most notably not on the list — nor on the slides – is the idea to extend the Medicaid rebates into the Medicare dual eligible or low-income subsidy program. House Democrats have been very vocal about supporting such a policy, which the drug industry has also suggested is being pushed by the White House. The drug industry is strongly opposed to the idea, saying that it would undermine the success of the Part D program.

Still, some sources have suggested that the GOP may be willing to support — or at least not oppose — the concept out of frustration that the drug industry backed health reform. Others sources told Inside Health Policy weeks ago that the policy was off the table. — Amy Lotven ( alotven@iwpnews.com This e-mail address is being protected from spambots. You need JavaScript enabled to view it ), Rachana Dixit ( rdixit@iwpnews.com This e-mail address is being protected from spambots. You need JavaScript enabled to view it ) and Sahil Kapur ( skapur@iwpnews.com This e-mail address is being protected from spambots. You need JavaScript enabled to view it )