Despite concerns that any additional cuts to Medicare would muddy the Democrats’ political opposition to Paul Ryan’s privatization scheme, President Obama pledged to reduce Medicare and Medicaid spending as part of his new jobs plan last night. The $447 billion American Jobs Act will include an expansion of a cut in payroll taxes and new investment on public infrastructure projects that will be “paid for” through spending cuts, tax reform, and “by making modest adjustments to health care programs like Medicare and Medicaid“:
OBAMA: Now, I realize there are some in my party who don’t think we should make any changes at all to Medicare and Medicaid, and I understand their concerns. But here’s the truth: Millions of Americans rely on Medicare in their retirement. And millions more will do so in the future. They pay for this benefit during their working years. They earn it. But with an aging population and rising health care costs, we are spending too fast to sustain the program. And if we don’t gradually reform the system while protecting current beneficiaries, it won’t be there when future retirees need it. We have to reform Medicare to strengthen it.
The administration will release the details of the plan next Monday, but during an appearance on Rachel Maddow after the speech, senior White House adviser Valarie Jarrett explained — in terms that sounded remarkably similar to the rhetoric used by Republicans — that the Medicare cuts would not affect existing retirees. “If you listen carefully to what the President said, and if you look at the bill — he intends to strengthen Medicare, he intends to protect existing beneficiaries,” she said, adding, “the President is fighting to make sure that Medicare is available for future generations and that we protect those who are depending on those right now.”
Obama has already proposed billions in Medicare and Medicaid savings in April 2011 — as part of a broader deficit reduction proposal — and they may offer a hint as to the kind of off-sets he would include in the American Jobs Act:
— Strengthening the Independent Payment Advisory Board (IPAB) created by the Affordable Care Act by setting a new target of Medicare growth per beneficiary growing with GDP per capita plus 0.5 percent. Allow the board to “promote value-based benefit designs that promote proven services like prevention without shifting costs to seniors” and give it “additional enforcement mechanisms such as an automatic sequester as a backstop for IPAB, Congress, and the Secretary of Health and Human Services.”
— Adopting a “blended” rate for Medicaid reimbursements by replacing the series of federal matching formulas with a single matching rate for all program spending.
— Investing in “patient safety” to prevent patients from getting injured or sicker while they are in the hospital and helping patients heal without complication. Achieving the initiative’s goal would mean more than 1.6 million patients will recover from illness without a preventable complication, reducing costs by up to $50 billion in Medicare and billions more in Medicaid over the next 10 years.
— Prescription drug reform: limiting payments for prescription drugs by leveraging Medicare’s purchasing power and possibly extending Medicaid drug rebates to dual eligibles in Part D.
— Reducing abuse and increasing accountability in Medicaid and Medicare: prevent states from using provider taxes to lower their own spending “while not providing additional health services through Medicaid; recover erroneous payments from Medicare Advantage; establish upper limits on Medicaid payments for durable medical equipment; and take other actions to improve program integrity.”
These are just some of the options — a detailed walk through the many commissions that have offered their own deficit reduction plans would reveal even more savings. One would only hope that Obama also stays away from raising the Medicare eligibility age and considers strong progressive alternatives like aggressively implementing and expanding payment reform pilots.