Today’s Managing Health Care Costs Indicator is $320 billion

Barack Obama’s plans to pay for the American Jobs Act would lead to a $4 trillion drop in the deficit –through a combination of decreased expenditures and increased revenue collection (a.k.a. taxes).   Because of the elimination of some current tax expenditures (also a.k.a. tax increases), many feel that this bill is dead on arrival in the Republican-controlled House of Representatives.  Still, this is likely to be the foundation on which an eventual compromised is reached – so we could think of this as the opening bid on the Democratic side.

The Obama proposal includes $320 billion in decreased health care costs, $248 billion from Medicare, and $72 billion from Medicaid.  In all instances, these cuts prevent growth – not cutting existing costs.  There are few winners in these proposals – since they save serious dollars.  My take on impact of these proposals on various stakeholders:

Home Care
Cut $135 billion in pharmaceutical expenses by making the dual-eligibles (Medicare and Medicaid) eligible for Medicaid-level pricing.
This returns prescriptions for these members to the Medicaid schedule – as they were before Medicare Part D was enacted in 2003

Cut $3.5 billion from a public health and disease prevention fund

Institute $100 copay for home care (more than 5 visits) beginning in 2017. (This will yield $400 million in savings)
Part of the goal of this is to reduce fraud by making Medicare beneficiaries more cognizant of home care bills

15% surcharge on “rich” Medigap plans, which will yield $2.5 billion in new federal revenue
This will raise revenue –but it will also discourage “first dollar” coverage, which many believes leads to overutilization. Providers will likely see increased price sensitivity

Raise Medicare premiums for those who are well off ($20 billion over a decade)

Change Medicaid state reimbursement formulas ($14.9 billion over 10 years).  This will advantage states with high rates of enrolling Medicaid eligibles.
Medicaid is the weakest element of the Affordable Care Act – since the states can choose not to fund this

Fix the physician SGR (Sustainable Growth Revenue) formula, so that there would not be massive cuts in Medicare physician fees ($300 billion cost over a decade)
This reflects political and other reality – a 29.6% fee schedule cut in January would lead to substantial access issues for Medicare members

Post acute care (rehab hospitals, home care, nursing homes) cuts ($42 billion over ten years.
This is consistent with recommendations of MedPAC.  Some worry it could take away the ability of some frail elderly to avoid institutionalization

Bring biosimilar equivalents to market sooner