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White House proposes nearly $400 billion in Medicare, Medicaid reductions

April 10, 2013

President Obama today released a fiscal year 2014 budget request that includes $374 billion in proposed reductions to Medicare, of which $306 billion would come from health care providers, and $18.9 billion in reductions to Medicaid. The budget proposal would cancel the Budget Control Act’s sequester, including the annual 2% cut to hospitals’ Medicare payments. It also would reduce bad debt payments to providers by $25.5 billion; Medicare graduate medical education payments by $10.98 billion; and critical access hospital payments from 101% to 100% of reasonable costs. Among other changes, the plan proposes saving $79.04 billion by adjusting Medicare payment updates for skilled nursing facilities, long-term care hospitals and inpatient rehabilitation facilities; $8.16 billion by implementing bundled post-acute care payments; and $9.46 billion by modernizing clinical laboratory payments. Medicaid proposals include delaying the ACA’s disproportionate share hospital cuts for one year (2014) to recognize the Patient Protection and Affordable Care Act’s lower coverage estimates, while increasing DSH cuts in 2016 and 2017 to compensate for the cost. “America’s hospitals must continue to meet the needs of the patients and communities they serve in spite of current financial pressures,” said AHA President and CEO Rich Umbdenstock. “Even though Congress already cut Medicare and Medicaid payments for hospital services by billions of dollars, the Administration has proposed additional reductions. The solution to what ails our nation’s fiscal health is not further cuts to providers that care for millions of America’s seniors, but creative solutions to modernize the Medicare program.” AHA members received a Special Bulletin with further details.