Obama's budget makes $360B in health care cuts

Proposal seeks to shave $4 trillion from federal deficit

President Obama on Monday released a budget proposal for fiscal year (FY) 2013 that aims to reduce the federal deficit by $4 trillion over the next decade and includes changes in health care spending.

The proposal seeks to cut total spending in Medicaid, Medicare, and other health care programs by $360 billion in part through lower payments to health care providers. For example, a White House fact sheet says that under the proposed FY 2013 budget, Medicare would reimburse 25% of hospitals' bad debt resulting from beneficiaries' non-payment, down from the current 70%. 

The proposal also would provide CMS with a $1 billion, or 26%, increase in its program management funds, which reflects the agency's role in implementing federal health reform law provisions. Meanwhile, NIH's biomedical research budget would be frozen at $30.7 billion, but the agency's grant-making policies would be revised to increase the number of new research grants by 7%.

The following graphic maps how some of President Bush and President Obama's discretionary budget requests have changed over the past seven years. (Related analysis.)

The FY 2013 budget, which would take effect Oct. 1, complies with an agreement made with Congress last August to reduce by $1 trillion discretionary spending, which funds most government programs but not entitlement programs, such as Medicare and Medicaid.

Republican response
The proposal likely will spark a debate with congressional Republicans, who are expected to charge that the plan does not do enough to restrain the nation's deficit.

House Budget Committee Chair Paul Ryan (R-Wis.) already has criticized Obama for failing to offer long-term cost-control strategies for entitlement programs. Ryan is drafting an alternative to Obama's budget that likely will mirror a measure that the House approved last year but that failed in the Senate. "We're taking responsibility for dealing with the drivers of our debt," he said, adding, "Medicare is going bankrupt."

According to the New York Times, because of the Republican opposition, Congress is unlikely to accept much of Obama's budget proposals (Calmes, New York Times, 2/12; Crutsinger, AP/San Francisco Chronicle, 2/13; Zigmond, Modern Healthcare, 2/12 [subscription required]; Rogers, Politico, 2/12; Montgomery, Washington Post, 2/12).


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