Bush to cut Medicare to achieve budget surplus

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Bush will seek Medicare cuts.
Source: www.whitehouse.gov

President George W. Bush is expected to call for large cuts in Medicare and Medicaid when he presents his $3 trillion 2009 budget request today, according to administration officials and budget documents.

The two health programs, which cost $627 billion last year, account for nearly one-fourth of all federal spending, which Bush said is unsustainable and must be cut to achieve a budget surplus by 2012, reported The New York Times (NYT).

The White House, however, anticipates higher deficits in 2008 and 2009, reflecting the current weakness of the economy and the cost of a stimulus package, according to NYT.

The president’s budget proposes to cut $1.2 billion in the next year from Medicaid and nearly $14 billion over five years.

The cuts, however, would not apply to payments insurance companies receive for private Medicare Advantage plans. A Congressional Budget Office analysis in 2007 showed that medical services offered through these plans cost 12 percent more, on average, than traditional Medicare. Some plans are overpaid by 50 percent, according to the Las Vegas Sun.

In the next five years, the largest amount of Medicare savings, by far, would come from hospitals: $15 billion from an across-the-board reduction in the annual updates for inpatient care; $25 billion from special payments to hospitals serving large numbers of poor people; and $20 billion from capital payments for the construction of hospital buildings and the purchase of equipment, reported NYT.

William A. Dombi, vice president of the National Association for Home Care and Hospice, said the proposal could affect many of the three million Medicare beneficiaries who receive home health services each year.

According to NYT, President Bush is scheduled to submit legislation to strengthen the financial condition of Medicare and to reduce its reliance on general revenues, which include income taxes within 15 days of sending his budget to Congress.