Obama Budget Cuts $400 Billion in Health Care Spending

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The Administration budget includes money for a fix to the flawed sustainable growth rate (SGR) formula for calculating physician payments, but digs deeper into health care spending than the Senate budget proposal by $125 billion.

One victory for advocates of advanced diagnostic imaging is that the 2014 budget recommends closing of the in-office ancillary services exception (IOASE) to the Stark self-referral law. The Office of Management and Budget (OMB) documents indicate that removal of advanced diagnostic imaging, radiation therapy, and physical therapy services from the IOASE could save the government $6.05 billion over ten years.

However, like previous White House budgets, it also includes the provision to require prior authorization for advanced imaging for Medicare beneficiaries. In addition, it proposes expanding the role of the Independent Payment Advisory Board (IPAB) in reviewing what Medicare pays for and expect IPAB to save about $4.1 billion in reducing long-term drivers of Medicare cost growth by 2024.

Pharmaceutical companies take one of the heaviest hits, with big discounts on what Medicare will pay for prescription drugs, proposals to speed the adoption of generics. The budget also proposes $6 billion in additional changes to the premiums seniors pay for drugs that are administered in a doctor's office, which presumably would include imaging contrast agents and other radiopharmaceuticals.

Hospitals take a considerable hit, particularly rural ones. For example, the budget proposes ending the higher payments Critical Access Hospitals (CAHs) get if the CAH is within 10 miles of another hospital.

It goes comparatively light on cuts to Medicare beneficiaries actual entitlements to skirt controversy. The proposal to increase the eligibility age for Medicare that had been part of earlier budget negotiations is not included, for example.

Seeking to leverage adoption of interoperable electronic health record (EHR) systems into health IT solutions to the factors that are driving the increases in Medicare costs, the budget provides $26 million for the Office of the National Coordinator for Health IT to support work to advance EHR technology and standards.

Another spending increase is 640 million to fight fraud and abuse, which could translate into more aggressive auditing of reimbursement claims. A year ago, the Centers for Medicare & Medicaid Services (CMS) began issuing comparative billing reports for advanced imaging providers — an indicator that it is one Medicare service of particular interest to the agency as it looks for fraud and abuse.

In place of the SGR formula, physicians would see their payment frozen at current levels for a few years and then the system would transition to a model that reimburses physicians more for meeting certain as-yet-to-be-determined quality and outcome measures. Ominously, it says that “to complement these changes, the Administration also supports immediate reforms to improve the accuracy of Medicare’s current physician payment system.” This indicates that the Administration believes that certain physician payments may be too high while others are too low. Recent CMS physician payment schedules have shifted payments to reimburse primary care providers more at the expense of payments to specialists.

The full budget with summary tables is available here.