How Trump would cut Medicare by $818B in a decade

by Kimberly Leonard | March 11, 2019 04:05 PM

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President Trump's proposed budget released Monday appeared to call on Congress to cut $818 billion from Medicare over 10 years, despite a long-standing promise from the president that he wouldn't touch the popular program.

The budget does not outline specific cuts to Medicare, nor does it propose a cost-saving plan along the lines of an idea from former House Speaker Paul Ryan, R-Wis., to give beneficiaries subsidies to buy private coverage. Instead, the budget envisions spending reductions through Congress passing prescription-drug legislation and through efforts to reduce improper payments to healthcare providers.

"He's not cutting Medicare in this budget," Russell Vought, acting director of the Office of Management and Budget, said at a White House press briefing Monday. "What we are doing is putting forward reforms that lower drug prices, that, because Medicare pays a very large share of drug prices in this country, has the impact of finding savings. We are also fighting waste, fraud, and abuse."

Vought said that Medicare spending would still rise and that beneficiaries wouldn't face any "structural" changes in their benefits.

The budget sees prescription drug reforms yielding $69 billion in savings, though some of the policies would require Congress to pass new laws. Ideas include banning high-cost brand name drugs from keeping generics off the market, negotiating the cost of drugs patients get at the hospital or in a doctor's office, and approving generics faster. The budget also proposes to reduce what Medicare pays doctors and hospitals. Roughly $6.4 billion in savings would come from reducing fraud, waste, and abuse. In all, Medicare spending would fall by 7.6 percent over a decade.

The cuts are part of a larger goal toward balancing the budget by 2034, which the budget achieves on paper by relying on rosy forecasts for economic growth. The budget projects 3.2 percent real gross domestic product growth for 2019, for instance, whereas the Federal Reserve and the Congressional Budget Office both expect 2.3 percent.

While the cuts to Medicare Trump proposed wouldn't result in direct cuts in patients' benefits, the proposals are likely to become a central line of attack for Democrats as they gear up to fight Trump in 2020. People on Medicare, the majority of whom are 65 and older, make up a large cohort of Trump supporters.

"From a pure political perspective, this is — by far — the most radical, unpopular proposal that any 2020 candidate had put forward thus far," tweeted Jon Favreau, a speechwriter for former President Barack Obama. "Every Democrat should be talking about this every day. Start running the ads now and don’t stop until Election Day." 

Obama also implemented similar cuts to Medicare through his signature healthcare law, the Affordable Care Act or "Obamacare." That law cut $716 billion from Medicare by cutting hospital and doctor payments and by reducing spending on Medicare Advantage, the private health insurance option for Medicare. Both spending cuts were meant to pay for other parts of the healthcare law.

Still, several Democrats and their supporters seized on the information shortly after the budget became public.

Senate Minority Leader Chuck Schumer, D-N.Y., called the Medicare cuts, among other cuts the administration called for, "devastating, but not surprising."

The proposal also received backlash from the hospital industry. Chip Kahn, president and CEO of the Federation of American Hospitals, which represents investor-owned hospitals, said in a statement the cuts were "arbitrary and blunt."

"The impact on care for seniors would be devastating," he said. "Not to mention that massive reductions would drastically reduce resources critical to care for low-income Americans and cripple efforts to stave off the looming physician shortage. Hospitals are less and less able to cover the cost of care for Medicare patients, it is no time to gut Medicare."

The healthcare industry, however, is no more pleased with proposals liberal Democrats have introduced on Medicare.

More than 100 House Democrats, including nearly every senator running for the Democratic presidential nomination, have proposed moving all people who live in the U.S. onto Medicare, while also having the program cover much more medical services than it does now. Such a move is projected to increase government spending on healthcare by about $32 trillion over a decade, according to the left-leaning Urban Institute and the right-leaning Mercatus Center at George Mason University.

The figure is $2 trillion less than current spending, but would come through cutting payments to healthcare providers by roughly 40 percent compared with what they get from private insurers. The latest version of the bill, unveiled in February, hasn't yet been analyzed for cost.

In the president's budget, the more significant cuts to government healthcare beneficiaries would be enacted through Medicaid, which covers low-income adults, people with disabilities, pregnant women, and children. The Trump administration opposes the way that Obamacare allowed low-income people to enroll in Medicaid regardless of disability status or whether they were working.

The budget requests rolling back Obamacare's expansion of Medicaid and instead converting the program to a block grant in which states would get more say in how the money is spent. It also wants people on Medicaid to pay co-pays if they go to the emergency department for a nonemergency need, and it would impose work requirements in exchange for coverage. The changes would reduce Medicaid spending by $241 billion.

“It’s clear that the administration is once again dead-set on cutting critical health care programs relied on by millions of Americans, especially ones impacting seniors and children," Brad Woodhouse, executive director of the pro-Obamacare group Protect Our Care, said in a statement.

https://www.washingtonexaminer.com/policy/healthcare/how-trump-would-cut-medicare-by-818b-in-a-decade