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The Bush Administration recently unveiled a $2.9 trillion budget proposal that would increase funding for military efforts and attempt to reduce the federal deficit by cutting funding for domestic programs, including Medicare and Medicaid. The Bush Administration recently unveiled a $2.9 trillion budget proposal that would increase funding for military efforts and attempts to reduce the federal deficit over the next 5 years by cutting funding for domestic programs, including Medicare and Medicaid.

Legislative and administrative proposals would cut $5.3 billion from the Medicare program in 2008 and nearly $76 billion over the next five years. Much of the savings would be attained through legislative proposals that would reduce the growth in services from 6.5 to 5.6 percent annually.

Hospitals would take the biggest hit under the market basket changes proposed by the administration, seeing a reduction of 0.65 percentage points off the market basket increase for inpatient care in each of the next five years, losing $13.8 billion in total as a result. Hospitals would see the same reduction in the market basket increase in Medicare payments for outpatient care for a savings of $3.4 billion. A reduction in hospital outpatient payments would affect radiologists affected by the DRA cuts by lowering the HOPPS payment rate for the technical component of advanced imaging services including MR, CT and PET.

Under the proposal, home health agency payments would be frozen at their current rates for the next five years for a savings of $9.6 billion, while skilled nursing facility payments would remain static in 2008 and be reduced 0.65 percent annually afterward, for a savings of $9.2 billion. Combinations of payment freezes and or 0.65 percent annual reductions for other services including inpatient rehabilitation, hospice, ambulatory surgical centers, and the ambulance fee schedule, as well as competitive bidding for clinical lab services make up the rest of the legislative proposals under the administration’s plan to “foster productivity and efficiency.”

In an effort to “rationalize Medicare payments and subsidies”, the administration proposes to eliminate duplicate payments for certain medical education expenses in the case of Medicare Advantage payment rates for a savings of $4.4 billion. Reducing payment rates for certain conditions treated in skilled nursing facilities and inpatient rehabilitation facilities would save $2.9 billion. Establishing a 13-month rental period for power wheelchairs would save $530 million, while reducing the rental period for oxygen equipment from 36 to 13 months would save $2.4 billion. Extending Medicare secondary payer status for ESRD from 30 to 60 months would save nearly $1.1 billion. Lastly, Medicare would save about $7 billion by phasing out payments for bad debt incurred by providers.

Radiologists would be directly affected by a proposal where Medicare payments to all providers would be reduced by 0.4 percent once the Medicare Trustees issue a “fund warning”, which is expected in the next 12 months. A provision in the Medicare Modernization Act of 2003 requires the Trustees to issue a warning if general fund contributions exceed 45% of overall Medicare expenditures, and requires Congress to act within a certain time period. This proposal would only apply if Congress fails to enact other funding changes after the warning is issued.

An additional $10.2 billion in savings would come from administrative changes in the Medicare program to improve efficiency, productivity and program integrity.

The President’s budget proposal cuts the Medicaid program by $13 billion through legislative revisions such as reducing payments for administrative costs, cutting pharmacy reimbursement and making it more difficult for owners of valuable homes to qualify for the program.

$12.7 billion would be cut through administrative changes, which include cutting $5 billion in payments to providers, eliminating $3.6 billion in certain payments for school-based services, cutting $2.2 billion in payments for rehabilitation services, and slashing $1.8 billion in payments for graduate medical education.

In total, the proposal adds up to $102 billion in cuts to both programs over five years. Last year the President’s budget contained nearly $40 billion in proposed cuts, very few of which were enacted by the Republican controlled Congress. The initial reaction from Democrats has been negative and they are calling the proposal an assault on the nation’s elderly and needy.

A summary of the entire proposed budget for the Department of Health and Human Services can be viewed at http://www.dhhs.gov/budget/08budget/2008BudgetInBrief.pdf.


Reprinted by permission of the American College of Radiology