Get Ready For The Budget Battle Over Health Care
It's a perennial contest. In one corner: health care entitlement programs, one of the biggest slices of the federal budget pie; in the other, the drive to tame the deficit, weighing in this week as the political talking point du jour.
The latest venue is President Obama's 2012 budget, to be released Monday. According to many White House watchers, Obama is likely to pull his punches when it comes to entitlements such as Medicare and Medicaid.
"I'm not holding my breath in the health area that I'm going to see anything new and radical," says Robert Reischauer, a former Congressional Budget Office director and president of the Urban Institute.
Taking a crack at Medicare is considered dangerous at best. Other health spending cuts could disrupt the implementation of the president's health law.
In addition, the health law already takes a whack at Medicare, the federal program for the elderly and disabled, by reducing growth by $455 billion over 10 years. Though Richard Foster, Medicare's top actuary, says some of those cuts are politically unsustainable and will be reversed by Congress, many are expected to stick. The fees that Medicare pays doctors and hospitals — almost $200 billion worth of the health law cuts — have long been a target for budget cutters.
What's left to cut in health care for the 2012 budget? "Not much," says Reischauer. He thinks Obama's health law could result in more savings down the road if all goes as planned, but those dividends are years away.
Instead of the massive changes to entitlements that budget hawks like Alan Simpson, who co-chaired Obama's deficit-reduction commission, say are necessary, White House budget director Jacob Lew last week laid out a plan to jab at the deficit, including a five-year discretionary spending freeze. That sidesteps Simpson's calls from the ropes to take on "the big four," Medicare, Medicaid, Social Security and defense spending.
Still, there are a few options for health care dollars that the administration could go after, says Dan Mendelson, the CEO of Avalere Health, a consulting firm. The law creates an independent board to hack away at Medicare costs, known as the Independent Payment Advisory Board, but hospital spending is off the table until 2020 as the result of White House negotiations with the hospital lobby.
One way to wring some more cash out of the system would be to move hospitals to the chopping block sooner, Mendelson said. It's not clear whether the administration would pursue a strategy like that, which would clearly upset the hospitals, but the White House has "to show fiscal discipline or they'll be hypocritical."
However, waiting may be politically prudent, says Jim Capretta, a former White House budget official under President George W. Bush and an entitlements hawk. Obama, he says, "wants the Republicans to go first on bigger budget changes."
That could set up a counter punch down the road, Capretta says. In a few months, Obama could "come back and say, we can get to a better fiscal situation, but we don't have to do it the mean Republican way."
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