Health-care plan may mean cuts to hospitals

WASHINGTON — Administration officials said Saturday that President Obama intends to pay for his health-care overhaul partly by cutting more than $200 billion in expected reimbursements to hospitals over the next decade, a proposal likely to provoke a backlash from cash-strapped medical institutions.

Obama has insisted his health-care plan will not add to the federal deficit, and he had already set aside in his budget what he calls a $635 billion "down payment" toward the overall 10-year cost of the overhaul, which is expected to top $1 trillion. But Republicans and some Democratic legislators have been pressing him to provide details on how he would cover the rest. He used his weekly Internet and radio address to provide some of those details.

Obama said he had identified "an additional $313 billion in savings that will rein in unnecessary spending and increase efficiency and the quality of care," bringing the total to nearly $950 billion.

He did not offer a breakdown, but advisers said that in addition to the more than $200 billion in lowered hospital reimbursements, the president expected $75 billion in savings over 10 years by getting better prices for prescription drugs, and $22 billion in other savings.

"These savings will come from common-sense changes," Obama said in his address. "For example, if more Americans are insured, we can cut payments that help hospitals treat patients without health insurance."

He added: "If the drugmakers pay their fair share, we can cut government spending on prescription drugs. And if doctors have incentives to provide the best care instead of more care, we can help Americans avoid the unnecessary hospital stays, treatments and tests that drive up costs."

Broadly speaking, Obama wants to extend coverage to the nation's 45 million uninsured, preserve consumer choice and cut rising health-care costs. He has argued that fixing the nation's health-care system is crucial to the economic health of the United States.

But as Congress contemplates the details of the legislation, the question of how to pay for the plan is among the thorniest it will face. Already, one of Obama's early proposals — limiting tax deductions for high-income people — has run into major roadblocks on Capitol Hill. Obama may be hoping that his address Saturday would give lawmakers the political leeway to adopt other cost-saving measures.

The administration expects to achieve the lowered hospital payments in two major ways. First, said Obama's budget director, Peter Orszag, payments to hospitals will be reduced to try to encourage them to work more productively and efficiently.

Orszag said hospitals could figure out ways of treating patients "more effectively, through health information technology, a nurse coordinator instead of an unnecessary specialist," for example. These "productivity adjustments" would account for $110 billion in savings.

Second, the administration expects to lower payments to hospitals that treat large numbers of low-income patients. Medicare and Medicaid make special extra payments to these hospitals, but Orszag said those payments would become less necessary over time, as more of the nation's 45 million uninsured acquire coverage through the new program. This would account for $106 billion in savings.

The president of the American Hospital Association, Richard Umbdenstock, said Saturday, "Payment cuts are not reform," and denounced "blunt cuts that cripple hospitals' ability to do better for their patients."

Dr. Patricia Gabow, chief executive of the Denver Health and Hospital Authority, which operates a 477-bed public hospital, said it would be "pretty risky" for Congress to cut payments to safety-net hospitals before knowing whether new legislation reduced the amount of uncompensated care they must provide.

"What about homeless people, the chronically mentally ill, substance abusers and people with low literacy?" Gabow asked. "You think they will be using the federal health-insurance exchange to enroll in insurance plans? I don't think so."

Kenneth Raske, president of the Greater New York Hospital Association, said the proposed cuts could be "devastating to hospitals that serve inner-city communities."

Raske noted that none of the major proposals in Congress would provide health insurance to illegal immigrants, and many of them would be unable to pay their hospital bills. In addition, he said, the federal payments will be needed because "Medicaid woefully underpays for outpatient clinics" and other services in some states, including New York.

Sen. Max Baucus, D-Mont., chairman of the Finance Committee, intends to introduce his plan this week. Aides said it would include a proposal to tax some employer-provided health benefits, a notion that Obama criticized during his campaign for the White House. Workers might, for example, have to pay income tax on the value of family coverage exceeding $15,000 a year.

Labor unions, many employers and many House Democrats oppose such a tax. Obama did not mention taxing health benefits in his Saturday address.