Richard L. Gundling, FHFMAVice President, Product Development, HFMA
Constraining the cost of entitlement programs is the theme in President Bush's proposed 2007 budget. As part of his "American Competitiveness Initiative," he has stated that these entitlement programs are the biggest challenge to our long-term fiscal health.
Bush has proposed to squeeze $36 billion in savings from Medicare over five years. This is coming mainly from hospitals, nursing homes, and other healthcare service providers. The proposed budget has used MedPAC's recommendations of a 0.45 percent reduction in the market basket increases to hospitals. This is always the politically easy way to trim a lot of money from providers. Though Bush's proposed savings would come principally from cutting payments to providers, it also includes a mechanism that could cut Medicare more broadly if certain spending thresholds are met. This is to prod Congress to take additional action to slow Medicare growth. The President's budget proposal provides the start of negotiations with Congress, which has the final say over government expenditures. But the Medicare reductions that we have been warning about over the past several may be rearing their ugly heads.
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