Richard L. Clarke, DHA, FHFMAPresident and CEO, HFMA
The old saying “the devil is in the details” applies well to the federal budget mess. While many agree on the goal to balance the federal budget, the details of how to get there spark lively debate.
Yesterday, President Bush released his budget proposal to the Congress. The proposal reflects the Bush Administration’s goal to balance the federal budget by 2012 from a current official deficit of $248 billion. That goal, and even its timing, is acceptable to many on both ends of the political spectrum. However, the president proposes to get there through a focus on entitlement programs, and that is far from universally palatable.
The president proposed deep cuts of $75.8 billion in five years to the Medicare program, noting that it has serious long-term financial problems--a concern shared by many. But to solve the problems with Medicare, three basic options are available: increase revenue through taxation, reduce costs through increased beneficiary cost sharing or benefits cuts, or reduce costs through cuts to suppliers and providers of care, especially physicians. Not surprisingly, most of the budget savings, some $60 billion in five years or 80 percent of the total savings, come from the third option: reducing payments to providers and suppliers. More specifically, the budget proposes reducing annual updates for hospitals, hospices, and ambulance services for a total $18.7 billion in savings, while skilled nursing facilities and inpatient rehabilitation facilities would get no payment increase in FY08 and reduced increases subsequently, for a total savings of $11.1 billion.
For Medicaid, the president proposed $13 billion in savings from new legislation, such as proposing to align all reimbursement rates in Medicaid at 50 percent, and $12.7 billion savings through administrative action, such as eliminating Medicaid funding of graduate medical education.
No matter which approach the president selected, some interest group would complain. The devilish details impact different constituents in different ways, with everyone pointing to the other side to bear the burden of balancing the budget.
These details challenge the overall goal of bringing the federal budget into balance and placing Medicare on a sound financial footing. Solving the federal budget shortfall and strengthening Medicare’s financial status will take a collaborative approach with all options on the table. The president’s budget proposal, with providers the key source of cost savings, looks more like slash-and-burn budgeting than a balanced approach to solving these devilish problems and helping our communities.
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