Thursday, March 12, 2009

Reconfiguring Medicare: Attorney Comments On Obama's 2010 Budget

Characterizing healthcare reform as key to the nation’s fiscal recovery, President Obama outlined his FY 2010 budget request to Congress last week. Noting that the United States spends over $2.2 trillion on healthcare each year—or approximately 16 percent of the total economy—the President’s budget establishes a non-binding reserve fund of more than $630 billion as an initial down payment on healthcare reform.

Reconfiguring Medicare
The reserve fund would be financed in part from new revenue generated by certain changes in federal taxes and from savings proposals designed “to promote efficiency and accountability” over ten years that include the following changes to the Medicare program:
• Replacing the current payment mechanism for MedicareAdvantage plans with a competitive bidding system (savings = $176 B)
• Bundling Medicare payments to hospitals for hospitalization and care in a post-acute setting (savings = $18 B)
• Improving Medicare home health payments “to align with costs” (savings = $37 B)
• Linking a portion of Medicare payment for inpatient services to a hospital’s performance on specific quality measures (savings = $12 B)
• Reducing Medicare payments to hospitals with high readmission rates (savings = $8 B)
• Requiring higher-income beneficiaries enrolled in Medicare Part D to pay higher premiums as is currently required for physician and outpatient services (savings = $8 B)
• Using “private sector enhancements” to improve Medicare payment integrity (savings = $2 B)
• Ensuring that Medicare makes appropriate payments for imaging services through the use of radiology benefit managers (savings = $260 M)

The budget document reflects a $330 billion “best estimate” baseline for “comprehensive, but fiscally responsible” physician payment reform. Remember that physician payments will undergo a 20 percent reduction in 2010 unless Congress intercedes. Changes for which no specific details or cost savings are attributed include user fees for surveys and certification by CMS and “addressing financial conflicts of interest in physician-owned specialty hospitals”—possibly indicating that the administration has not settled on a complete prohibition of physician-owned hospitals.

Any questions or comments should be directed to: or call 213-233-2260.  Tracy Green is a principal at Green and Associates in Los Angeles, California.  They focus their practice on the representation of professionals, particularly health care professionals including individual physicians, corporate providers and group practices.


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