Medicare Targeted for Cuts Under HHS Budget

The 2013 budget proposed by the Department of Health and Human Services reflects familiar ideas presented by President Obama to the debt reduction committee: fully fund the Affordable Care Act, reduce Medicare and Medicaid costs, and cut provider reimbursements.

Overall HHS spending is proposed to increase by about 8% from $871.9 billion to $940.9 billion. Only 8% of the HHS budget represents discretionary spending that can be shifted around, increased or eliminated. The 122-page HHS budget proposes increasing that spending by $0.3 billion to $76.4 billion.

The big winner in the HHS budget sweepstakes is the Centers for Medicare & Medicaid Services, which could see a $1 billion increase in funding to $4.8 billion for 2013. According to CMS officials about $860 million of those increased dollars are already earmarked for development of federal health insurance exchanges. The remainder will be applied to other ACA programs.

The bigger losers are Medicare providers, who would see their reimbursements slashed by $297 million over 10 years. The Obama administration projects that cuts to providers and other "improvements," will produce $366 billion in budget savings over 10 years.

The size of the reductions caught some industry observers off guard. "Cuts in Medicare and Medicaid are heavier than the industry was expecting," says Paul Keckley, executive director of the Deloitte Center for Health Solutions.