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Medicare, Medicaid on the Table

8 cuts Congress's deficit committee might make

6. Reduce Medicaid assistance.

People who qualify for both Medicare and Medicaid — the state-run health program for those with low incomes — represent about 15 percent of people in Medicaid but consume almost 40 percent of its spending. People in this group are generally older and sicker, and many of them live in nursing homes where, once their own financial resources are depleted, Medicaid pays the bill.

Federal funding for Medicaid could be slashed, or the states could be allowed more leeway to reduce their own spending by raising the bar for eligibility and cutting payments to nursing homes. A bill to provide this kind of flexibility to states, introduced by Sen. Orrin Hatch (R-Utah) and Rep. Phil Gingrey, M.D., (R-Ga.) is estimated to save $2.1 billion in federal funds over 10 years.

7. Cut Medicare payments to doctors, hospitals and other health care providers.

Doctors are already under threat of a nearly 30 percent cut in reimbursements from Medicare under a law that was passed in 1997, but these cuts have been staved off by Congress every year in short-term "doc fixes." If the super-committee fails to act, another 2 percent cut to Medicare provider payments would automatically take effect in 2013. The committee could recommend further cuts in provider payments — for hospitals as well as physicians — but much would depend on whether it uses an ax or a scalpel, analysts say.

The American Medical Association and other medical groups warn that across-the-board cuts would result in more doctors refusing to accept Medicare patients and add to an already critical shortage of primary care physicians, especially in rural areas.

8. Lower government's bill for prescription drug coverage.

Leading Democrats have long pressed for the federal government to negotiate prices for Medicare's Part D prescription drug program to lower costs. Currently, it's up to the individual private drug plans to negotiate prices, and they have far less bargaining clout. Republican lawmakers oppose direct government negotiation as interference in the open market, and specifically prohibited it when they designed the Part D benefit in 2003.

Democrats also have proposed requiring drug manufacturers to offer rebates to the government for drugs used by Part D enrollees who are eligible for both Medicare and Medicaid — just as the companies have long provided rebates in the Medicaid program itself — at an estimated saving of $50 billion over 10 years. Both approaches remain politically contentious, and the drug industry would mount massive lobbying efforts against them.

Patricia Barry is a senior editor with the AARP Bulletin.

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