President Barack Obama has released some more details of his plan for overhauling the healthcare system, saying it will reduce healthcare costs and expand coverage.

Obama says he is committed to undertaking reform without assuming any more new debts for the country. For example, his 2010 budget request includes a $635 billion “down payment” on reform. He says that toughly half of this amount comes from revenue proposals, including limiting the value of itemized deductions for families making over a $250,000 a year to the rates they were during the Reagan years, and about half comes from savings from Medicare and Medicaid.

Since making the proposal, the administration has worked with Congress on other ways to offset the cost of healthcare reform. To that end, the administration is now detailing savings proposals that will contribute another $313 billion over 10 years to paying for healthcare changes, bringing the total offsets put forward by the administration to nearly $950 billion over 10 years. Obama argues that this would extend the solvency of Medicare's Hospital Insurance Trust Fund by seven years to about 2024.

Obama's fact sheet on the healthcare plan follows.

• Incorporate productivity adjustments into Medicare payment updates.   Permanently adjust most annual Medicare payment updates by half of the economy-wide productivity factor estimated by the Bureau of Labor Statistics. Obama argues this adjustment will encourage greater efficiency in healthcare provision, while more accurately aligning Medicare payments with provider costs.

• Reduce subsidies to hospitals for treating the uninsured as coverage increases.  Instead of paying hospitals to treat patients without health insurance, give people coverage so that they have insurance. As health reform phases in, the number of uninsured will go down, and the government can reduce payments to hospitals for treating those previously uncovered.
• Pay better prices for Medicare Part D drugs. There are a variety of ways to achieve this goal, Obama says.  For example, drug reimbursement could be reduced for beneficiaries dually eligible for Medicare and Medicaid.  The administration is working with Congress to develop a policy to achieve these savings.

Other Savings

• Adjust payment rates for physician imaging services to better reflect actual usage. To provide more accurate payment for physician imaging services, the Department of Health and Human Services would increase the equipment utilization factor for advanced imaging (such as magnetic resonance imaging (MRI) and computed tomography (CT) machines) from 50 percent to 95 percent.
• Adopt MedPAC's recommendations for 2010 payments to skilled nursing facilities, inpatient rehabilitation facilities, and long-term care hospitals.  To bring down costs and maintain quality, we should update payments based on MedPAC's consideration of multiple variables, such as quality, access to care, and adequacy of payment. Doing so would implement MedPAC's 2010 payment recommendations for skilled nursing facilities, inpatient rehabilitation facilities, and long-term care hospitals.

• Cut waste, fraud, and abuse.  It is important that patients get the best care, not just more care. Unnecessary treatments are not only expensive, but also can harm the health of the patient. To discourage physicians from ordering unnecessary or excessive treatment, we should increase the scrutiny of physicians in high-risk areas or those that order a high volume of high-risk services (such as home health, durable medical equipment, and home infusion therapy) through additional pre-payment review.

Paying for Health Care Reform: 2010 Budget Proposals

The above savings would be in addition to the down payment for comprehensive health care reform of $635 billion over 10 years detailed in the FY 2010 Budget. The reserve fund is financed roughly half through proposals to generate more revenue, and half through efficiencies and savings from Medicare and Medicaid. Based on our projections, the Medicare proposals contained in the reserve fund would extend the solvency date of the Hospital Insurance (HI) Trust Fund by two years and reduce beneficiary premiums for physician and outpatient services by about $33 billion over the next 10 years. As a result of these proposals, Medicare beneficiaries will also see an improvement in the quality of their services. The reserve fund includes a broad array of savings proposals including:

• Reducing Medicare overpayments to private insurers. The establishment of a competitive system where payments are based upon an average of plans' bids submitted to Medicare would save taxpayers close to $177 billion over 10 years, as well as reduce Part B premiums.

• Improving Medicare and Medicaid payment accuracy. By strengthening program integrity efforts, the Centers for Medicare and Medicaid Services (CMS) will address vulnerabilities that have led to billions of dollars in overpayments and fraud each year. 

• Improving care after hospitalizations and reducing readmission rates. A combination of incentive payments and penalties should lead to better care and result in fewer readmissions – saving roughly $25 billion over 10 years. 

• Expanding the Hospital Quality Improvement Program : By linking a portion of Medicare payments for acute in-patient hospital services to hospitals' performance on specific quality measures, quality of care for beneficiaries will improve, and Medicare will save approximately $12 billion over 10 years.