Deficit Panel Takes Tough Stance on Health Costs

WASHINGTON (AP) — The health care cuts proposed by leaders of President Barack Obama's deficit commission would reach virtually every corner of society, making cost curbs in the new overhaul law look tame by comparison.

The plan tackles the unfinished business of Obama's health care remake: how to keep it affordable. An advanced society that guarantees the latest medical technology to nearly all its citizens has to make hard choices about what to pay for and how much.

Workers with solid coverage on the job, seniors, drug companies, trial lawyers, hospitals, doctors, state governments and federal employees would all feel the pinch. For Medicare recipients, the biggest change would be an increase in cost-sharing.

The plan by commission co-chairmen Erskine Bowles and Alan Simpson is drawing criticism from groups ranging from AARP to hospitals and labor unions. Is it politically doable?

"Right now, no," said economist Robert Reischauer, an informal adviser to policymakers of both parties on health care. "But we have a huge challenge ahead of us, and if we start by saying this proposal or that proposal is unacceptable, we are never going to get to a solution."

The plan leaves in place Obama's signature health care law expanding coverage to more than 30 million uninsured, but it would repeal a new long-term care program included in the legislation, calling it "financially unsound."

It would gradually phase out the federal tax break for job-based health plans, a change that would force workers and their families to seek out cost-conscious insurance. Labor unions, which have given up wage increases to secure better coverage, are adamantly opposed.

There are even bigger changes in the proposal. Sarah Palin take note:

For the first time, the government would set — and enforce — an overall budget for Medicare, Medicaid and other federal programs that cover more than 100 million people, from Alzheimer's patients in nursing homes to premature babies in hospital intensive care.

Palin attracted wide attention by denouncing nonexistent "death panels" in Obama's overhaul, but a fixed budget as the commissioners propose could lead to denial of payment for medical care in some circumstances.

Overall, the nation will spend about $2.6 trillion this year on health care, and there's evidence that a significant share of that is for procedures and tests that are of little benefit to patients. There seems to be room enough to cut, but no consensus on what should go.

The nonpartisan deficit commission scheduled a vote Friday on its leaders' controversial plan. Even if it gets enough support to go to Congress, immediate prospects are dim. Yet the problem isn't going away.

"We are going to see all of these things on the table over the next couple of years as we really struggle with the deficit," said Christine Ferguson, a former senior Republican congressional aide and top state health official.

"Unless the economy turns around, these are the kinds of the proposals that are going to be debated," added Ferguson, a professor at George Washington University. She called some "pretty Draconian."

If the plan proves politically untouchable, Medicare will be a big part of the reason.

Newly elected Republicans campaigned against the Medicare cuts in the health care law, and the commission proposal would slice deeper while also making significant changes in how the program works.

Many seniors would face an increase in cost-sharing for medical services.

The deficit commission found that Medicare's co-payments are low in most cases, encouraging overtreatment and overuse. Revamping cost-sharing would raise $110 billion through 2020. In return, seniors would get an annual cost-sharing limit of $7,500, stop-loss protection that isn't currently offered under traditional Medicare.

The proposal would also take on so-called Medigap plans, supplemental insurance that many seniors purchase to plug holes in Medicare. Such plans would no longer be able to offer wraparound coverage that insulates beneficiaries from nearly all cost-sharing. That would raise an additional $38 billion through 2020.

"They are asking sick people to pay more in terms of cost-sharing," said John Rother, AARP's top health policy expert. "You are a Social Security beneficiary living on $15,000 a year, and they want you to pay up to $7,500? We are talking about bankrupting people. This doesn't fly in the real world."

Other Medicare changes include a new payment system for doctors that would reward quality outcomes instead of sheer numbers of visits, tests and procedures. And a board created by the new health care law to force Congress to cut questionable Medicare spending would get broader reach.

Federal workers — hit with a pay freeze by Obama — would become guinea pigs in a health insurance experiment. The federal employee plan would be replaced with a fixed payment to purchase private health insurance. The concept could later be extended to Medicare.

Validating a goal Republicans have long pursued, the commission also tackled malpractice litigation, recommending a series of limits on jury awards and the creation of specialized courts to try such cases. That's another area that Obama's health care law tiptoed around.

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Online:

Deficit commission: www.fiscalcommission.gov