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Fiscal Cliff Cuts Could Hit Health Care Providers


Well, even if Americans largely agree on addressing the deficit with a combination of tax hikes and spending cuts, the consensus falls apart when you get specific about those spending cuts. And that may be why politicians have been wary of discussing cuts in too much detail. We're going to try to remedy that now with NPR's Scott Horsley. Hi, Scott.

SCOTT HORSLEY, BYLINE: Good to be with you, Robert.

SIEGEL: Congressional Republicans have said they want to hear specific proposals about spending cuts from the White House. How is the Obama administration responding?

HORSLEY: Well, the White House insists that President Obama is fully prepared to cut spending if the congressional Republicans will budge on the tax rates for the highest earners in America. If you go back to the fall of last year when the deficit cutting super committee was meeting, the president put out a fairly detailed proposal that called for spending cuts and White House spokesman Jay Carney says most of those proposals are still on the table.

JAY CARNEY: The president, unlike any other party to these negotiations, has put forward detailed spending cuts, as well as detailed revenue proposals.

HORSLEY: All together, that plan calls for about $600 billion worth of spending cuts over the next decade. About half of that would come from health care programs and about half from other parts of the federal budget.

SIEGEL: Okay. What kind of cuts is the president actually talking about?

HORSLEY: Well, it runs the gamut, Robert. About $30 billion in cuts to agricultural subsidies, cuts to federal retirement benefits, a $4 billion cut to flood insurance. Medicare, of course, is the big enchilada, although most of the cuts the White House is proposing here don't affect the benefits that Medicare beneficiaries receive, but would instead affect the payments to health care providers.

For example, reduced payments to teaching hospitals. One big cut would be demanding bigger discounts on prescription drugs. That alone would total about $135 billion over a decade. And also, the White House wants to strengthen the so-called IPAD, that's the expert panel that's been set up to make recommendations to try to curb healthcare inflation in the Medicare program.

Now, one thing the White House is not touching is Medicaid, the health care program for the poor. Remember, under the new health care law, states have the option of expanding their Medicaid programs to cover more of the poor and the White House doesn't want to do anything that would discourage states from exercising that option.

SIEGEL: Well, Republicans say they want to see bigger cuts in spending proposed by the Democrats or at least agreed to. What are they proposing?

HORSLEY: Yeah, they're calling for about twice the level of cuts that the Democrats have called for - $1.2 trillion, of which they'd like about half to come from the government's health care programs. Now, they haven't provided a lot of details, or really any details, of what those cuts might be. However, in the past, congressional Republicans have talked about things like raising the eligibility age for Medicare up to 67.

Now right away, but over a period of time. That alone would save about $148 billion from the Medicare budget, although it's possible the government would have to pay some of that out again in subsidies to private health insurance because those folks between 65 and 67 would now perhaps be in the government health care exchanges. Republicans have also talked about cutting subsidies for private insurance under the new health care law and doing things like paying out Medicaid to states in block grants, which would grow more slowly.

SIEGEL: Now, one of the most complicated, but I gather one of the more important ideas in all of this is revising how we measure inflation. What does that mean?

HORSLEY: Right. There's something you might have heard talked about, the chain CPI, which is it's a technical adjustment to the way inflation is measured. And so inflation would grow more slowly. This would, over time, save the government money because, for example, Social Security cost of living adjustments would grow more slowly. It would also bring in more revenue because things like tax brackets would ratchet up more slowly.

And over a decade, you're talking real money, something on the order of 250 to $300 billion. This is not without some controversy, but it's probably one of the easier changes to make.

SIEGEL: So when we look at the proposals that are out there, the Republicans and the Democrats are pretty far apart on spending cuts.

HORSLEY: Well, in dollars and cents, it's about $600 billion, obviously in terms of priorities the gap is perhaps even bigger.

SIEGEL: Okay. NPR's Scott Horsley, thanks.

HORSLEY: My pleasure, Robert. Transcript provided by NPR, Copyright NPR.

Scott Horsley is NPR's Chief Economics Correspondent. He reports on ups and downs in the national economy as well as fault lines between booming and busting communities.
Prior to his retirement, Robert Siegel was the senior host of NPR's award-winning evening newsmagazine All Things Considered. With 40 years of experience working in radio news, Siegel hosted the country's most-listened-to, afternoon-drive-time news radio program and reported on stories and happenings all over the globe, and reported from a variety of locations across Europe, the Middle East, North Africa, and Asia. He signed off in his final broadcast of All Things Considered on January 5, 2018.