President's Modest 4 Percent Increase in Medicare Budget Puts Squeeze on Healthcare Providers

President Barack Obama unveiled the details of his 2014 budget proposal, and even though he has proposed to grow Medicare by 4 percent to $524 billion, healthcare providers will receive smaller reimbursements per patient should the budget be approved.

The current year’s Medicare budget, in which healthcare providers endured a 2 percent across-the-board cut in reimbursements, was in fact double the increase (8 percent over fiscal 2012) over what has been proposed for 2014. The good news is that the trend is exactly the reverse for Medicaid, which had a small increase this year but next year will grow by 14 percent should Congress approve.

The president proposes to reduce expenditures to Medicare providers by more than $5.6 billion next year. These savings will be realized by reductions to the following programs:

• Reduce Medicare coverage of bad debts -$200 million
• Graduate medical education: Better align graduate medical education payments with patient care costs -$780 million
• Better align payments to rural providers with the cost of care:Reduce Critical Access Hospital (CAH) payments from 101 percent of reasonable costs to 100 percent of reasonable costs –$90 million
• Prohibit CAH designation for facilities that are less than 10 miles from the nearest hospital  –$40 million
• Drug rebates and additional Part D savings: Align Medicare drug payment policies with Medicaid policies for low-income beneficiaries –$3,140 million
• Encourage efficient post-acute care: Adjust payment updates for certain post-acute care providers –$830 million
• Equalize payments for certain conditions commonly treated in inpatient rehabilitation facilities and Skilled Nursing Facilities (SNFs) –$140 million
• Encourage appropriate use of  inpatient rehabilitation hospitals –$190 million
• Additional provider efficiencies:Reduce overpayment of Part B drugs –$220 million

The proposal is now in the hands of Congress, where the Senate and the House have generated their own respective budget proposals for 2014.