Bush Proposes Health Cuts in Budget

Feb. 4, 2008 -- Government health care programs would face deep cuts under a federal budget proposed by the Bush administration on Monday.

The $3.1 trillion budget for the fiscal year beginning Oct. 1 proposes cutting Medicare by $183 billion over the next five years, including $13 billion in cuts next year.

The budget, which serves only as a blueprint for Congress's spending decisions, also proposes cuts to the CDC, substance abuse programs, and health programs for children and families.

Administration officials described the proposals as cost-cutting measures that are needed to protect government spending against rising health costs. The budget also proposes making permanent tax cuts for wealthier Americans.

"Some are going to be unhappy with this budget," Health and Human Services Secretary Michael O. Leavitt told reporters Monday. But Leavitt said the cuts were needed to protect Medicare's finances.

Long-Term Financing of Medicare

A report released last summer by the Board of Trustees for Medicare and Social Security cautioned that Medicare's Part A Trust Fund, which pays for hospital services, is set to run out of cash reserves in 2019. After that, the government would not be able to pay all of Medicare's hospital costs without borrowing the money or raising taxes.

"The Medicare part of the budget should be viewed as a stark warning," Leavitt said.

Leavitt urged lawmakers and the media to focus on Medicare's long-term financial picture instead of year-to-year cuts. "We hear the warnings but we do nothing," he said.

Proposed Medicare cuts include reduced payments to a wide range of health care providers, including hospitals, nursing homes, hospice care, and ambulance services. The proposal could also require some seniors with higher incomes to pay higher premiums for outpatient services and prescription drugs.

The budget also proposes new caps on eligibility for the Medicaid insurance program for the poor and for the State Children's Health Insurance Program (SCHIP).

Congress Reacts

Congress ultimately makes spending decisions that President Bush can choose to approve or veto. The budget met with fierce reaction from congressional Democrats, who control the process of setting a budget and spending levels on Capitol Hill. They suggest the budget could have a hard time getting serious consideration in Congress this year.

"This administration ought to know that five years' worth of Medicare and Medicaid cuts totaling $200 billion are dead on arrival with me and with most of the Congress," said Sen. Max Baucus, D-Mont., chairman of the Senate Finance Committee, which has jurisdiction over Medicare and Medicaid.

Sen. Gordon Smith, R-Ore., another Finance Committee member, also reacted coolly to the proposal. "Cuts to Medicare and Medicaid start an unwelcome ripple effect in state budgets and doctors offices."

Several interest groups, including those representing hospitals and Medicare patients, also reacted negatively to the budget proposal.

David Sloan, chief lobbyist for AARP, warned the budget would "shift costs" instead of saving the government money. "The proposed automatic, across-the-board cut in Medicare would seriously undermine the program's ability to serve our nation's retirees," he said in a statement.

In addition to Medicare cuts, the budget also proposes:

• $433 million in cuts at the CDC, largely through savings in construction costs.
• $50 million increase to the $1.8 billion in government funding of the FDA, including increased resources for food safety.
• No increase for research at the National Institutes of Health. The agency's budget would remain flat at $29.3 billion.