A Compendium of Federal

Budget and Cost Cutting

Proposals from the Health
Policy Perspective
May 2011
Prepared by:
Kate Ross,
Economic and Policy Analyst
Ali Renner,
Government Affairs and Policy Analyst
Table of Contents
Introduction 2

Government Accountability Office (GAO): “Opportunities” 3

Congressional Budget Office (CBO): “Reducing the Deficit” 4

Office of the President: “Terminations, Reductions, and Savings” 7

Office of the President: “Shared Prosperity and Responsibility” 10

Representative Paul Ryan, House Budget Committee: “The Path to Prosperity” 11

Republican Study Committee: “Honest Solutions: Fiscal Year 2012 Budget” 13

National Commission on Fiscal Responsibility and Reform: “The Moment of Truth..” 14

The Bipartisan Policy Center: “Restoring America’s Future” 17

Senator Pat Toomey: “Restoring Balance” 20

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 A Compendium of Federal Budget and Cost Cutting Proposals
From the Health Policy Perspective
May 2, 2011
INTRODUCTION

Rising health care costs are the single greatest threat to America’s economic stability. They also threaten the
ability of all Americans to receive high quality care in a reliable way. Total health care expenditures were 17
percent of our gross national product in 2010, and are projected to reach 20 percent by the end of this decade.

Unfortunately, no consensus exists as to the best way to solve this problem. The Affordable Care Act took
steps in the right direction, beginning pilot projects to improve the quality and efficiency of care in the Medicare
and Medicaid programs, creating the controversial Independent Payment Advisory Board and taking steps to
increase competition in the insurance markets through state exchanges. Deficit reduction plans from Members
of Congress, the White House and independent groups have offered competing solutions, but tend to focus on
solely the federal health programs without addressing overall health system cost growth.

The National Coalition on Health Care staff prepared the following compendium of health related budget and/or
deficit reduction proposals as a quick guide to the current policy debates on the Hill and in the media. While
there is growing agreement among Republicans, Democrats and Independents that regaining control of the
federal budget means finding a way to curb health care costs, a national consensus on the path forward has
yet to emerge.

Additional budget proposals are likely in the coming months. As an early August deadline for action to extend
the nation’s debt ceiling looms, Vice-President Biden is negotiating with members of the House and Senate
leadership to achieve agreement on a package that can help ensure passage of the debt ceiling increase.
And, despite the withdrawal of Senator Tom Coburn from negotiations, remaining members of the Senate’s
“Gang of Six” are continuing to work toward their goal of developing legislation based on the
recommendations issued by President Obama's National Commission on Fiscal Responsibility and Reform.
Every effort will be made to update this guide as new proposals surface.

Below are summaries of recommendations made by the following parties regarding budget cutting options for
the FY 2012 budget:
1. United States Government Accountability Office (GAO). “Opportunities to Reduce Potential Duplication
in Government Programs, Save Tax Dollars and Enhance Revenue.” March 2011.
2. Congressional Budget Office (CBO). “Reducing the Deficit: Spending and Revenue Options.” March
2011.
3. Report by Office of Budget and Management (OMB). “The President’s Budget: Terminations,
Reductions, and Savings.” February 2011.
4. The Office of the President. “The President’s Framework for Shared Prosperity and Responsibility.”
April 2011.
5. Chairman Paul Ryan of the House Committee on Budget. “The Path to Prosperity.” April 2011.
6. Report by the Republican Study Committee (RSC). “Honest Solutions: Fiscal Year 2012 Budget.” April
2011.
7. The National Commission on Fiscal Responsibility and Reform. “The Moment of Truth.” December
2010.
8. The Bipartisan Policy Center’s Debt Reduction Task Force (Senator Pete Domenici and Dr. Alice Rivlin,
Co-Chairs). “Restoring America’s Future: Reviving the Economy, Cutting Spending and Debt, and
Creating a Simple, Pro-Growth Tax System.” November 2010.
9. Senator Pat Toomey: “Restoring Balance: A budget proposal for fiscal year 2012 that balances the
budget and encourages economic growth.” May 10, 2011.
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Government Accountability Office report to Congress: “Opportunities to Reduce Potential
Duplication in Government Programs, Save Tax Dollars and Enhance Revenue.” March 2011

Congress asked the Government Accountability Office (GAO) to identify federal programs, agencies, offices,
and initiatives, either within departments or government-wide, which have duplicative goals or activities. This
is the first of these annual reports. It highlights “34 areas where agencies, offices, or initiatives have similar or
overlapping objectives or provide similar services to the same populations; or where government missions are
fragmented across multiple agencies or programs.” The report also includes “47 additional areas—beyond
those directly related to duplication, overlap, or fragmentation—describing other opportunities for agencies or
Congress to consider taking action that could either reduce the cost of government operations or enhance
revenue collections for the Treasury. All of these areas span a range of agencies and government missions:
agriculture, defense, economic development, energy, general government, health, homeland security,
international affairs, and social services. Collectively, by reducing or eliminating duplication, overlap, or
fragmentation and addressing these other cost savings opportunities, the federal government could potentially
save billions of tax dollars annually and help agencies provide more efficient and effective services—but these
actions will require some difficult decisions.”

“The U.S. Government Accountability Office (GAO) is known as ‘the investigative arm of Congress’ and ‘the
congressional watchdog.’ GAO supports the Congress in meeting its constitutional responsibilities and helps
improve the performance and accountability of the federal government for the benefit of the American people.”

1. Opportunities exist for Department of Defense (DOD) and Veteran’s Affairs (VA) to jointly
modernize their electronic health record system.
2. VA and DOD need to control drug costs and increase joint contracting whenever it is cost
effective.
3. HHS needs an overall strategy to better integrate nationwide public health information systems.
4. Preventing Billions in Medicaid Improper Payments Requires Sustained Attention and Action by
the Centers for Medicare and Medicaid.
a. GAO suggests that the steps HHS has taken thus far have not been adequate, and they need to
address the gaps in oversight and management of the program.
5. Federal Oversight over Medicaid supplemental payments needs improvement, which could lead
to substantial cost savings
a. GAO has recommended that CMS establish uniform guidance for states that sets acceptable
methods for calculation of non-Disproportionate Share Hospital (DSH) supplemental payments
and to make sure all supplemental payments are reviewed by CMS.
6. Better targeting of Medicare’s claims review could reduce improper payments.
a. GAO found that improving automated review and better targeting the claims to be reviewed
manually could help prevent improper payments.
7. Potential savings in Medicare’s payments for health care.
a. GAO has found potential for cost savings.
i. Physician practice patterns. Profiling physician practice patterns to encourage more
efficient provision of health care services.
ii. Imaging Services. Introducing prior approval requirements and other front-end
approaches to better manage the use of imaging services.
iii. Home Oxygen. Reducing and restructuring payments for home oxygen.
iv. Physician Payments. Reforming payments for physician services so that when two
services overlap, only one payment is made for the overlapping portion.

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Congressional Budget Office: “Reducing the Deficit: Spending and Revenue Options.” March
2011.

The Congressional Budget Office provides Congress with “objective, nonpartisan, and timely analyses to aid in
economic and budgetary decisions on the wide array of programs covered by the federal budget, and the
information and estimates required for the Congressional budget process.” Among its many other products,
the CBO produces regular compendiums for Congress detailing potential budget options.

“This report presents 105 illustrative options that would reduce projected budget deficits. As in past reports, the
options cover an array of policy areas—from defense to energy to entitlement programs to provisions of the tax
code. The budgetary effects shown for most options span the 10 years from 2012 to 2021 (the period covered
by CBO's January 2011 baseline budget projections), although many options would have longer-term effects
as well. “

“The options in this volume come from legislative proposals, various Administrations' budget proposals,
Congressional staff, other government entities, and private groups, among others. Because the spending
options in this volume are intended to help lawmakers review individual programs, they do not include large-
scale budget initiatives, such as eliminating entire departments or agencies. The options are intended to reflect
a range of possibilities, not a ranking of priorities, and the report does not provide an exhaustive list of policy
alternatives. The inclusion or exclusion of a particular policy change does not represent an endorsement or
rejection by CBO. In keeping with CBO's mandate to provide objective, impartial analysis, this report makes no
recommendations.”

1. Add a “Public Plan” to Health Insurance Exchanges.

a. Net Effect on Deficit:
i. Reduce Deficit by $88B between 2012-2021
ii. Increase Deficit by $17.4B between 2012-2016
b. Premiums would be 5% to 7% lower than those offered by private plans.
c. Eligible Income: 138% to 400% of the federal poverty level
2. Limit Medical Malpractice Tests.
a. Cost:
i. Increase Deficit by $62.4M between 2012-2021
ii. Increase Deficit by $15.1M between 2012-2016
3. Adopt a Voucher Plan and Slow the Growth of Federal Contributions for the Federal Employees
Health Benefits (FEHB) Program.
a. Cost:
i. Increase Deficit by $31.35M between 2012-2021
ii. Increase Deficit by $5.47M between 2012-2016
b. Option would offer a voucher for the FEHB program that would cover the first:
i. $5,000 of an individual’s premium
ii. $11,000 of a family’s premium
iii. Vouchers would be indexed to inflation
c. Currently, the insured pays 25% of the premiums cost for the lower options and a higher
percentage for high cost insurance plans. The federal government pays the remainder of the
premium.
4. Convert Medicaid’s Payment for Long-Term Care Services into a Block Grant.
a. Change in Outlays (Indexed the grants to changes in ECI)
i. Reduce Federal Outlays by $73.3 between 2012-2016
ii. Reduce Federal Outlays by $287.4B in 2012-2021

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 b. Change in Outlays (Indexed the grants to changes in ECI and in the Medicaid populations who
are aged, blind and disabled.)
i. Reduce Federal Outlays by $41B between 2012-2016
ii. Reduce Federal Outlays by $186 in 2012-2021
c. Option would convert the federal share of Medicaid payments for LTC as well as a portion of the
federal share of Medicaid Administrative costs into a block grant for each state. Acute care
would still receive funding per usual course.
5. Reduce the Floor on Federal Matching Rates for Medicaid Services.
a. Change in Outlays:
i. Reduce Federal Outlays by $75B in 2012-2016
ii. Reduce Federal Outlays by $181B in 2012-2021
b. 2012: This option would lower the 50% floor on federal matching rates to 45% for all Medicaid
services reimbursed by FMAP rate. This means smaller federal contributions for states with
higher income per capita.
c. 2014: Federal government will pay a different matching rate for newly eligible enrollees under
the ACA. They will vary from 90% – 100% by year and are not affected by FMAP formula.
6. Raise the Age of Eligibility for Medicare to 67.
a. Change in Outlays:
i. Reduce Federal Outlays by $18.2B in 2012-2016
ii. Reduce Federal Outlays by $124.8B in 2012-2021
7. Impose Cost Sharing for the First 20 Days of a Stay in a Skilled Nursing Facility Under Medicare.
a. Change in Outlays:
i. Reduce Federal Outlays by $8.1B in 2012-2016
ii. Reduce Federal Outlays by $21.3B in 2012-2021
b. Under current regulations, Medicare beneficiaries do not pay a copayment for their first 20 days
on SNF. Days 21 through 100, they pay a copayment of 12.5% of the hospital inpatient
deductible.
c. Under new legislation, Medicare beneficiaries would pay 5% of the inpatient deductible.
8. Require a Copayment for Home Health Episodes Covered by Medicare.
a. Change in Outlays:
i. Reduce Federal Outlays by $14B in 2012-2016
ii. Reduce Federal Outlays by $40.1B in 2012-2021
b. Medicare beneficiaries would now be required to pay copayments for each home health
episode, a 60 day period of services. Beneficiary would pay 10% of total cost.
9. Reduce Medicare Costs by Changing the Cost-Sharing Structures for Medicare and Medigap
Insurance.
a. Change in Outlays:
i. Reduce Federal Outlays by $35.2B in 2012-2016
ii. Reduce Federal Outlays by $92.5B in 2012-2021
10. Increase the Basic Premium for Medicare Part B to 35 Percent of the Program’s Costs.
a. Change in Outlays:
i. Reduce Federal Outlays by $71.3B in 2012-2016
ii. Reduce Federal Outlays by $241.2B in 2012-2021
b. This option would gradually rise, starting in 2012. In a five year period, the Part B premium
would increase from 25% to 35%.
11. Reduce Medicare’s Payment Rates Across the Board for High-Spending Areas.
a. Change in Outlays:
i. Reduce Federal Outlays by $11.6B in 2012-2016
ii. Reduce Federal Outlays by $47.6B in 2012-2021
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 b. This option would provide for across the board reductions to Medicare payment rates for
services covered under Part A and B (fee for service parts of the program).
c. The payment rates under these options would be reduced in areas where relative spending
exceeds 1.1% of the national average, which is where spending is 10% higher. Reductions
would equal one half of the difference between the region’s relative spending and the threshold
of 1.1.
12. Eliminate the Critical Access Hospital (CAH), Medicare-Dependent Hospital (MPH), and Sole
Community Hospital (SCH) Programs in Medicare.
a. Change in Outlays:
i. Reduce Federal Outlays by $23B in 2012-2016
ii. Reduce Federal Outlays by $62.2B in 2012-2021
b. This option would eliminate the CAH, MDH and SCH programs and end the higher Medicare
payments made to these facilities.
13. Require Manufacturers to Pay a Minimum Rebate on Drugs Covered Under Medicare Part D for
Low-Income Beneficiaries.
a. Change in Outlays:
i. Reduce Federal Outlays by $38B in 2012-2016
ii. Reduce Federal Outlays by $112B in 2012-2021
b. This option would require manufacturers of brand name drugs to pay the federal government a
rebate on drugs purchased by enrollees in the LIS program, starting in 2013.
c. Manufacturers would be required to participate in the new Part D rebate program in order for the
drugs to be covered by Medicaid, the Veterans Health Administration, and Parts B and D of
Medicare.
14. Accelerate and Modify the Excise Tax on High-Cost Health Care Coverage
a. Net Effect on Deficit:
i. Reduce Deficit by $309.5B between 2012-2016
ii. Reduce Deficit by $100.1B between 2012-2021
b. Starting in 2018, an excise tax will be imposed on employment based health coverage if the
total value of that coverage, including both the employee’s and employer’s contributions,
exceeds a certain threshold.
15. Increase the Payroll Tax Rate for Medicare Hospital Insurance by 1 Percentage Point
a. Net Effect on Deficit:
i. Reduce Deficit by $650.8B between 2012-2016
ii. Reduce Deficit by $285.9B between 2012-2021
b. Financing for Hospital Insurance (HI) benefits provided under Medicare Part A is the HI payroll
tax. Currently, 2.9% of earning with the cost shared equally by the employee and employer.
16. Repeal the Individual Health Insurance Mandate
a. Net Effect on Deficit:
i. Increase Deficit by $74B between 2012-2016
ii. Increase Deficit by $282B between 2012-2021

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Office of Management and Budget: “The President’s Budget for Fiscal Year 2012 -
Terminations, Reductions, and Savings.” February 2011

Every year, on the first Monday in February, the President submits his budget to Congress in order to kick-start
the budgetary process so that it may be completed by the start of the new fiscal year on October 1. The
document reflects the fiscal and programmatic priorities of the President and Congress will take these priorities
under advisement, although the final budget produced by Congress may not reflect them. The Fiscal Year
2012 budget proposal comes as the United States is in the midst of economic recovery and reflects President
Obama’s plan “to rebuild our economy and win the future by out-innovating, out-educating, and out-building our
global competitors and creating the jobs and industries of tomorrow.”

Included in the FY 2012 budget was a section called “Terminations, Reductions and Savings.” This portion of
the budget “identifies programs that do not accomplish their intended objectives, are not efficient, or that
replicate efforts being completed by another initiative and recommends these programs for either termination
or reduction. There have been more than 120 terminations, reductions, and other areas of savings identified
that will save approximately $20 billion each year.”

1. Health Care (Medicaid Proposals)

a. Brief Summary:
i. Proposed Changes from Current Law (Totals):
1. 2012 -2016: -$2,350M
2. 2012- 2021: -$10,570M
ii. Limit Medicaid Reimbursement of Durable Medical Equipment (DME) based on
Medicare Rates.
iii. Rebase Medicaid Disproportionate Share Hospital (DSH) allotments in 2021.
2. Health Care (Medicare Proposals)
a. Brief Summary:
i. Proposed Changes from Current Law (Totals):
1. 2012 -2016: -$880M
2. 2012- 2021: -$6,490M
b. Require the Secretary to determine the geographic scope of Quality Improvement Organization
(QIO) contracts to maximize efficiency.
c. Eliminate the conflict of interest between beneficiary protection and quality improvement
activities for QIO.
d. Expand pool of contractors eligible for QIO work.
e. Extend the QIO contract length from 3 years up to 5 years.
f. Align QIO contract terminations with Federal Acquisition Regulations.
g. Dedicate HER penalties to improving Medicare program financing.
3. Health Care (Pharmaceutical Proposals)
a. Brief Summary:
i. Proposed Changes from Current Law (Totals):
1. 2012 -2016: -$4,435M
2. 2012- 2021: -$12,897M
b. Modify length of exclusivity to facilitate faster development of generic biologics.
c. Prohibit brand and generic drug companies from delaying the availability of new generic drugs.
4. Program Integrity Allocation Adjustment – Centers for Medicare and Medicaid Service
a. Brief Summary:
i. Mandatory Savings (in millions)
1. 2012-2016: -$4,600
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 2. 2012-2021: -$10,270
ii. Multi-year increase in program integrity funding at HHS through a discretionary
allocation adjustment.
iii. It is currently estimated that for every dollar spent by HHS to fight health care fraud and
reduce improper payments, about $1.50 will be saved and averted.
5. Program Integrity Initiative-Expand CMS Activity.
a. Brief Summary:
i. Proposed Changes from Current Law (Totals):
1. 2012 -2016: -$9,060M
2. 2012- 2021: -$32,335M
ii. Medicare Proposals
1. Recover erroneous payments made to insurers participating in Medicare
Advantage.
2. Increase scrutiny of providers using higher-risk banking arrangements to receive
Medicare payments.
3. Allow civil monetary penalties for providers who do not update enrollment
information.
4. Study the feasibility of using universal product numbers (UPNs) to improve
payment accuracy in Medicare.
5. Create a system to validate physicians’ and practitioners’ orders for certain high
risk products and services.
6. Require prepayment review for all power wheelchairs.
iii. Medicaid Proposals
1. Reduce Medicaid provider tax threshold beginning in 2015.
2. Strengthen Medicaid third-party liability.
3. Track high prescribers and utilizers of prescription drugs in Medicaid.
4. Require manufacturers that improperly report items for Medicaid drug coverage
to fully repay States.
5. Enforce Medicaid drug rebate agreements.
6. Increase penalties on drug manufacturers for fraudulent non-compliance with
Medicaid drug rebate agreements.
7. Require drugs to be properly listed with the FDA to receive Medicaid coverage.
8. Prohibit Federal funds from being used as Medicaid/CHIP State share unless
specifically authorized by law.
iv. Medicare/Medicaid Proposals
1. Use a portion of Recovery Audit Contractor recoveries to implement actions that
prevent improper payments and fraud.
2. Provide flexibility to the Secretary in implementing predictive analytics
technologies for claims payment to maximize cost effectiveness.
3. Permit exclusion of individuals affiliated with entities sanctioned for fraudulent or
other prohibited actions from federal health care programs.
4. Limit the discharge of debt in bankruptcy proceedings in cases of fraudulent
activity.
5. Strengthen penalties for illegal distribution of Medicare, Medicaid, or CHIP
beneficiary identification privileges.

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Office of the President: “The President’s Framework for Shared Prosperity and Responsibility.”
April 2011

As part of the ongoing discussions around fiscal responsibility and deficit reduction, President Obama laid out
his framework for Shared Prosperity and Responsibility in a speech in April of 2011. The framework builds on
the 2012 budget proposal and reflects the President’s vision for cutting unnecessary spending throughout the
government while maintaining investments for the future. It is designed to achieve $4 trillion in deficit reduction
over 12 years or less and introduces a “debt failsafe” trigger for across the board spending reductions if budget
projections do not show that the debt-to-GDP ratio has stabilized and is declining by 2014. This trigger would
not apply to Social security, low-income programs or Medicare benefits.

1. Debt Failsafe Trigger

a. Trigger ensures that deficits as a share of the economy average no more than 2.8% of the GDP
through the second half of the decade.
b. The trigger does not apply to Social Security, low-income programs, or benefits for Medicare
enrollees.
c. If by 2014, budget projections do not show that the debt to GDP ratio has stabilized and is
declining in the second half of the decade, the failsafe will trigger an across the board spending
reduction.
i. This also includes spending through the tax code.
d. Proposes that the trigger include a mechanism that does not make an economic downturn
worse or interfere with the nation’s ability to respond to a national security threat.
2. Addressing the long-term driver of Medicare cost growth
a. Strengthen Independent Payment Advisory Board (IPAB).
i. Analyze Medicare cost growth.
1. Set a new target of Medicare growth per a beneficiary growing with GDP per
capita plus .5%.
2. Improve quality of care while reducing costs, including allowing it to promote
value-based benefit designs that promote proven services role prevention
without shifting costs to seniors.
3. Enforcement mechanisms such as an automatic sequester as a backstop for
IPAB, Congress and the Secretary of HHS.

b. Reforming the Federal-State partnerships to strengthen Medicaid and promote simplicity,

efficiency and accountability.
c. Current federal matching formulas for public programs would be replaced with one across
the board formula.
d. States are rewarded for efficiency through formula and automatic increases if a recession
forces enrollment and State costs to rise.

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Chairman Paul Ryan, House Budget Committee: “The Path to Prosperity.” April 2011

As part of the federal budget process, the Budget Committees from both chambers of Congress produce
budget resolutions. House Budget Committee Chairman Paul Ryan (R-WI-01) released the “Path to
Prosperity” in April of 2011 and the Budget Committee passed it along party lines. The Path to Prosperity
would drastically reduce government spending and make significant changes to federal health programs and
the tax code. The plan is projected to reduce the deficit by $4.4 trillion.

The resolution, H.CON.RES.34, passed the House of Representatives by a vote of 235 to 193.

1. “Efficient, Effective and Responsible Government”

i. Streamlining Other Government Agencies
1. “Repeals the new health care law and moves towards patient-centered reform.”
ii. Eliminating wasteful spending
1. Anti-Fraud Accounts:
a. Waste of taxpayers’ dollars in improper payments to Medicare, Medicaid,
Unemployment Insurance, Supplemental Social Security and Disability
Insurance programs.
b. In 2010, there was $125 billion in improper payments.
c. Saves a total of $26 billion over the next 10 years
2. “Strengthening the Social Safety Net”
i. Repairing a Broken Medicaid System
1. Secures the Medicaid benefit by converting the federal share of Medicaid
spending into a block grant tailored to meet each state’s needs, indexed for
inflation and population growth.
a. States will have freedom to tailor Medicaid programs that fit the needs of
their own populations.
2. Improve the health-care safety net for low-income Americans by giving states the
ability to offer their Medicaid populations more options and access to better care.
a. Medicaid recipients will be able to choose own doctors.
3. “Save $750 billion over 10 years, contributing the long term stabilization of the
federal government’s fiscal path and encouraging fiscal responsibility at the state
level.”
a. “Medicaid’s improper payment rate is $33 billion a year.”
b. “Medicaid’s current structure gives states a perverse incentive to grow the
program and little incentive to save.”
3. Fulfilling the Mission of Health and Retirement Security for All Americans
i. “Saving Medicare”
1. “Save Medicare for current and future generations while making no changes for
those in and near retirement.”
a. “For younger workers, when they reach eligibility, Medicare will provide a
Medicare payment and a list of guaranteed coverage options from which
recipients can choose a plant that best suits their needs.”
i. Premium Support: “A better way to deliver secure benefits.”
1. Medicare would make a payment to the plan chosen by the
beneficiary.
b. “Future Medicare beneficiaries will be able to choose a plan like the
members of Congress do.”

10
 c. “Medicare will provide additional assistance for lower-income
beneficiaries and those with greater health risks.”
2. Ensure litigation is not passed on to consumers in the form of higher health-care
premiums by capping non-economic damages in medical liability lawsuits.
3. “Any current- law Medicare savings must go to saving Medicare, not financing
the creating of the new open ended health care entitlements.”
4. “Fix the Medicare physician payment formula for the next ten years so that
Medicare beneficiaries continue to have access to health care.”
a. “These reforms also ensure affordability by fixing the currently broken
subsidy system and letting market competition work as a real check on
widespread wastes and sky rocketing health care costs.”
i. “Putting patients in charge of their health care dollars will force
providers to compete against each other on price and quality.”

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Republican Study Committee (RSC): “Honest Solutions: Fiscal Year 2012 Budget.” April 2011

“The Republican Study Committee is a group of 175 House Republicans organized for the purpose of
advancing a conservative social and economic agenda in the House of Representatives.” RSC Budget and
Spending Task Force Chairman Scott Garrett and RSC Chairman Jim Jordan put forth a budget proposal for
FY 2012, “Honest Solutions,” that would build on House Budget Committee Chairman Paul Ryan’s proposal to
balance the budget in nine years and to “put us on track to fiscal sanity in America.”

1. “Make Medicare Stronger.”

a. The RSC wants to transform Medicare systems similar to the one Members of Congress have
and to the current Medicare Part D which allows seniors to choose between private prescription
drug plans.
b. The RSC proposes that in 2017, all current beneficiaries will have the option to voluntarily opt-in
to a menu of private insurance plans.
i. Can choose to stay in current program.
ii. Beneficiaries in the new insurance market would receive premium subsidies to help
offset the cost of their health insurance policy.
1. Subsidies would be adjusted for an individual’s current health and the cost of
medical care in the area which they live as well as the individual’s wealth and
income.
c. No changes to Medicare for those currently 60 years old and older.
2. Adjust the Medicare Eligibility Age.
a. This budget proposes rising the age of Medicare eligibility by two months every year beginning
with those born in 1952 until the eligibility age reaches 67 for those born in 1963.
b. Does not affect individuals currently 60 or older.
3. “Reduce Medicare Waste, Fraud, and Abuse.”
a. Budget proposes dedicating resources to the elimination of improper payments on Medicare’s
bank accounts.
4. “Improve Medicare.”
a. The RSC believes that greater use of health information technology should be a part of an
improved Medicare system.
b. The RSC proposes making medical breakthroughs more readily acceptable to patients.
c. Financial Incentives for Medicare beneficiaries who lead healthy lifestyles.
i. Such as; insurance premium discounts or reduced cost sharing if beneficiaries quit
smoking, control cholesterol, or lose weight.
5. Repeal Obamacare.
6. “Make Medicaid Stronger than Ever.”
a. The RSC proposes block granting the entire Medicaid program at FY 2006 levels starting in FY
2012 and funding the program with an inflation adjustment through FY 2021.
b. States must work to modernize their administrative systems for determining enrollment, set and
enforce eligibility standards to ensure the truly needy are receiving care, expand the use of
managed care programs, and move away from the nursing home model toward home and
community care.
7. Reduce Funding for the State Children’s Health Insurance Program (SCHIP).

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National Commission on Fiscal Responsibility and Reform Budget: “The Moment of Truth..”
December 2010

The National Commission on Fiscal Responsibility and Reform was created by an executive order in February
of 2010. Composed of eighteen bipartisan members from the House, Senate and individuals outside of
Congress, the Commission was tasked with “identifying policies to improve the fiscal situation in the medium
term and to achieve fiscal sustainability over the long run.” The Commission was required to produce and vote
on a report containing a set of recommendations by December 1, 2010. The final report required the approval
of fourteen of the eighteen members and would then be sent to Congress for consideration.

The Moment of Truth is the product of the Commission. Despite the efforts of the Commission Co-Chairs, the
Moment of Truth only garnered eleven of eighteen votes. Although the report did not immediately go to
Congress, a number of Members have since endorsed it, and Senator Mark Warner (D-VA) and Senator Saxby
Chambliss (R-GA) announced they were working to develop legislation based on the report. Those two
senators have since joined the four Senators from the Commission who voted to approve the Moment of Truth
to form the “Gang of Six,” whose negotiations around fiscal responsibility are ongoing as of April 2011.

The Co-Chairs of the Commission launched a private entity, the Moment of Truth Project, in March of 2011 “to
increase awareness of our country's fiscal challenges, educate people about the choices we face in dealing
with them, and promote action on reducing the national debt and deficit. It also hopes to use the Fiscal
Commission as an example and framework for how bipartisan agreement on a comprehensive fiscal plan is
possible.”

1. Recommendation 3.1: Reform the Medicare Sustainable Growth Rate (SGR).

a. Saves $3 billion in 2015, $26 billion through 2020, relative to a freeze.
b. Reform the SGR for physician payment and require the fix to be offset.
i. SGR – “doc fix” – was created to control Medicare spending by setting targets for
physician services and reducing payment updates if spending exceeded the targets.
2. Recommendation 3.2: Reform or Repeal the Community Living Assistance Services and
Supports (CLASS) Act.
a. Costs $11 billion in 2015, $76 billion through 2020
b. This act established a voluntary long-term care insurance program enacted as part of
the Affordable Care Act, attempting to address the need for non-institutional long-term care.
c. Program is not financially sound.
i. The program’s earliest beneficiaries will pay modest premiums up front, reducing the
national deficit, but they will receive benefits many times longer.
a) Will need to increase premiums and decrease benefits to sustain the system.
i. This will make the program unappealing to beneficiaries and
financially unsound.
3. Recommendation 3.3: Pay for the Medicare “Doc Fix” and CLASS Act.
a. Enact specific health savings to offset the costs of the SGR fix and the lost receipts from
repealing or reforming the CLASS Act.
b. Medicare Savings
i. Increase government authority and funding to reduce Medicare fraud.
a) Saves $1 billion in 2015, $9 billion through 2020
b) Recommends increases in resources (through a cap adjustment in the
discretionary budget) and authority to CMS to reduce waste from fraud and
abuse.
ii. Reform Medicare cost-sharing rules.

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 a) Saves $10 billion in 2012, $110 billion through 2020
b) Cost sharing for many medical services is low. This leads to over utilization
of healthcare. Thus, copays do not offer protection from catastrophic
financial risk or any indicators in spending predictability.
c) Commission recommends establishing a single combined annual deductible
of $550 for Part A (hospital) and Part B (medical care), along with a 20%
uniform coinsurance on health spending above the deductible.
d) Catastrophic coverage would also be provided to seniors by reducing their
coinsurance rate to 5% after costs exceed $5,500 and capping total sharing
at $7,500.
iii. Restrict first-dollar coverage in Medicare supplemental insurance.
a) Medigap savings included in previous option. Additional savings total $4
billion in 2015, $38 billion in 2020.
b) Medigap plans are private insurance plans that cover much of the cost
sharing in Medicare. Reduction of cost sharing leads once again to
overutilization of care.
c) This recommendation would prohibit Medigap plans from covering the first
$500 of an enrollee’s cost sharing liabilities and limit coverage to 50% of the
next $5,000 in Medicare cost sharing.
d) Also recommended for Tricare, other federal retirees and for private
employer-covered retirees.
iv. Extend Medicaid drug rebate to dual eligibles in Part D.
a) Saves $7 billion in 2015, $49 billion through 2020.
b) Drug companies are required to pay rebates for prescription drugs purchased
by Medicaid beneficiaries.
c) The Commission recommends that these rebates be extended to Medicaid
beneficiaries who are also eligible for Medicare (dual eligible) and who
receive prescription drug coverage through Part D.
v. Reduce excess payments to hospitals for medical education.
a) Saves $6 billion in 2015, $60 billion through 2020.
b) Medicare provides additional funding to hospitals with teaching programs for
costs related to residents receiving a graduate medical education (GME), as
well as, indirect costs (IME).
c) Commission recommends bringing these payments in line with the costs of
medical education by limiting hospitals’ direct GME payments to 120% of the
national average salary for residents in 2010 and updated annually by
chained CPI.
d) Commission also recommends an IME adjustment from 5.5% to 2.2%, which
the Medicare Payment Advisory Commission estimated would more
accurately reflect indirect costs.
vi. Cut Medicare payments for bad debts.
a) Saves $3 billion in 2015, $23 billion through 2020.
b) Medicare currently reimburses hospitals for unpaid deductibles and copays
owed by beneficiaries. The commission recommends putting a gradual end to
this.
vii. Accelerate home health savings in ACA.
a) Saves $2 billion in 2015, $9 billion through 2020.
b) Commission recommends accelerating the policies in the ACA changing
reimbursements for home health providers.
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 c. Medicaid Savings
i. Eliminate state gaming of Medicaid tax gimmick.
a) Saves $5 billion in 2015, $44 billion through 2020.
b) Some states finance Medicaid by imposing taxes on the same providers who
are paid by the Medicaid program. The Commission proposes the restriction
and eventual elimination of this practice.
ii. Place dual eligibles in Medicaid managed care.
a) Saves $1 billion in 2015, $12 billion through 2020.
b) Place dual eligibles in Medicaid managed care. Medicare would continue to
pay its share of the costs, reimbursing Medicaid.
iii. Reduce funding for Medicaid administrative costs.
a) Saves $260 million in 2015, $2 billion through 2020.
b) The Commission recommends eliminating Medicaid payments to states for
administrative costs that are duplicative of funds originally included in the
Temporary Assistance for Needy Families (TANF) block grants.
d. Other Savings
i. Allow expedited application for Medicaid waivers in well-qualified states.
ii. Medical malpractice reform
a) Saves $2 billion in 2015, $17 billion through 2020.
b) Modify the “collateral source” rule to allow outside sources of income
collected as a result of an injury (i.e. workers’ compensation).
c) Impose a statute of limitations on medical malpractice lawsuits.
d) Replace joint-and-several liability with a fair-share rule.
e) Create specialized “health courts” for medical malpractice lawsuits.
f) Allow “safe haven” rules for providers who follow best practices of care.
iii. Pilot premium support through Federal Employee Health Benefits (FEHB)
Program.
a) Saves $2 billion in 2015, $18 billion through 2020
b) The Commission proposes transforming the FEHB program into a defined
contribution premium support plan that offers a fixed subsidy that grows by no
more than GDP plus 1% each year.
i. Retirees could use this subsidy to pay a portion of their Medicare
premium.
4. Recommendation 3.4: Aggressively Implement and Expand Payment of Reform Pilots.
a. Direct CMS to design and begin implementation of Medicare payment reform pilots,
demonstration, and programs as rapidly as possible. Allow successful programs to be
expanded without further congressional action.
5. Recommendation 3.5: Eliminate Provider Carve-outs from IPAB.
a. Give the Independent Payment Advisory Board (IPAB) authority to make
recommendations regarding hospitals and other exempted providers.
6. Recommendation 3.6: Establish a Long-term Global Budget for Total Health care Spending.
a. The Commission recommends setting up a review process for all federal health care
spending.
b. Establish a global budget for total federal health care costs and limit the growth to GDP
plus 1%.

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The Bipartisan Policy Center’s Debt Reduction Task Force: “Restoring America’s Future:
Reviving the Economy, Cutting Spending and Debt, and Creating a Simple, Pro-Growth Tax
System.” November 2010.

“The Bipartisan Policy Center (BPC) is a think tank that was established in 2007 by former Senate Majority
Leaders Howard Baker, Tom Daschle, Bob Dole and George Mitchell to develop and promote solutions that
can attract public support and political momentum in order to achieve real progress. The BPC’s Debt
Reduction Task Force is chaired by former Senate Budget Committee Chairman Pete Domenici and former
White House Budget Director and Federal Reserve Vice Chair Alice Rivlin, and includes former White House
and Cabinet officials, former Senate and House members, former governors and mayors, and business, labor,
and other leaders.” The Task Force’s plan, “Restoring America’s Future” is designed to solve the debt crisis
and create jobs.

According to the BPC, “The plan reduces and stabilizes the debt at 60 percent of the economy, and it reforms
personal and corporate taxes to make America more competitive, ensures that Social Security can pay
benefits to future generations, and controls health care costs. To be sure, Restoring America’s Future makes
tough choices. It freezes discretionary spending, reforms programs, ends tax deductions, and raises new
taxes. But, by stabilizing the debt, reforming the tax code, and controlling health care costs, it lays the
groundwork for a brighter future.”

1. Incentivize Employers and Employees to Select More Cost-effective Health Plans by Capping
and Phasing out the Tax Exclusion for Employer-Sponsored Health Insurance.
a. Description:
i. Under current law, employer contributions to employee health benefits are not taxable;
also, many employers have set up a way for their employees to pay for their health
premiums from pre-tax income. This causes a large revenue loss for the US
government, roughly $250 billion a year.
ii. The Task Force proposes a cap on contributions for employers and employees who are
eligible for tax-favored treatment in 2018. Then, reduce the cap each year by equal
dollar amounts. In 2028, all contributions to employer sponsored plans will be taxable.
This proposal will also replace the excise tax on high premium health insurance plans
that is scheduled to start in 2018.
b. Cumulative Budget Savings in Billions from 2012 through:
i. 2020: $113
ii. 2025: $1,141
iii. 2030: $3,299
iv. 2040: $9,925
2. Gradually Raise Medicare Part B Premiums from 25% to 35% of Program Costs over Five Years.
a. Description:
i. Gradually Raise Medicare Part B Premiums from 25% to 35% of Program Costs over
Five Years.
b. Cumulative Budget Savings from 2012 through 2018: $128 billion
3. Use Medicare’s Buying Power to Increase Rebates from Pharmaceutical Companies.
a. Description:
i. This proposal will apply Medicaid’s approach to Medicare Part D, effectively increasing
rebates by 15%.
ii. Applies a minimum rebate for all single-source drugs.
b. Cumulative Budget Savings from 2012 through 2018: $100 billion
4. Modernize Medicare’s Benefits Package, Including the Copayment Structure
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 a. Description:
i. Provide catastrophic protection.
ii. Reduce very high deductibles for hospital stays.
iii. Cost sharing for home health and laboratory services.
iv. IPAB will review benefit structures every two years.
b. Cumulative Budget Savings from 2012 through 2018: $14 billion
5. Bundle Medicare’s Payments for Post-Acute Care to Reduce Costs
a. Description:
i. Broaden applicability of the inpatient Diagnosis Related Group (DRG) payment to post-
acute services.
ii. New bundled payment rates will be budget neutral, with a plan to capture 80% of the
efficiencies gained from the broader payment unit for the program and allow hospitals to
retain 20%.
b. Cumulative Budget Savings from 2012 through 2018: $5 billion
6. Strengthen Medicare for the Long Term: Transition to a Premium Support Option
a. Description:
i. The program will transition Medicare to a premium support program.
ii. The Task force proposes that, starting in 2018, federal support per Medicare enrollee will
be limited to the 2017 level and will be allowed to grow no faster than a five year moving
average of GDP plus 1%.
b. Cumulative Budget Savings in Billions from 2012 through:
i. 2020: $172
ii. 2025: $858
iii. 2030: $2,089
iv. 2040: $7,147
7. Control Medicaid Costs in the Short Term: Eliminate Barriers to Enrollment for
Medicare/Medicaid Dual Eligibles in Managed Care Options.
a. Description:
i. This proposal would create ways for states to streamline their efforts enrolling dual
eligibles in managed care. They would implement such measures by providing a fast-
track channel for waiver applications and by eliminating barriers created by present
upper payment limit rules on provider reimbursement.
b. Cumulative Budget Savings from 2012 through 2018: $5 billion
8. Control Medicaid Costs in the Long Term: Incentivize Government to Control Medicaid Growth.
a. Description:
i. The Task force’s goal is to reduce excess cost growth in the Medicaid program by GDP
plus 1%.
1. Breaks Medicaid’s financial link between the federal government and the states
in a budget-neutral manner.
2. Optimal allocation of program responsibilities between the states and federal
government would be determined and make each party directly responsible for
that component of the program, which will restore incentives to control costs.
b. Cumulative Budget Savings in Billions from 2012 through:
i. 2020: $20
ii. 2025: $202
iii. 2030: $655
iv. 2040: $2,983
9. Require States to Cap Awards for Noneconomic and Punitive Damages for Medical Malpractice.
a. Description:
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 i. The Task Force proposes that the federal government provide substantial grants to
states to fund the development and testing of major reforms in the medical liability
system, such as safe harbors for practicing in accordance with accepted practice
guidelines, specialized medical liability courts, enterprise liability, and special
administrative procedures for handling most medical malpractice claims.
b. Cumulative Budget Savings in Billions from 2012 through:
i. 2020: $48
ii. 2025: $81
iii. 2030: $130
iv. 2040: $299
10. Introduce an Excise Tax on the Manufacture and Importation of Beverages Sweetened with
Sugar or High-Fructose Corn Syrup (Non-diet Soft drinks, Sweetened Fruit Drinks, etc.) to
reduce Obesity-Related Health Care Costs
a. Description:
i. This proposal will impose an excise tax in 2010 of 1 cent per ounce, indexed to inflation
after 2018, on the manufacture and importation of beverages sweetened with sugar,
high-fructose corn syrup or similar sweeteners.
ii. The tax will not apply to beverages with artificial sweeteners.
b. Cumulative Budget Savings in Billions from 2012 through:
i. 2020: $156
ii. 2025: $260
iii. 2030: $375
iv. 2040: $644

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Senator Pat Toomey: “Restoring Balance: A budget proposal for fiscal year 2012 that balances
the budget and encourages economic growth.” May 10, 2011.

Senator Toomey’s FY 2012 “Balanced Budget Proposal” claims to balance the budget by 2020 with a modest
surplus in 2021. He believes that it will reduce publicly held debt by approximately 54.5% of the GDP by 2021.
The budget also proposes to lower spending to 18.4% of the GDP.

1. Repeals Obamacare taxes, spending and entitlement programs

2. Medicare
a. Permanently reforms the sustainable growth rate so doctors do not face the prospect of
devastating cuts each year
b. Implements medical malpractice reform
3. Medicaid
a. Promotes flexibility by implementing a block grant program to the states
b. Gradually reduces spending to $14 billion more than pre-stimulus levels (2008 level) by 2019
c. Keeps spending above the 2000 level adjusted for population growth and inflation

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