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President Proposes Plan for Reducing Federal Budget

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President Proposes Plan for Reducing Federal Budget

April 18, 2011

On April 13, President Obama delivered a speech outlining his plan for reducing the federal budget deficit by $4 trillion within 12 years, in part through Medicare and Medicaid reforms. Specifically, the president is calling for $480 billion in Medicare and Medicaid cuts by 2023 and at least an additional $1trillion in cuts over the subsequent decade.

With regard to Medicaid, the plan calls for savings of at least $100billion over 10 years. The president’s plan would replace the current federal matching formulas with a single matching rate that rewards states for efficiency and automatically increases if a recession increases enrollment and associated state costs. AdditionalMedicare and Medicaid “accountability” proposals include, among others, restricting states’ use of provider taxes to lower their state spending without providing additional health services; recovering “erroneous” payments from Medicare Advantage plans; capping Medicaid payments for durable medical equipment (DME); and implementing Medicaid management of high prescribers and users of prescription drugs, among other things.

President Obama has asked Majority Leader Harry Reid, Speaker John Boehner, Minority Leader Nancy Pelosi and Minority Leader Mitch McConnell to each designate four members to participate in bipartisan, bicameral negotiations led by the vice president—beginning in early May—to develop a legislative framework for comprehensive deficit reduction.