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Obama budget sets Medicare savings, hospitals seek reprieve

By David Morgan

WASHINGTON (Reuters) - President Barack Obama's budget plan for 2015 would save $402 billion from the Medicare and Medicaid government healthcare programs for the elderly and poor over the next 10 years, primarily due to reduced reimbursement to healthcare providers and drugmakers.

A White House budget proposal for the fiscal year beginning October 1, released on Tuesday, would save more than $350 billion by pursuing a familiar menu of options that range from increased drug rebates to more efficient post-acute care, reduced hospital admissions and new means testing for Medicare.

The proposals are not expected to be enacted by Congress, where lawmakers are pursuing their own budget plans. But the blueprint does set out administration priorities on issues that could loom large in November's congressional elections, including a long-standing policy to avoid major structural changes for Medicare.

Medicare and Medicaid are expected to remain drivers of federal debt, but administration officials believe the programs are best sustained through more moderate reforms. They are expected to represent a combined $1.4 trillion in federal spending by 2024, versus an estimated $862 billion today, according to White House data.

A leading hospital group is calling on budget chiefs in the Senate and House of Representatives to avoid payment reductions for hospitals and other policy mandates, saying the changes are unnecessary because Medicare is on track to see an additional $900 billion in savings over the next decade.

A study commissioned by the Federation of American Hospitals, which represents more than 1,000 facilities, said the windfall would result from structural changes in the healthcare sector that include the adoption of new care and payment models encouraged by Obama's healthcare reform law.

The group also noted that healthcare spending growth has been near historic lows in recent years. The nonpartisan Congressional Budget Office recently reduced its 10-year spending forecast for Medicare and Medicaid by $221 billion as a result of slower growth.

Federation President Charles Kahn said in letters to lawmakers, including Senate Budget Committee chair Patty Murray and House Republican counterpart Paul Ryan, that new spending reductions would be "unsustainable and counterproductive" for hospitals.

"They would jeopardize both access to care now, and the investments hospitals must make, going forward, to accelerate the structural changes driving the new era of low cost growth," he wrote.

Obama's proposed savings on healthcare spending are part of a $77.1 billion discretionary budget for the Department of Health and Human Services. The plan calls for $800 billion less than spending levels enacted by Congress for this year.

The proposal would keep public funding for the Food and Drug Administration unchanged at $2.6 billion while estimating that the agency would receive $2.1 billion in revenues from industry user fees. That would mean a decline in the portion of the FDA budget provided through tax dollars. This year, FDA is expected to see only $1.8 billion in fee revenue.

The FDA budget sets aside $24 million in new funding for food safety and $25 million to strengthen the agency's oversight of compounding pharmacies in the wake of a 2012 outbreak of fungal meningitis that killed 64 people. The outbreak was linked to a compounding pharmacy in Massachusetts.

The White House proposal at the National Institutes of Health, which oversee biomedical research, remained flat at $30.2 billion, compared with $30.15 billion in outlays for the current fiscal year. A year ago, Obama proposed $31 billion in funding for the agency.

The administration touted NIH's cutting-edge research into cancer, Alzheimer's and other disorders. But analysts said the proposal, if enacted, would do little to alleviate pressures on researchers who have seen funding cuts in recent years as a result of deficit reduction.

(Additional reporting by Toni Clarke; Editing by Michele Gershberg and Jonathan Oatis)

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