President Bush's new budget proposal would cut $196 billion over five years from both Medicare and Medicaid -- programs that provide health care to millions of poor and elderly, federal officials announced Monday.
The proposed cuts are part of a plan to stop Medicare from running out of money in little more than a decade, Secretary of Health and Human Services (HHS) Mike Leavitt told reporters during a press conference. He said the savings would help keep premiums affordable, maintain the Medicare/Medicaid system, and balance the current Medicare budget.
"The Medicare portion of the budget should be viewed as a stark warning," Leavitt said. "Medicare on its current course is 11 years from going broke. Americans have become numbed to entitlement warnings as a repeated cycle of alarms and inaction," he said.
But President Bush and Leavitt are sure to face a Congressional showdown over the budget proposals.
"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," Sen. Max Baucus, D-Mont., and chairman of the Senate Finance Committee, told the Associated Press.
Not every agency would lose funds in the new budget: The cash-strapped U.S. Food and Drug Administration would receive a nearly 6 percent boost in financing, much of which would go to programs that oversee food safety, agency officials said.
All of these announcements stem from the $3.1 trillion 2009 budget proposal announced by the Bush administration Monday.
According to Leavitt, the majority of the Medicare cuts would come from reductions to fees paid to hospitals, nursing homes and hospices.
Medicare makes up 56 percent of the $737 billion HHS budget, Leavitt said. Cuts in the Medicare budget will become the norm until Medicare itself changes, he said. "We can keep our national commitment, but to do this we need to change our management of Medicare," Leavitt said.
Under the president's plan, the annual growth of Medicare spending would slow to 5 percent instead of the 7 percent currently projected. Similarly, spending growth would slow from 7.3 percent to 7 percent for Medicaid.
Medicare is an inefficient system and needs to be changed, Leavitt charged. Changing the system means putting more responsibility into the hands of consumers, enabling them to make their own health-care decisions, he said.
"If consumers were allowed to make the decisions in an efficient market, through electronic medical records, through quality measures, through cost comparisons and choices and incentives, their decisions would be far more precise and wise," he said. "It would produce better health, and at a lower cost."
But at least one critic believes a shrinking Medicare budget would hurt consumers and the health-care system.
"President Bush's proposed cuts to Medicare would hurt older and disabled Americans and take a wrecking ball to many essential hospitals across the country," Robert M. Hayes, president of the Medicare Rights Center, said in a prepared statement. "It is indefensible for the President to propose hurting America's grandparents while maintaining his rabid defense of Medicare overpayments to for-profit health insurance companies."
Under the Bush proposed budget, the U.S. Food and Drug Administration would receive an additional $130 million added for fiscal year 2009, which begins Oct. 1.
"The agency's 2009 budget includes $2.4 billion, which includes direct budget authority and user fees," John Dyer, FDA's deputy commissioner for operations and chief operating officer, said during a Monday afternoon teleconference. "That's a 5.7 percent increase over the 2008 budget just passed by Congress."
According to Dyer, the budget would increase resources spent on food safety, modernize drug safety, speed approval of generic drugs and improve the safety and review of medical devices. The budget also includes increases in salaries and up to 1,000 additional employees for the FDA.
The agency, which was shaken by a long list of food recalls and food-linked illness outbreaks in 2007, plans to boost its inspections of domestic and imported food, as well as medical products. It will also target more inspections of high-risk food items, Dyer said.
An industry group applauded the agency's new emphasis on bringing cheaper generic drugs to the public faster.
"Bringing generic medicines to market in a timely manner is a win-win for the federal government, the generic industry and, most of all, consumers," Generic Pharmaceutical Association President and CEO Kathleen Jaeger said in a prepared statement.
Other agencies within HHS would either receive no added funding or lose money under the Bush budget proposal. These include the National Institutes of Health, which would see its budget hold steady at $29.4 billion for next year, and the Centers for Disease Control and Prevention, which would have $400 million shaved off its current budget of $6.2 billion. Programs aimed at providing health care to the rural poor would see their budgets fall from $6.9 billion to $6.0 billion, the president's office announced.
In addition to these other agencies, U.S. Environmental Protection Agency is looking at a $7.14 billion budget proposal for 2009. The agency hopes to use its money to strengthen energy and homeland security around cities and major ports.
The EPA would also continue to promote energy efficiency and clean air and water standards. The agency intends to use $170 million to fund emergency teams that can address more than one terrorist attack at a time, the agency said in a statement. In addition, the EPA is looking for a total of $563 million for criminal enforcement.