This weekend Speaker Boehner rejected President Obama’s call for a “grand bargain” that would include both cuts to Medicare and Medicaid (and Social Security) along with tax increases to reduce the projected federal debt by about $4 trillion. Instead, Mr. Boehner seems to be indicating that there are not enough votes in the Republican caucus for a deal that includes tax increases – any deal should only include cuts.

You may ask yourself, well, how did I get here? Back in April, along with a spirited defense of the role for government in the economy, the President laid out a comprehensive approach to debt reduction. The deal he outlined included cuts in military spending, and tax increases. It also included a fix for the Medicare physician payment formula to end the annual ritual of finding funding for a temporary rate patch. Although one can question whether it is either fair or logical to use cuts in Medicaid to partially pay for an increase in Medicare physician payments, as the administration proposed, at least there was some overall balance to the approach. The concern is that as the negotiations continue, the same scope of Medicare and Medicaid cuts would remain on the table without the other elements of the deal.

Equally concerning is the composition of the proposed cuts. Although definitive information about the negotiations is hard to come by, the health care proposals identified in the media are mostly a combination of missed opportunities and bad ideas.

Let’s take a look at each category:

Missed Opportunities

Graduate Medical Education One proposal on the table is to reduce federal funding for graduate medical education. Instead of focusing on reducing GME funding, a better approach would be to make better use of existing funding by redirecting funding to increase the supply of primary care physicians as outlined here.

Medicare Bad Debt Another proposal is to eliminate funding for Medicare bad debt. This is another missed opportunity. A reduction in bad debt should contain an explicit exclusion that free care given pursuant to a financial assistance policy would still be reimbursed, giving hospitals an incentive to actually qualify people for financial assistance. This would not only help Medicare beneficiaries, but also low-income underinsured people who often have a hard time obtaining financial assistance.

Bad ideas

The main bad ideas on the table are variations on the theme of shifting costs onto Medicare and Medicaid beneficiaries, including blended rate (combining regular federal Medicaid match, CHIP match and enhanced match for new eligibles under the ACA into a single rate); eliminating or curtailing states’ use of provider taxes; and increases in Medicare cost sharing, all of which will shift costs onto state Medicaid programs and result in cuts in rates or benefits.

A better way In a plan presented to the Senate Democratic caucus, Budget Chair Kent Conrad outlined a better approach that relies more on progressive taxes and less on health care cuts.

Nor does Conrad’s proposal exhaust the opportunities. In a future post we will look at some of the policy options that could generate federal health care savings that improve quality, efficiency and the underlying health of the public without hurting Medicare and Medicaid beneficiaries.

— Michael Miller, Policy Director