Obama Budget Creates $633 Billion Health Care Reform Reserve Fund

On February 26, 2009, President Obama presented Congress with a fiscal year 2010 budget summary. 

Among other things, the budget establishes a "reserve fund" of $633.8 billion over 10 years (2010-2019) to help finance health care reform. According to the budget documents, $317.8 billion of the $633.8 billion would be funded by new revenue resulting from certain federal tax changes. 

However, the other half (or $316 billion) of the reserve fund would be derived from savings proposals aimed at promoting efficiency and accountability, aligning incentives toward quality, and encouraging shared responsibility.  With respect to the Medicare program, the proposals and related savings for 2010-2019 include:

Aligning Incentives Toward Quality:

• Encourage hospitals serving Medicare beneficiaries to reduce readmission rates - $8.4 billion
• Create hospital quality incentive payments - $12 billion
• Encourage primary care physicians to administer flu vaccine to Medicare beneficiaries - Savings negligible or undetermined at this time
• Enable physicians to form voluntary groups that coordinate care for Medicare beneficiaries and to receive performance based payments for the coordinated care - Savings negligible or undetermined at this time

Promoting Efficiency and Accountability:

• Establish competitive bidding for Medicare Advantage - $176.6 billion
• Promote efficient provision of acute care through bundled Medicare payments covering hospital and post-acute settings - $17.8 billion
• Address financial conflicts of interest in physician-owned specialty hospitals - Savings negligible or undetermined at this time
• Ensure that Medicare makes appropriate payments for imaging services through the use of radiology benefit managers - $260 million
• Provide private sector enhancements to ensure Medicare pays accurately - $2 billion
• Improve Medicare home health payments to align with costs - $37 billion

Encouraging Shared Responsibility:

• Require certain higher income beneficiaries enrolled in the Medicare drug benefit to pay higher premiums, as is currently required for physician and outpatient services - $8.1 billion