Hospitals, Drugmakers Lash Out at Obama Deficit Plan

Monday, 19 Sep 2011 06:18 PM


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WASHINGTON - The U.S. hospital and drug industries lashed out at provisions of President Barack Obama's deficit reduction plan that would saddle them with more than $200 billion in federal healthcare spending cuts.

Lobbyists vowed to fight proposals for Medicare, which covers the elderly, that are aimed at saving $135 billion on prescriptions by requiring drugmakers to provide steeper rebates similar to those for Medicaid, which covers the poor.

Another $42 billion would come from adjustments in Medicare payments to hospitals, skilled nursing facilities and in-patient rehabilitation centers.

Obama outlined the plan Monday as part of a $3.6 trillion proposal to cut the nation's debt that would largely rely on raising taxes on the wealthy and corporations.

Other provisions target payments that hospitals and drugmakers receive from Medicaid, aiming to put more of the burden of cost-savings on industry than on beneficiaries of government health benefits.

Together, the hospital and pharmaceutical industries will bear about two-thirds of the $320 billion in savings that the Obama plan envisions in federal healthcare spending.

On Wall Street, shares of hospital operators declined as investors feared more reimbursement cuts to the Medicare program. HCA Holdings Inc fell 6.7 percent, Community Health Systems Inc 3.2 percent and Tenet Healthcare Corp 3.8 percent.

The NYSE Arca pharmaceuticals index <.DRG> fell 0.9 percent, in line with the wider stock market, as investors are already expecting weaker sales in the U.S. market with an influx of generic medicines.

The two industries' main trade groups -- the American Hospital Association and the Pharmaceutical Research and Manufacturers of America -- said the president's deficit-cutting plan could mean the loss of thousands of jobs and curtail access for the elderly, disabled and the poor.

"Funding cuts would mean decreased access to care for our nation's seniors and could overload emergency rooms, shut down trauma units and reduce patient access to the latest treatments," AHA President and Chief Executive Rich Umbdenstock said in a statement.

PhRMA Senior Vice President Matt Bennett took aim at the plan's intent to strengthen the Independent Payment Advisory Board, an oversight panel created by Obama's 2010 healthcare law, saying a strengthened body could impose sweeping changes to Medicare without congressional scrutiny.

"We believe IPAB will result in access problems for Medicare beneficiaries," he said in a separate statement.

PhRMA's interests would also be affected by a proposal to speed generic drugs to the market by prohibiting court settlements that delay their arrival and reducing the period of time that brand name biologic drugs are protected.

The overall debt reduction plan calls for $1.5 trillion in tax revenues, $580 billion in mandatory spending cuts and more savings from drawing down U.S. military involvement in Iraq and Afghanistan.

The president's proposals are a recommendation for the six Republicans and six Democrats on a congressional "super committee" that is charged with reducing the deficit by at least $1.2 trillion over 10 years ahead of a November deadline.

Analysts said few of the president's healthcare savings proposals were likely to pass muster with Republicans in Congress, who rejected them as a political stunt.

Advocates for Medicare and Medicaid beneficiaries warned that the proposals would still shift a significant amount of the burden onto elderly, disabled and poor beneficiaries as well as cash-strapped states.

For example, about $4 billion would be saved from future retirees by raising deductibles for Medicare doctor visits, imposing a new charge for home healthcare and placing a surcharge on some private insurance plans that help pay Medicare costs. All of those changes would begin in 2017.

At least one healthcare group welcomed the plan. The American Medical Association said a proposal to reform Medicare payments to doctors would better reflect the costs of caring for patients. (Additional reporting by Susan Kelly in Chicago; Editing by Michele Gershberg and Ted Kerr)

© 2014 Thomson/Reuters. All rights reserved.

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