By Jill Brown - February 14, 2012

Print

When the White House said its proposed 2013 budget calls for more than $350 billion in cuts to HHS over 10 years, health insurers could be excused for assuming the worst, after getting a major hit in fees via the health reform law.

But perhaps payers have suffered enough already. In the 2013 budget, “Pain is felt by pharma, providers, states and the ‘rich,’” say equity analysts Tom Carroll and Mark Kelly at Stifel Nicolaus. That may indicate that “regulators continue to be satisfied with the level of pain already inflicted to payers.” Medicare Advantage also escaped unscathed in the most recent budget, Carroll and Kelly add — although they still are suffering the effects of reform law-mandated cuts.

So where are the cuts coming from? The administration is “presenting a package of proposals that would save an estimated $358.5 billion over 10 years,” including Medicare savings of $302.8 billion and Medicaid savings of $55.7 billion. Among those taking one for the team:

Drug companies:

• The budget would extend the Medicaid drug rebate formula to the Medicare Part D program ($155.6 billion in savings over 10 years). “The proposal would require manufacturers to pay the difference between rebate levels they already provide Part D plans and the Medicaid rebate levels.”

• The proposal calls for prohibiting pay-for-delay agreements ($8.6 billion in savings over 10 years). Beginning in 2013, this proposal would authorize the Federal Trade Commission (FTC) to prohibit deals between brand and generic drug companies that delay entry of generic drugs and biologics into the market.

• The budget also would reduce from 12 years to seven the length of exclusivity allowed to manufacturers of brand-name biologics ($3.7 billion in savings over 10 years), in order “to encourage faster development of generic biologics while retaining appropriate incentives for research and development for the innovation of breakthrough products.”

Providers:

• The budget would adjust payments for some post-acute care providers ($56.7 billion in savings over 10 years). The budget would “gradually realign” reimbursement for inpatient rehabilitation facilities, long-term care hospitals, skilled nursing facilities and home health agencies, by 1.1 percentage points beginning in 2014 through 2021.

• The document calls for cutting Medicare coverage of bad debt ($35.9 billion in savings over 10 years). Starting in 2013, this proposal would reduce bad debt payments to 25% over three years.

• The budget also would cut certain advanced imaging payments ($820 million in savings over 10 years). “Beginning in 2013, this proposal implements a payment reduction for advanced imaging equipment to account for higher levels of utilization of certain types of equipment.”

The “rich”:

• The budget would increase income-related premiums under Part B and Part D by 15%, starting in 2017 ($27.6 billion in savings over 10 years). Premiums would range between 40% and 90% depending on a person’s income. The budget calls for 25% of beneficiaries under Parts B and D to eventually be subject to these premiums.