House Democrats Say CBO Projects $500 Billion in Gross Savings From Medicare

House Democratic committee leaders late Tuesday said that a Congressional Budget Office (CBO) score for Medicare provisions in their draft health overhaul projects they would achieve more than $500 billion in gross savings over 10 years. However, other provisions that would require additional spending would cut the net savings to $152 billion, and CBO cautions that its estimate is preliminary.

Democratic leaders of the Energy and Commerce and Ways and Means committees said their proposal would extend the solvency of the Medicare trust fund and also make important changes in delivery system and payment mechanisms in Medicare. The discussion draft, unveiled on June 19, remains under development, they said.

"The committees have been working with CBO for several months, along with the administration, developing policies that are both good for Medicare and provide funding for reforms," the two committee chairmen, Democrats Henry A. Waxman of California and Charles B. Rangel of New York, said in a statement. "This table is one of the many steps in the process. We have many savings items that were recommended by the administration and the Medicare Payment Advisory Committee, and we are looking forward to working in our committees to develop the final proposals.

"These estimates show our commitment to strengthening the Medicare program and advancing fiscally-sound health reform that will help all Americans gain access to affordable, quality care that meets their needs," they said.

A copy of the CBO estimate distributed by the committees says that it is preliminary and incomplete, in part because provisions in the bill would interact with changes in Medicaid and expanded health insurance coverage, and the impact of those changes has not yet been estimated.


While savings are outlined, the CBO document also indicates that additional spending would be required for items such as changes in the physician sustainable growth rate. No estimates were made of the impact of increasing revenue through higher taxes, such as increased Medicare payroll taxes or income taxes.

The CBO estimate shows that in Medicare Part A hospital services, savings are gained through a freeze in skilled nursing facility payment updates as well as inpatient rehabilitation facility payment updates, incorporating productivity improvements into market basket updates, and reductions in payments to hospice care and psychiatric hospitals.

In Medicare Part B, savings would come in the outpatient hospital fee schedule, rental and purchase of power-driven wheelchairs and payments for imaging services. In both Part A and Part B, funds would be saved via reductions in hospital admissions, payment adjustments for home health care. Medicare Advantage plans would face a reduction.

- Preliminary Medicare Estimate (pdf)

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