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President’s FY 2014 Budget Slashes Medicare Funding for Providers, Including IME

April 12, 2013—President Obama April 10 released an FY 2014 budget request that calls for $401 billion in cuts over ten years to health care (see related stories). Among the proposed cuts is nearly $307 billion over ten years from Medicare providers, including a reduction in Medicare indirect medical education (IME) payments to teaching hospitals, $68 billion in Medicare structural reforms, and $19 billion in Medicaid cuts. In an April 10 statement, AAMC President and CEO Darrell G. Kirch, M.D., said the “cuts to Medicare in the president’s proposal will have serious consequences on the health of the nation.”

The president’s budget contains several cuts to providers that are of interest to AAMC members, including reducing Medicare IME payments by $11 billion, Medicare bad debt payments by $25.5 billion, and rebasing Medicaid disproportionate share hospital (DSH) payments, a reduction of $3.6 billion, over ten years.

Dr. Kirch said, “Medicare cuts to ‘providers’ are cuts to patients. The proposed drastic reductions in Medicare indirect medical education (IME) payments will make it increasingly difficult for teaching hospitals and their physicians to provide care for the sickest in their communities, especially seniors and the underserved. These cuts also may force teaching hospitals to curtail vital services such as 24/7 trauma and burn units that are not available anywhere else in the community, and will worsen an already critical shortage of doctors in the United States.”

The budget also assumes the Medicare sustainable growth rate (SGR) formula is repealed and lays out principles for reforms to the current fee-for-service program.  According to the budget’s HHS summary, “The Administration supports a period of payment stability lasting several years to allow time for the continued development of scalable accountable payment models. Such models can take different forms, but all will have several common attributes such as encouraging care coordination, rewarding practitioners who provide high-quality, efficient care, and holding practitioners accountable through the application of financial risk for consistently providing low quality care at excessive costs.” The budget, however, does not identify offsets for the $138 billion cost of a ten year freeze to physician payments. 


Len Marquez
Director, Government Relations
Telephone: 202-862-6281


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Washington Highlights, a weekly electronic newsletter, features brief updates on the latest legislative and regulatory activities affecting medical schools and teaching hospitals.

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Jason Kleinman
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Telephone: 202-903-0806