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Health insurers and physicians fretted over large portions of the President’s fiscal year 2013 budget for the U.S. Department of Health and Human Services (HHS), a $76.4 billion in overall spending tab.

The proposal, among other things, cuts reimbursements for doctors, hospitals and others providing outpatient services.

Indeed, major budget savings would from cutting spending on Medicare through payment cuts for hospitals and other providers.

Specifically, the HHS budget reduces payments to hospitals, post-acute care, and other providers where the Obama Administration perceives payments in excess of patient care costs, according to an informational memo passed among health insurers. 

Projected savings from all Medicare proposals is estimated at $290 billion over the next decade, but providers are concerned. The goal is to reach more than $360 billion in savings from Medicare, Medicaid and other health programs over 10 years. 

“Scheduled cuts to physicians who treat seniors and military families have threatened patient access to care, and temporary patches by Congress have made the problem bigger and more expensive. The time has come for a permanent solution.  There is a unique and fiscally responsible opportunity to use projected spending for the wars in Iraq and Afghanistan to protect access to care for the military and seniors without adding to the nation’s deficit, and we urge Congress to act swiftly,” stated American Medical Association (AMA) President Elect Jeremy A. Lazarus, M.D., in a statement to reporters.

“Of course doctors, hospitals, other providers need to get paid,” said one health insurance legal counsel in Washington who has worked on state and federal health issues.

“Cutting reimbursement rates is also counter-productive: It drives people out of medical professions and makes it more difficult to attract and retain the numbers we are going to treat 32 million, or more, older, sicker, needier patients… The Patient Protection and Affordable Care Act (PPACA) is a number of often untried or conflicting approaches and initiatives slapped together to get 51 votes, often without rhyme or reason, that may collapse on its own, regardless of what the Supreme Court rules or the electorate does in November,” he said.

Overall, the proposed budget assumes PPACA implementation would reduce the deficit by more than $1 trillion over the next two decades.  

Other savings would come from new surcharge on Medicare premiums for beneficiaries who buy near “first dollar” Medigap coverage to fill in gaps between Part A (hospital) and Part B (outpatient) services – the government would collect the surcharge by adding an amount equal to about 15% of the average Medigap policy premium onto a Medigap policy owner’s Medicare Part B premium.

Other savings are projected to come from additional means testing of the Part D premium; enhanced scrutiny of the pharmaceutical industry; and other legislative changes, according to a review by an insurance group.