After taxes, health-care costs are probably the thorniest issue facing policymakers looking for a way to avoid the so-called fiscal cliff, an economically toxic combination of tax increases and spending cuts looming Jan. 1 if compromise fails.
Rising health-care costs are the most stubborn element of the nation's long-term budget woes. At the same time, a recent report for the government estimated that the U.S. health-care system squanders $750 billion a year, about 30 cents of every medical dollar.
The center's proposal is notable because the organization serves as a kind of idea factory for President Obama's administration, akin to the conservative Heritage Foundation during Ronald Reagan's presidency. The plan calls on Obama to draw the line against broader cuts and premium increases in budget talks with Republicans.
Congressional Republicans call the approach wishful thinking. They argue that all health care programs, including Medicaid for the poor and Obama's law covering the uninsured, must be on the table.
The center's plan rejects raising the Medicare eligibility age to 67, a concession that Obama quietly offered during failed budget negotiations last year. Instead it focuses on squeezing Medicare service providers, a strategy the plan's authors say will make the entire health care system more efficient without risking quality.
Drugmakers would take the biggest hit, accounting for $160 billion, or about 40 percent of the proposed 10-year savings.
Hospitals account for an additional $61 billion in cuts, or 16 percent of the total. Medical device manufacturers and insurance companies would be on the hook for about $20 billion apiece. Nursing homes are targeted for $16 billion in reductions.
Among seniors with Medigap insurance that covers medical costs from the first dollar, the well-to-do would have to pay the first $500 out of pocket.
The center is also proposing to repeal a payment formula for doctors that has failed to contain costs, replacing it with a plan that rewards primary and preventive care while squeezing specialists. Unless Congress acts, doctors will face a nearly 30 percent cut in Medicare payments Jan. 1.