For Medicare physician payments, the budget proposes $311 billion over 10 years. The administration says it will work with Congress to reform the payment system tied to quality incentives. Congress last month approved its budget blueprint, blocking a 21 percent physician fee cut scheduled for 2010 and calling for a two-year increase. The administration would boost Medicare and Medicaid anti-fraud and abuse funding at the Centers for Medicare and Medicaid Services (CMS) by $311 million for fiscal 2010 and $1.7 billion over 5 years for greater oversight of the Medicare Advantage and prescription drug programs. Of the proposed Medicare savings, the biggest portion would come from requiring managed care plans to bid competitively for Medicare Advantage (MA) contracts to serve beneficiaries, saving an estimated $177 billion over 10 years. Payments to plans would be based on an average of plans’ bids as well as enrollment in the prior year. The purpose is to drive down overpayments to MA plans and let the market set the upper payment level, said a CMS official. Payments to home health agencies would be cut by about $34 billion over 10 years and there would be no inflation update for 2010. Hospitals also are targeted for savings. The budget would establish programs to reward hospitals for quality, reducing program spending by about $12 billion over 10 years. Changes to reduce hospital readmission rates and bundle some post-acute care payments into the hospital’s rate would translate into more than $24 billion in savings over 10 years. The budget also would require high-income beneficiaries to pay more in premiums for Medicare’s Part D drug benefit, based on a sliding scale (as under the Part B benefit), with income thresholds indexed annually for inflation. Under Part B, beneficiaries who earn more than $85,000 a year ($170,000 for couples) pay higher premiums.