HHS loosens Medicare red tape as part of Obama plan

A patient waits in the hallway for a room to open up in the emergency room at Ben Taub General Hospital in Houston, Texas, July 27, 2009.

(Reuters) - Health officials on Tuesday proposed loosening some Medicare rules in what they say could lead to $1.1 billion in first-year savings as part of President Barack Obama's effort to cut federal red tape.

Most of the savings would come through changes to the conditions of participation in the government health program for the elderly and disabled. For example hospitals would no longer need a dedicated director of outpatient services and could contract out laboratory and radiology tests.

The Department of Health and Human Services (HHS) joins other federal agencies -- including Agriculture, Housing, Interior and Transportation -- that are taking steps aimed at lightening the regulatory burden and save money.

Obama, who faces a tough 2012 re-election fight, called for the regulatory review in a January executive order, seen as an effort to improve his relations with the business community.

The U.S. Chamber of Commerce and other business groups have been skeptical about the overall initiative. They say other potentially costly regulations could quickly undercut any savings.

HHS said the rule changes it was proposing would save hospitals, doctors and other healthcare providers $1.1 billion in the first year and $5 billion over five years, and do so without cutting how much providers get reimbursed.

"The rules would also remove many outdated billing practices, saving physicians time and money," HHS Secretary Kathleen Sebelius told reporters.

HHS also proposed a Medicare Regulatory Reform effort to eliminate conflicting, duplicative, overlapping or outdated administrative requirements and procedures. Health officials said getting rid of unnecessary paperwork and procedures would lead to reallocation of time but not job cuts.

To read the proposals, see: r.reuters.com/nuj54s and r.reuters.com/vuj54s .

Medicare could face a bigger overhaul as part of a deficit-reduction effort in Congress.

A special congressional "super committee" is looking for at least $1.2 trillion in deficit savings over 10 years before a November 23 deadline. Analysts say any deal could include $300 billion to $500 billion in reductions from Medicare, Medicaid and other federal health programs.

(Reporting by Alina Selyukh in Washington D.C.; Additional reporting by Anna Yukhananov; Editing by Tim Dobbyn)