Wouldn't it be better if people never had to go into the hospital in the first place? Aside from the supplemental costs - "surgical complications increase the margin the hospital makes on the patient by 330 percent for the privately insured and 190 percent for Medicare patients." - consider the quality of life issues.
If Medicare is concerned with scaling this program up from a couple thousand people, instead of completely cutting a program which has proven its ability to cut costs AND improve quality of life, why not try it with five or ten thousand people first? If that works, then try it with 20 thousand people, then 50 thousand. If it doesn't scale at that point, then cut it.
Another possible solution is to find a way to eliminate the for-profit hospitals. But Medicare's solution - "It’s pushing providers to band together into accountable care organizations, or ACO, that get a flat fee for all care related to a patient." - sounds destined to fail from the outset to this layman.