Health Law Daily Presidential budget: $1.8T deficit reduction, health reform plays role
Tuesday, February 9, 2016

Presidential budget: $1.8T deficit reduction, health reform plays role

By Sarah E. Baumann, J.D.

President Obama’s proposed 2017 budget claims to slash the deficit by $1.8 trillion over the next 10 years, reverse the “mindless austerity budgeting” that followed sequestration in 2013, and strengthen Medicare, Medicaid, and other federal health care programs. The deficit decrease includes roughly $400 billion in health care savings, which, in part, build on Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) incentives to improve quality and control costs; tax and immigration reform are other significant drivers of the reduction. The proposed budget also includes funding to expand access to health care services, curb prescription drug abuse, and train members of the health care workforce.

While the Bipartisan Budget Act of 2013 (P.L. 113-67) reversed some effects of 2013 sequestration in 2014 and 2015, it did not impact sequestration in 2016. Without congressional action, non-defense discretional spending, when adjusted for inflation, will be at its lowest level since 2006, but the Administration argues that the need for pro-growth investments has increased. The President’s budget allegedly allows for those investments, while cutting unnecessary spending. He noted that federal health care spending already experienced lower than expected growth from 2011 to 2013, in part due to the ACA.

Medicaid and CHIP. With respect to Medicaid and the Children’s Health Insurance Program (CHIP), the budget includes proposals that would:

  • allow states to streamline eligibility determinations for children in Medicaid and CHIP provide one year of continuous Medicaid eligibility to adults;
  • expand access to Medicaid home and community-based services (HCBS) in lieu of institutional care for individuals with disabilities and the elderly, including a long-term pilot project that would allow fives states to test a more streamlined approach to delivering long-term support services (LTSS);
  • authorize a budget-neutral pilot in a limited number of states to provide qualifying low-income adults under age 55, as opposed to adults 55 and older, with benefits under the Program for All-Inclusive Care for the Elderly (PACE); and
  • lower Medicaid drug costs for states and the federal government, in part by improving calculating Medicaid Federal upper limits based only on generic drug prices to improve drug pricing and collecting an additional rebate for generic drugs whose prices grow faster than inflation.

Medicare. In order to encourage provider efficiency and improve patient care, some budget proposals would:

  • adjust payment updates and other payment modifications for certain post-acute care providers;
  • align certain special payments to hospitals with the cost of care;
  • reduce Medicare bad debt payments;
  • improve Medicare Advantage payment accuracy;
  • apply a premium surcharge for new beneficiaries beginning in 2019 if they choose Medigap coverage that provides first, or near-first, dollar coverage, since research indicates that they have less incentive to consider the costs of health care services;
  • grant the HHS the authority to negotiate drug prices for biologics and high-cost Part D drugs to allow for access to and affordability of these treatments; and
  • increase discounts offered by the pharmaceutical industry and close the coverage gap for brand drugs in the Part D benefit by 2017, three years earlier than under current law.

Fraud. The budget would cut waste, fraud, and abuse in Medicare and Medicaid by:

  • Requiring prior authorization for power mobility devices and advanced imaging;
  • Directing states to track high prescribers and utilizers of prescription drugs in Medicaid to identify abnormal patterns; and
  • support efforts to investigate and prosecute allegations of abuse or neglect of Medicaid beneficiaries in non-institutional health care settings and in the territories.

Health system delivery reforms. The ACA sought to reform health care delivery systems to improve care and promote provider efficiency. The budget would:

  • make single, bundled payments for post-acute care providers;
  • improve incentives for providers to deliver care in the most appropriate ambulatory setting;
  • repealing the Medicare Sustainable Growth Rate formula;
  • implement quality bonuses for the highest rated Part D plans; and
  • modify incentives in the Medicare Part D to encourage patient engagement in health care decisions.

Other proposals. In addition to funding the federal health care programs mentioned above and investing in deliver system reforms, the budget would:

  • increase funding for states to expand existing Prescription Drug Monitoring Programs, increase federal funding to decrease inappropriate prescriptions, and fund expanded and improved treatment for individuals addicted to heroin and prescription opioids;
  • increase FDA funding to implement new safety measures under the Food Safety Modernization Act for domestic and imported foods by $301 million;
  • invest $4.2 billion, including $2.7 billion in new mandatory resources, in the Health Centers program in 2016 to support services for existing patients and enable health centers to expand services to 1.1 million additional patients;
  • invest in innovative programs to train new health care workers, including the National Health Services Corps and a new competitive graduate medical education program;
  • implement a Cybersecurity National Action Plan (CNAP), to enhance cybersecurity and protections through various industries, including health care, in part by establishing a “Commission on Enhancing National Cybersecurity.” The President specifically calls on insurers and other health care stakeholders to improve data stewardship practices to protect health information.

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