Budget breakdown: Hospitals push back against Obama's proposals

President's proposed budget seeks cutbacks for hospitals, other health organizations

Topics: Medicare, Reimbursement, Finance, Medicaid, Health Policy, Market Trends, Strategy, Recession/Downturn

February 14, 2012

Hospitals and other health care groups are pushing back against President Obama's fiscal year (FY) 2013 budget proposal, which they call "shortsighted" and detrimental to the health care safety net.

The administration on Monday released an FY 2013 budget that aims to reduce the federal deficit by $4 trillion over the next decade and includes changes in health care spending. Specifically, the proposal seeks to reduce Medicare and Medicaid spending by about $360 billion over the next decade.

The Medicare and Medicaid cuts would occur in part through lower payments to health care providers. For example, a White House fact sheet says that under the proposed FY 2013 budget, Medicare would reimburse 25% of hospitals' bad debt resulting from beneficiaries' non-payment, down from the current 70%. Meanwhile, Medicare funding for graduate medical education would drop by $9.7 billion.

In addition, payments to critical-access hospitals (CAHs) would decrease by $1.4 billion and the criteria to qualify as a CAH would narrow, a change that is expected to save $590 million.

Obama's FY 2013 budget proposal also would provide CMS with a $1 billion, or 26%, increase in its program management funds, which reflects the agency's role in implementing federal health reform law provisions. Meanwhile, the proposed budget freezes NIH's biomedical research budget at $30.7 billion and cuts $660 million, or 11%, from CDC.

Hospitals criticize budget proposal
Hospital groups widely panned the proposed budget, CQ HealthBeat reports.

According to American Hospital Association (AHA) President and CEO Richard Umbdenstock, the proposal "once again targets funding for hospital care and could result in fewer nurses, less access to cutting-edge treatments, and longer waits for emergency care."

Meanwhile, Federation of American Hospitals President and CEO Chip Kahn called the cuts "shortsighted" and "counterproductive." He said, "[n]ot only will they weaken the hospital safety net and reduce access for seniors and other vulnerable citizens, they also threaten the vital role that America's hospitals play as the largest private employers and source of good, new jobs in most communities across the country."

Budget unlikely to be adopted
However, the president's budget proposal faces significant challenges in Congress and is unlikely to be passed into law. Republicans already have signaled they will fight the proposal, and Senate Majority Leader Harry Reid (D-Nev.) has said he will not bring a budget resolution to the floor.

According to Reid, Congress agreed to discretionary spending levels for 2012 and 2013, which is a key component of the budget process, during last year's negotiations over the nation's debt ceiling (Davis, USA Today, 2/13; Reichard/Norman, CQ HealthBeat, 2/13 [subscription required]; AHA News, 1/13; Norman, CQ HealthBeat, 2/13 [subscription required]; Barr, Modern Healthcare, 2/13 [subscription required]; Zigmond/Daly, Modern Healthcare, 2/13 [subscription required]).

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