Trump's latest budget proposal includes $854B in Medicare cuts

The White House on Monday released President Trump's fiscal year (FY) 2020 budget proposal, which includes steep cuts to federal Medicaid funding, a national Medicaid work requirement, and a proposal to cut $854 billion in federal Medicare spending over 10 years.

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FY 2020 budget proposal details

Trump's budget proposal, called "A Budget for a Better America," calls for $4.7 trillion in total federal spending in FY 2020, and includes a request for $8.6 billion to construct a barrier between the U.S.-Mexico border—a move that raises the risk of another government shutdown when FY 2019 ends on Sept. 30, the Post reports.

The budget request calls for a total of $56 trillion in federal spending over 10 years, the Post reports. According to Politico, the White House Office of Management and Budget said the budget proposal calls for a total of $2.7 trillion in spending cuts, which is higher than any other president's administration has ever proposed. The budget proposal seeks to balance the federal budget by 2034, Politico reports.

While Trump's budget is not binding, because Congress ultimately is tasked with drafting and approving federal spending measures that then must be signed by the president to become law, the budget proposal does shed light on the Trump administration's federal funding priorities.

Below we break down the administration's health care priorities for FY 2020.

Health care provisions

The budget proposal calls for reducing HHS' budget by 21% when compared with FY 2019 spending levels, bringing the department's budget down to a total of $1.29 trillion in FY 2020. That $1.29 trillion figure would include:

  • $34.4 billion for NIH, down by 13% from FY 2019, which would scale back funding for medical research;
  • $12 billion for CDC, down by 1% from FY 2019;
  • $10.7 billion for the Health Resources and Services Administration, down by 8% from FY 2019;
  • $7.3 billion for the Indian Health Services, up by 6% from FY 2019;
  • $6.3 billion for CMS, down by 4% from FY 2019;
  • $6.1 billion for FDA, up by 12% from FY 2019; and
  • $43 million for the Office of the National Coordinator for Health IT, down by 28% from FY 2019.

Budget's Medicare proposals: Medicare provider payment cuts, site-neutral payment reform, and more

The budget proposal calls for cutting $845 billion in federal Medicare spending over 10 years. However, both Axios and Vox report that these cuts would largely stem from lower payments to hospitals and a renewed focus on targeting fraud and abuse in the program—proposals that former President Barack Obama and other Democrats have supported in the past.

Specifically, Trump's budget proposal calls for reducing Medicare reimbursements for providers' bad debts stemming from unpaid beneficiary copayments and deductibles. Medicare currently reimburses providers for 65% of those bad debts, but the budget proposes reducing those reimbursements to 25% over three years, beginning in FY 2020. The budget proposal suggests exempting critical access hospitals, federally qualified health centers, rural health clinics, and rural hospitals with fewer than 50 beds from the reimbursement reduction. The administration estimated the change would save $38.5 billion over 10 years.

In addition, the budget proposal calls for reducing Medicare's uncompensated care payments for services provided to non-Medicare beneficiaries beginning in FY 2021. Under the proposal, uncompensated care payments would be based on hospitals' shares of charity care and non-Medicare bad debt, as indicated on hospitals' Medicare cost-reports. Total Medicare payments for uncompensated care would be equal to FY 2019 payments, "increased annually by the urban Consumer Price Index," Inside Health Policy reports. Further, the budget proposes shifting such payments from the Medicare Trust Fund to the Department of the Treasury. The administration estimated the change would save $98 billion over 10 years.

The budget proposal also calls for "realigning incentives through site-neutral payment reform to ensure accurate payments across different health care provider types are based on patient characteristics rather than site of care," including removing current exemptions for site-neutral payments implanted under the Bipartisan Budget Act of 2015, Inside Health Policy reports. The administration estimated the site-neutral payment changes would save about $160 billion over 10 years.

The budget also proposes changes to address "excessive" payments for post-acute care providers by creating a unified payment system that is based on patients' clinical needs rather than the types of care provided to patients. According to Inside Health Policy, the Medicare Payment Advisory Commission has been working on developing such a payment system.

At the same time, the budget proposes increasing Medicare payments for certain primary care services. Under the proposal, primary care providers would be able to seek Medicare reimbursements from evaluation and management services and receive a risk-adjusted Medicare Priority Care payment beginning in FY 2021. That payment would be funded by a 5% annual reduction to all non-evaluation and management services, Inside Health Policy reports.

Further, the budget proposal calls for implementing a cap on out-of-pocket spending on prescription drugs for Medicare beneficiaries enrolled in Medicare Part D. According to the Associated Press, Congress would help to determine the limit.

Overall, the administration predicted that the Medicare changes proposed in the budget would add eight years of solvency to the Medicare Trust fund, Inside Health Policy reports.

Budget's Medicaid proposals: Turning Medicaid into a block grant program—and imposing new eligibility requirements

Notably, Trump's budget would significantly overhaul Medicaid and reduce federal Medicaid spending by nearly $1.5 trillion over 10 years. To achieve those cuts, the budget would eliminate federal funding for Medicaid expansions under the Affordable Care Act (ACA) and redirect a portion of those funds to provide Medicaid funding to states via block grants beginning in 2021.

In addition, the budget proposal suggests tying future increases in federal spending on Medicaid to the rate of general inflation, which typically is lower than the rate of health care inflation, the AP reports.

Trump's Medicaid proposal is largely based on the so-called "Graham-Cassidy" bill that surfaced during the 2017 ACA repeal-and-replace debate, but failed to garner enough votes to pass, Vox reports. The budget projects the change would reduce federal Medicaid spending by $241 billion over 10 years.

The budget proposal states, "The administration recognizes that the only way to reform Medicaid and set it on a sound fiscal path is by putting states on equal footing with the federal government to implement comprehensive Medicaid financing reform through a per-capita cap or block grant."

The budget proposal also calls for establishing copayment requirements for Medicaid beneficiaries who seek non-emergency care at emergency departments, as well as imposing a national Medicaid work, volunteer, or training requirement, similar to those that already have been approved in seven states—though such requirements currently are being challenged in court.

Budget's insurance reforms: No more $0 exchange coverage  

The budget proposal calls for requiring every individual who receives subsidies under the ACA to help offset the cost of exchange plans to pay at least some amount for their coverage if they purchased it through the federal exchange. Currently, some U.S. residents who qualify for premium subsidies could purchase exchange plans for $0 out of pocket after their subsidies are taken into account.

Budget's public health proposals: Combatting the opioid epidemic and eliminating new HIV transmissions

The budget proposal requests $4.8 billion for HHS to continue efforts to combat the opioid epidemic and bolster prevention, recovery, research, and treatment resources for individuals with opioid-related substance use disorders. The proposal also requests $1.5 billion for state grants and $1 billion for medical research to target the opioid epidemic, as well as $221 billion to increase the number of workers addressing the epidemic and $330 million to support Department of Justice efforts at the state and local levels.

However, the budget proposal calls for cutting the Office of National Drug Control Policy's (ONDCP) budget by more than 95% in FY 2020 when compared with FY 2019, and shifting the office's two main grant programs to other federal agencies, Politico's "Pulse" reports. ONDCP currently oversees the United States' response to the opioid epidemic.

ONDCP spokesperson Peter Hoffman said the proposed cuts to the office's budget would not affect public health. "Nothing in [Trump's] budget would threaten the proven, effective counter-drug programs ONDCP oversees," Hoffman said, adding, "In fact, the overall drug control funding request is an increase of more than a billion dollars from the previous year."

In addition, the budget proposal calls for $291 million to fund the administration's goal of ending HIV transmission in the United States. In comparison, the federal government will spend $28.1 billion to fight HIV/AIDS domestically in FY 2019, according to the Kaiser Family Foundation.

However, the budget proposal calls for reducing federal spending on efforts to fight HIV/AIDS in other countries. Specifically, the proposal calls for cutting federal spending on the President's Emergency Plan for AIDS Relief by 22% and changing the United States' financing formula for the Global Fund to Fight AIDS, Tuberculosis, and Malaria, which would bring federal funding for the program down from $1.35 billion in FY 2019 to $1.1 billion in FY 2020.

Budget's proposed funding for VA health system

The budget proposal calls for $80.2 billion in FY 2020 discretionary funding for VA's health system. The White House in a fact sheet said that amount would fully fund implementation of the VA MISSION Act of 2018, which will "provide veterans greater choice on where they receive their health care, whether at a VA facility or through a private health care provider."

The budget proposal notes that curbing veteran suicides will be a top priority for VA.

Other health care funding proposals

In addition, Trump's budget calls on Congress to pass legislation that allows health care providers to elect not to provide abortion care, and FDA to collect $100 million in new fees from e-cigarette manufactures to help fund efforts intended to curb e-cigarette use among youth.

Budget proposal unlikely to be enacted as-is

Democratic lawmakers criticized the budget proposal, and House Appropriations Committee Chair Nita Lowey (D-N.Y.) said the proposal "has no chance of garnering the necessary bipartisanship support to become law."

According to the Post, Republican lawmakers "received the budget plan with a lukewarm embrace." Senate Budget Committee Chair Mike Enzi (R-Wyo.) said, "The president's annual budget proposal is the first step in the federal budget process and will allow us to consider how his priorities align with the priorities of Congress." He added, "I look forward to working with my colleagues and the president to curb federal overspending and help bring our deficits and debt under control."

Rep. Tom Cole (R-Okla.)—the ranking member on the House Appropriations Committee's Subcommittee on Labor, Health and Human Services, Education, and Related Agencies—called the budget proposal "less realistic than most president budgets."

Industry stakeholders, observers react

Various industry stakeholders and observers also criticized Trump's budget proposal, The Hill reports.

Federation of American Hospitals President Chip Kahn called Trump's proposed cuts to Medicare hospital payments "arbitrary and blunt." He said, "The impact on care for seniors would be devastating. Not to mention that massive reductions would drastically reduce resources critical to care for low-income Americans and cripple efforts to stave off the looming physician shortage."

The American Cancer Society's Cancer Action Network panned the budget's proposed cuts to NIH and the National Cancer Institute. "If passed, the proposed cut to NIH and NCI funding would squander years of renewed momentum and progress in advancing discovery in cancer and other chronic diseases," Lisa Lacasse, the organization's president, said. She added, "These investments have long enjoyed strong bipartisan support and have led to incredible understanding in how to detect, diagnose, and treat cancer that still claims the lives of more than 600,000 Americans each year."

Meanwhile, the Alliance for a Stronger FDA praised the budget proposal for requesting more funding for the agency. The group said FDA would "be able to apply new monies to important programs that benefit the American people, as well as hire needed scientific personnel to carry out the FDA's far-ranging mission" (Stein/Goldstein, Washington Post, 3/11; Paletta et al., Washington Post, 3/11; 2020 budget fact sheet, 3/11; Klein/Leonard, Washington Examiner, 3/11; Scholtes/Emma, Politico, 3/10; AP/ABC News, 3/11; Tankersley/Tackett, New York Times, 3/11; Diamond, "Pulse," Politico, 3/12; Sullivan/Hellmann, The Hill, 3/11; Frieden, MedPage Today, 3/11; White House FY 2020 budget proposal, 3/11; HHS budget FY 2020 budget proposal overview, 3/11; Resnick, Vox, 3/11; Stein, Inside Health Policy, 3/11 [subscription required]; Baker, "Vitals," Axios, 3/12; McGinley, Washington Post, 3/11; Lopez, Vox, 3/11; Wang/Cohrs, Inside Health Policy, [subscription required]; Cohrs, Inside Health Policy, 3/11 [subscription required]; Kliff, Vox, 3/11).

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