Blog Post

Budget breakdown: How Obama's proposal would change health care

March 5, 2014

    Juliette Mullin, Editor

    It is widely assumed that a president's budget proposal is dead on arrival: History has shown that the executive branch hardly ever gets exactly what it wants from Congress. No one expects President Obama's $3.9 trillion budget proposal—released yesterday—to be the exception.

    But as Politico's David Nather aptly points out, presidential budget proposals don't have to become law to impact political debates. So let's take a look at some of the ways Obama's budget proposal would affect health care in fiscal year (FY) 2015, which starts on Oct. 1.

    Medicare would get cut by $400 billion over 10 years.

    The administration is proposing more than $400 billion in cuts to the federal health care program over the next decade—much as it did in the FY 2014 budget. The cuts would mostly hit in the later years of the decade, with just $3.5 billion in cuts occurring in 2015.

    Under the proposal, Medicare reductions would affect both providers—everyone from hospitals to drug manufacturers—and beneficiaries. For example, the budget calls for an increase in premiums for outpatient care and drug coverage for high-income Medicare beneficiaries.

    The budget also included support for a bipartisan Congressional plan to reform the way Medicare reimburses doctors.

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    Overall, the HHS budget would surpass $1 trillion.

    The White House proposal pushes HHS spending over $1 trillion for the first time, an amount that reflects the growing number of Americans of Medicare age and the expansion of Medicaid.

    It does call for $1.8 billion to pay for the coverage rollout of the Affordable Care Act (ACA). Most of those funds will go to the federal insurance exchanges operating in 36 states, and all but $600 million of the funds would be covered by insurer fees.  (Note: The funds for the tax credits to pay for private insurance policies were included in the Treasury Department's budget.)

    According to ABC News, the overall department budget reflects the White House's "stay-the-course" approach for FY 2015. But it does include some new programs, including:

    • A $5.2 billion plan to help train more physicians by funding medical education programs for 13,000 new medical residents over the next decade;
    • A $100 million proposal to pay for pediatric health care provider training at children's hospitals; and
    • An additional $26 million in funding to combat prescription drug misuse and overdoses.

    Alzheimer's research would get a boost—but NIH wouldn't really get it what it wants.

    The White House is proposing a $30.36 billion budget for NIH in FY 2015, or slightly more than the $30.15 billion it was allocated this year. But the increase still leaves NIH hundreds of millions of dollars below pre-sequestration funding levels. The AP notes that NIH's budget has not kept pace with inflation over the last 10 years, and it now funds just one in six grant applications from outside researchers, down from one in three just 10 years ago.

    Obama's budget proposal does offer a big supplement for the institutes' main budget, calling for an additional $970 million in funding for Alzheimer's and brain research.

    The CAH program would get downsized.

    The HHS budget includes two significant changes for Critical Access Hospitals (CAHs):

    • CAHs would be reimbursed for 100% of reasonable costs, down from the current reimbursement rate of 101%. That would save an estimated $1.7 billion over 10 years.
    • The program would prevent hospitals located within 10 miles of another hospital from receiving or maintaining a CAH designation. This would save about $720 million over 10 years, according to HHS.
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