Blog Post

The big surprises for health care in Biden's budget proposal

By Heather Bell

June 3, 2021

    On Friday, President Biden unveiled his long-awaited $6 trillion fiscal year (FY) 2022 budget proposal, which reflects the administration's health policy priorities for the next fiscal year.

    We knew when the White House released its budget blueprint in April that health care was going to be a spending priority for the Biden administration. That blueprint told us to expect a 23% increase in spending for HHS, which includes $1.6 billion for CDC to bolster public health monitoring and response, as well as an emphasis on health equity and billions of dollars for medical research.

    There’s a lot to unpack in the budget proposal, which will be debated at length. But here are the four things that stood out to me most.

    1. Biden wants to pay for spending increases with tax increases on corporations and high-income households.

    One of the biggest questions about April’s blueprint was exactly how the Biden administration would pay for the proposed spending increases in health care, infrastructure, and education. Among other things, the Biden administration wants to increase the corporate tax rate by seven percentage points, to 28%, and the top tax rate on capital gains by about 19 percentage points, to 43.4%. Now we have some numbers regarding how much revenue those taxes would generate. For instance, the Biden administration projected that changes to the capital gains tax structure would generate $322 billion over a decade.

    Biden’s budget also projects what some economists consider too rosy of a picture for economic growth: 5.2% this year, 3.2% in 2022, and between 1.8% and 2% each year through 2031.

    2. Biden doubles down on ACA exchanges but punts broader Medicare reforms to Congress.

    The budget proposal shows that Biden is betting on the Affordable Care Act to reduce the uninsured rate. The proposal includes $163 billion over the next 10 years to make permanent the enhanced tax credits enacted as part of the American Rescue Plan. This includes eliminating premiums for those between 100% and 150% of the federal poverty level (FPL) and removing the 400% FPL eligibility cap to qualify for subsidies.

    We also learned what the Biden administration has in store for Medicare and Medicaid in FY 2022. The short (and surprising) answer is—not a lot. The budget calls for less than 1% increases to both programs, with $766 billion for Medicare and $517 billion for Medicaid.

    Notably, the budget does not include detailed dollar figures or policy proposals for the large-scale policy changes we've heard from Biden that would increase access to coverage—a federal public option, lowering the Medicare eligibility age, and expanding Medicare benefits. Instead, the proposal notes that the Biden administration supports these efforts but leaves Congress to nail out the details in legislation.

    3. Biden proposes to reduce CMMI funding.

    The other big surprise in Biden’s budget proposal was a $90 million reduction for CMMI. The budget did not propose any new value-based care models. Instead, it mentioned several existing models—including the CHART model and Global and Professional Direct Contracting—that are currently under review.

    In our Weekly Line last week, we predicted that FY 2022 will serve as a "bridge" year as the Biden administration figures out its value-based care strategy. This budget proposal feels in line with that prediction.

    4. Biden wants to increase oversight of 340B program.

    One of the less-noticed provisions tucked inside the budget proposal is an additional $7 million to bolster efforts to maintain the integrity of the Health Resources and Services Administration's 340B Drug Pricing Program. In addition, Biden's budget proposes requiring covered entities to report how 340B savings are being used. This suggests the Biden administration could look to build on or alter rules enacted under the Trump administration that sought to create a dispute-resolution process for the program.

    What comes next

    As I noted back in April, a president's budget proposal is not binding and rarely comes to full fruition, since the federal budget is ultimately set by Congress. In the coming weeks, House and Senate committees will begin crafting appropriations measures for the various federal departments and agencies, with the goal of passing a final FY 2022 spending package before September 30th, when the current fiscal year ends.

    I'll be watching that process to see what White House proposals and spending targets make it into a final bill. As I've written before, there's reason to believe at least some of Biden's health care spending goals could make it into the final bill. First, Democrats hold slim majorities in the House and Senate and thus have more authority to get their desired spending targets if they can agree within their own party. Second, Biden's proposal leaves out some of the more controversial health care reforms—public option, Medicare drug pricing, etc.—that Congress is currently debating.

    The Biden-Harris era has begun.

    What’s next for health care?

    Biden-Harris

    Learn about the new administration’s legislative priorities and Covid-19 plan, what we might see in the first 100 days, and more:

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