Democrats’ Anti-Choice Agenda

In response to various abortion legislation enacted in Alabama, Georgia, Missouri, and other states, the left has called for a national day of protest on this Tuesday. The groups calling for the protest object to “Donald Trump’s anti-choice movement.”

The groups know of which they speak. The left wants to prohibit choice in medicine, by forcing doctors and health-care providers with religious objections to perform abortions. Multiple Democrat health-care bills would not only force taxpayers to fund abortions, they would commandeer doctors to perform abortions—not to mention other medical procedures that might violate their deeply held religious beliefs.

Existing Conscience Protections

The second conscience provision, the Church Amendment, exists in permanent federal law. It prohibits organizations from discriminating against individuals who refuse to participate in abortions or sterilizations. However, the Church Amendment’s provisions only apply to entities receiving grants or loans under certain statutes and programs:

  • The Public Health Service Act;
  • The Community Mental Health Centers Act;
  • The Developmental Disabilities Services and Facilities Construction Act; and
  • Contracts for biomedical or behavioral research under any HHS program.

The last three programs in particular represent a relatively small percentage of federal funding. And while the Public Health Service Act encompasses a broad set of programs, it does not contain nearly the amount of federal funding as larger entitlements like Medicare and Medicaid.

Single Payer Undermines Conscience Protections

Single-payer legislation in both the House (H.R. 1384) and Senate (S. 1129) would undermine conscience protections. These bills would create a new, automatic funding mechanism for the single-payer program.

Because the single-payer program would not get funded through the Labor-HHS appropriations bill, the Weldon Amendment conscience protections included in that measure would not apply to the program. For the same reason, the Hyde Amendment’s prohibition on taxpayer funding of abortion, also included in the Labor-HHS spending bill, would also not apply.

In theory, the Church Amendment conscience protections would still apply. However, these protections only apply to the discrete federal programs listed above, and therefore may not apply in all cases. Moreover, if existing federal grant programs get subsumed into a new single-payer system—as the sponsors of the legislation would no doubt hope—then conscience protections might go away entirely.

Medicare for America: No Conscience Protections At All

Eliminating conscience protections would fit the rubric established by the Medicare for America bill (H.R. 2452). As I pointed out in the Wall Street Journal last week, the legislation belies its “moderate” label, as it would ban all private health care. On top of that, language on page 51 of the version of the bill introduced earlier this month makes clear that conscience protections do not apply to any medical professional, under any circumstance:

(3) HEALTH CARE PROVIDERS.—Health care providers may not be prohibited from participating in the Medicare for America [sic] for reasons other than their ability to provide covered services. Health care providers and institutions are prohibited from denying covered individuals access to covered benefits and services because of their religious objections. This subsection supercedes any provision of law that allows for conscience protection.

Even more than the Sanders bill, this language makes clear: Doctors have zero conscience protections under Medicare for America, whether about abortion or any other issue. To put it another way, medical professionals can practice their faith for one hour at church on Sunday, but if they wish to live their religious beliefs, they must join another profession.

Philosophical and Practical Concerns

Beyond the moral concerns outlined above, abolishing conscience protections could come with very severe unintended consequences. More than 600 Catholic hospitals (to say nothing of hospitals with other religious affiliations) serve more than one in seven U.S. patients.

Would passage of these bills force these religiously affiliated facilities to close, rather than have the facilities and the professionals within them violate their consciences? And if facilities close, or doctors leave the profession rather than performing procedures that violate their deeply held religious beliefs, who will pick up the slack? After all, our nation already faces looming physician shortages, and the promise of “free” care under a government-run system will only encourage more consumption of health services.

Liberals might want to keep the focus on the state initiatives in Alabama and elsewhere. But forcing people to violate their religious beliefs, and potentially chasing doctors and nurses out of the medical profession as a result, represents the truly radical policy.

This post was originally published at The Federalist.

Bill Cassidy’s “Monkey Business”

Last we checked in with Louisiana Republican Sen. Bill Cassidy, he was hard at work adding literally dozens of new federal health care requirements to a Republican “repeal-and-replace” bill. This week comes word that Cassidy continues to “monkey around” in health care — this time quite literally.

STAT reports: “Sen. Bill Cassidy is trying to help hundreds of chimpanzees enjoy an easy retirement in his home state of Louisiana. The Republican is pushing for an amendment to a major appropriations bill winding its way through Congress this week that would force the National Institutes of Health to make good on a 2015 promise to move all its chimps out of research facilities.”

Don’t get me wrong: I oppose animal cruelty as much as the next person. If NIH lacks a compelling scientific justification to conduct research on chimpanzees, or any other animal, then it should cease the research and provide alterative accommodations for the creatures affected.

But on at least three levels, Cassidy’s amendment demonstrates exactly what’s wrong with Washington D.C.

Problem 1: Skewed Priorities

The federal debt is at more than $21 trillion and rising — more than double its $10.6 trillion size not ten years ago, on the day Barack Obama took office. American troops remain stationed in Afghanistan, and elsewhere around the world. Russia still looks to undermine American democracy and to meddle in this year’s midterm elections. The situation with North Korea remains tenuous, as the North Koreans continue to develop intercontinental ballistic missile technologies and their nuclear program.

So why is Cassidy trying to consume Senate floor time with a debate and vote on the chimpanzee amendment, after having already sent a letter to NIH on the subject? On a list of America’s top policy issues and concerns, the fate of 272 chimpanzees wouldn’t register in the top 100, or even in the top 1,000. So why should members of Congress (to say nothing of their staffs) spend so much time on such a comparatively inconsequential issue?

Problem 2: Cassidy Doesn’t Want to Repeal Obamacare

Rather than spending time on a chimpanzee amendment, Cassidy — like his Senate Republican colleagues — should focus on keeping the promise they made to their voters for the past four election cycles that they would repeal Obamacare. But unfortunately, many of the people who made that promise never believed it in the first place.

Based on his record, Cassidy stands as one of those individuals opposed to Obamacare repeal. As I noted in June, Cassidy does not want to repeal the federal system of regulations that lies at the heart of the health care law. In fact, a health care plan released earlier this summer seemed designed primarily to give lawmakers like Cassidy political cover not to repeal Obamacare’s most onerous regulations — even though a study by the Heritage Foundation indicates those regulations are the prime driver of premium increases since the law passed.

Problem 3: Cassidy Just Voted to Entrench Obamacare

Earlier this month, I noted some Republicans in the Senate would likely vote to allow the District of Columbia to tax individuals who do not purchase health insurance, after having voted to repeal that mandate in last year’s tax bill. After I wrote that story, Cassidy became one of five Senate Republicans to do just that, by voting to table (or kill) an amendment defunding Washington’s new individual mandate.

Because Cassidy voted to keep the mandate in place in D.C., he voted to allow District authorities to seize and sell individuals’ property if they do not purchase “government-approved” health coverage. Rather than voting to repeal Obamacare, Cassidy and his colleagues voted to entrench Obamacare in the nation’s capital — for which they have sovereign jurisdiction under the Constitution.

Even apart from Cassidy’s flip-flopping on repeal of Obamacare and its individual mandate, the contrast with the letter to NIH raises its own questions. In that letter, Cassidy emphasized that former research chimpanzees should have “the opportunity to live in mixed-sex groups and … daily access to nesting materials.”

This all sounds well and good, but why does Cassidy seemingly care so much about giving freedom to chimpanzees and so little about giving freedom to District of Columbia residents to buy (or not buy) the health coverage they wish to purchase?

Congress, Stop Monkeying Around

Five years ago, Democratic Rep. Frank Pallone famously called a congressional hearing on the healthcare.gov debacle a “monkey court.” Five years later, the Cassidy amendment on chimpanzee research demonstrates how Congress continues to “monkey around.”

Republicans should stop the primate-related sideshows and focus on things that really matter. Like sticking to the promise they made to voters for eight years to repeal Obamacare.

This post was originally published at The Federalist.

Summary of Fiscal Year 2018 Budget

Late Monday afternoon, a document briefly appeared on the Department of Health and Human Services website as the Fiscal Year 2018 Budget in Brief. It’s unclear whether the document was a draft of the HHS budget, or merely a case of a staffer posting the official document online too early (our money would be on the latter). It also must be noted that other budget materials—the White House/Office of Management and Budget document, as well as supplemental materials from the Treasury and others—provide more detail and information not present solely within the HHS budget.

That said, based on the review of the document posted, the health budget seems in many respects functionally incoherent:

  • It proposes significant entitlement savings from Medicaid, over and above those included in Obamacare repeal, while proposing no direct savings from Medicare—a program that will spend more than $9 trillion in the coming decade, and which faces insolvency by 2028;
  • It grants states more flexibility with regards to Medicaid reform, while with respect to medical liability reform, it prescribes a solution from Washington—one that conservatives have argued is inconsistent with Tenth Amendment principles; and
  • It assumes $250 billion in savings from Obamacare repeal—more than the most recent estimate of the House legislation—a “magic asterisk” not likely to be achieved, but one on which the budget relies in order to achieve balance within a decade.

A summary of the document follows below.  We will have further information on the budget in the coming days, as more materials get released.

Discretionary Spending
While press reports in recent days have focused on the amount of “cuts” proposed in the President’s budget, it’s worth noting the HHS budget’s overall spending levels. When it comes to budget authority, the budget would spend $1.113 trillion in Fiscal Year 2018, which is a 1.24% reduction compared to the $1.127 trillion preliminary number for the current fiscal year, and a 0.54% reduction compared to the $1.119 trillion for Fiscal Year 2016.

Furthermore, the HHS budget actually increases the number of full-time equivalents (FTEs) within the Department—from 77,499 in FY16, to 79,505 in FY17, to 80,027 in FY18.

When compared to Fiscal Year 2017 amounts, the budget calls for the following changes in discretionary spending by major HHS divisions (tabulated by budget authority):

  • $850 million (31.0%) reduction for the Food and Drug Administration, as the Administration proposes increasing FDA user fees to compensate for reductions in taxpayer funding;
  • $449 million (4.2%) reduction for the Health Services and Resources Administration;
  • $55 million (1.1%) reduction for the Indian Health Service;
  • $1.3 billion (17.2%) reduction for the Centers for Disease Control;
  • $5.78 billion (18.2%) reduction for the National Institutes of Health;
  • $385 million (9.3%) reduction for the Substance Abuse and Mental Health Services Administration; and
  • $379 million (9.6%) reduction for the discretionary portion of the Centers for Medicare and Medicaid Services program management account.

Food and Drug Administration:  As noted above, the budget envisions a “recalibration” of how to pay for FDA pre-market review activities. Specifically, the budget would increase industry user fees “to fund 100 percent of cost for pre-market review and approval activities” for brand and generic prescription drugs and medical devices.

Medicare Proposals (Total savings of $22.6 Billion, including interactions)

Medicare Appeals:  Proposes new mandatory spending of $127 million in Fiscal 2018, and $1.27 billion over a decade, to address the pending backlog of Medicare appeals.

IPAB Repeal:  Repeals Obamacare’s Independent Payment Advisory Board (IPAB), at a cost of $7.6 billion over a decade. While opposing Obamacare’s notion that a board of unelected bureaucrats should be empowered to make rulings lowering Medicare spending nationwide, some conservatives may also oppose efforts to repeal a spending constraint on our nation’s largest health care entitlement without any similar efforts to control the program’s large (and growing) outlays.

Liability Reform:  Achieves Medicare savings of $31.4 billion from medical liability reforms. The reforms would impose caps on non-economic damages, provide safe harbors for physicians based on following clinical guidelines, allow for the creation of health courts, provide for a three-year statute of limitations, eliminate joint and several liability, allow courts to modify contingency arrangements, and provide for periodic payments for large jury awards.

The proposal would yield total savings of $55 billion overall. The largest share of $31.4 billion would come from Medicare—in part because a portion of physician fees are based on medical liability insurance payments. Medicaid savings would total $399 million. Much of the remaining $23.2 billion would come from revenue interactions with the current exclusion from employer-provided health insurance—i.e., a lowering of health insurance costs and premiums resulting in workers receiving slightly less of their compensation as pre-tax health benefits, and slightly more of their compensation as after-tax cash wages.

While supporting the concept of liability reform generally, some conservatives may be concerned that the budget’s proposals violate the principles of federalism. States can enact liability reforms on their own—and many states like Texas have done so, without any mandates from Washington. Some conservatives may therefore view this proposal as an example of “big government conservatism” inconsistent with the Tenth Amendment.

Medicaid and Other Health Proposals (Total savings of $627 Billion)

The HHS document notes that “the budget includes a net savings to Medicaid of $627 billion over 10 years, not including additional savings to Medicaid as a result of the Administration’s plan to repeal and replace Obamacare.”

Medicaid Reform:  Assumes $610 billion in savings (again, over and above Obamacare repeal) from Medicaid reform, giving states the choice between a per capita cap or a block grant beginning in 2020. The document specifically notes that this proposal will allow states to promote solutions that encourage work and promote personal responsibility.

State Children’s Health Insurance Program:  Assumes a two-year reauthorization of the State Children’s Health Insurance Program (SCHIP). The budget also proposes eliminating two Obamacare-related provisions—the increase in the enhanced federal match rate for SCHIP, and the maintenance of effort requirements imposed on states—in both cases at the end of the current fiscal year.

The budget would cap the level at which states could receive the enhanced federal SCHIP match at 250 percent of the federal poverty level ($61,500 for a family of four in 2017). Some conservatives would argue that this provision is one way to ensure federal funds are directed towards the vulnerable populations that need them most; guidance issued by the Bush Administration in 2007 provides other examples of potential policies to include.

Finally, the budget also proposes undoing an Obamacare change that required states to transition certain children off of SCHIP and into expanded Medicaid, allowing states to re-enroll these children into SCHIP.

On net, the SCHIP extension would save the federal government $5.8 billion over ten years, reflecting new costs to the SCHIP program ($13.9 billion), savings to Medicaid ($16.7 billion), and savings to other federal health programs ($3 billion).

Liability Reform:  As noted above, the budget assumes an additional $399 million in Medicaid savings from enacting liability reform.

Repeal of Obamacare
The budget assumes a net of $250 billion in savings from an Obamacare repeal/replace measure, savings accruing to both HHS and Treasury. Some conservatives, noting that the most recent score of Obamacare legislation showed a net savings of only $150 billion—with more new spending added since then—may question whether or not this assumption is realistic.

Pediatric Research Bill: Obamacare’s Road to Rationing?

A PDF of this Issue Brief is available on the Heritage Foundation website.

Later this month, the House of Representatives could consider legislation regarding pediatric research.[1] Legislation regarding this issue (H.R. 1724) was first introduced in April, and a new version of the bill (H.R. 2019) was introduced in May.

Although largely similar, H.R. 1724 would require the director of the National Institutes of Health (NIH) to provide a justification for any existing grants studying health economics, and would prohibit new grants until “a federal law has been enacted authorizing the National Institutes of Health to use funding specifically for health economics research.”[2] Press reports indicate that H.R. 2019 excludes the restrictions included in H.R. 1724 “in order to please Democrats who favor the research.”[3]

This is a mistake. The House should ensure that H.R. 1724’s proposed restrictions on health economics research remain in any NIH-related legislation that comes to the House floor. To do otherwise would provide tacit approval to Obamacare’s road to government-rationed health care.

Proposed Restriction a Necessary Protection

The provision omitted from H.R. 2019 would have instituted an important and necessary protection on taxpayer-funded research on cost-effectiveness in health care. In recent years, the federal government has funded numerous such studies. For instance, a June 2011 Government Accountability Office report examining projects funded by the “stimulus” highlighted NIH grants studying the cost-effectiveness of various medical treatments, including:

  • “A Comprehensive Model to Assess the Cost-Effectiveness of Patient Navigation,”
  • “Cost-Effectiveness of Hormonal Therapy for Clinically Localized Prostate Cancer;”
  • “Clinical and Cost-Effectiveness of Biologics in Rheumatoid Arthritis,” and
  • “Cost-Effectiveness of HIV-Related Mental Health Interventions.”[4]

Liberals Favor Cost-Effectiveness Research

Setting aside the wisdom of using taxpayer funds to examine the cost-effectiveness of various treatments, such research could eventually be used to deny patients access to certain kinds of care. Quotes from key policymakers reveal how some would use cost-effectiveness research as a way for government bureaucrats to block access to treatments that are deemed too costly:

  • Former Senator Tom Daschle (D–SD), President Obama’s first choice for Secretary of Health and Human Services, wrote in 2008 that “we won’t be able to make a significant dent in health-care spending without getting into the nitty-gritty of which treatments are the most clinically valuable and cost effective. That means taking a harder look at the real costs and benefits of new drugs and procedures.”[5]
  • In a 2009 interview with The New York Times, President Obama argued that “the chronically ill and those toward the end of their lives are accounting for potentially 80 percent of the total health care bill out here.… There is going to have to be a very difficult democratic conversation that takes place.”[6]
  • Former Medicare Administrator Dr. Donald Berwick, in his infamous 2009 interview, strongly argued in favor of taxpayer-funded cost-effectiveness research when stating that “the decision is not whether or not we will ration care—the decision is whether we will ration with our eyes open.”[7]

Lawmakers have already expressed their desire to use cost-effectiveness research to restrict access to certain treatments. A report prepared by the House Appropriations Committee in 2009, discussing “stimulus” funding for the types of projects highlighted above, noted that thanks to the research funding, “those items, procedures, and interventions that are most effective to prevent, control, and treat health conditions will be utilized, while those that are found to be less effective and in some cases more expensive will no longer be prescribed.”[8]

Road to Rationing

Although research comparing the relative merits and costs of medical treatments may sound appealing, past experience has demonstrated that such research can, and often is, used as a blunt tool by governments to restrict access to certain kinds of care. At a time when genetic advances have opened the door to personalized medical treatments, Obamacare has moved health policy in the opposite direction, expanding the federal bureaucracy in an attempt to micromanage the health care system.[9]

Imposing the restrictions on cost-effectiveness research included in H.R. 1724 would represent a good first step in restoring the balance between federal bureaucrats and patients.

 



[1]Daniel Newhauser, “Mindful of Previous Defeat, Cantor Pushes Bill to Increase Pediatric Research,” Roll Call, June 10, 2011, http://www.rollcall.com/news/mindful_of_previous_defeat_cantor_pushes_bill_to_increase_pediatric-225436-1.html?zkPrintable=true (accessed June 13, 2013).

[2]The Kids First Research Act of 2013, H.R. 1724, § 4.

[3]Newhauser, “Mindful of Previous Defeat.”

[4]U.S. Government Accountability Office, HHS Research Awards: Use of Recovery Act and Patient Protection and Affordable Care Act Funds for Comparative Effectiveness Research, GAO-11-712R, June 14, 2011, http://www.gao.gov/new.items/d11712r.pdf (accessed June 13, 2013).

[5]Tom Daschle, Scott Greenberger, and Jeanne Lambrew, Critical: What We Can Do about the Health Care Crisis (New York: Thomas Dunne Books, 2008), pp. 172–173.

[6]David Leonhardt, “After the Great Recession,” The New York Times, April 28, 2009, http://www.nytimes.com/2009/05/03/magazine/03Obama-t.html (accessed June 13, 2013).

[7]Biotechnology Healthcare, “Rethinking Comparative Effectiveness Research,” June 2009, http://www.ncbi.nlm.nih.gov/pmc/articles/PMC2799075/pdf/bth06_2p035.pdf (accessed June 13, 2013).

[8]Helen Evans, “Comparative Effectiveness in Health Care Reform: Lessons from Abroad,” Heritage Foundation Backgrounder No. 2239, February 4, 2009, note 3, http://www.heritage.org/research/reports/2009/02/comparative-effectiveness-in-health-care-reform-lessons-from-abroad.

[9]Kathryn Nix, “Comparative Effectiveness Research Under Obamacare: A Slippery Slope to Health Care Rationing,” Heritage Foundation Backgrounder No. 2679, April 12, 2012, http://www.heritage.org/research/reports/2012/04/comparative-effectiveness-research-under-obamacare-a-slippery-slope-to-health-care-rationing.

White House Budget Summary: Obama’s “One Percent” Solution

According to the Congressional Budget Office’s most recent baselines, the federal government will spend a total of $6.87 trillion on Medicare and $4.36 trillion on Medicaid over the next ten years – that’s $11.2 trillion total, not even counting additional state spending on Medicaid.  Yet President Obama’s budget, released today, contains net deficit savings of only $152 billion from health care programs.  That’s a total savings of only 1.35 percent of the trillions the federal government will spend on health care in the coming decade.  Sadly, it’s another sign the President isn’t serious about real budget and deficit reform.

Overall, the budget:

  • Proposes a total of $401 billion in savings, yet calls for $249 billion in unpaid-for spending due to the Medicare physician reimbursement “doc fix” – thus resulting in only $152 billion in net deficit savings. (The $249 billion presumes a ten year freeze of Medicare physician payments; however, the budget does NOT propose ways to pay for this new spending.)
  • Proposes few structural reforms to Medicare; those that are included – weak as they are – are not scheduled to take effect until 2017, well after President Obama leaves office.  If the proposals are so sound, why the delay?
  • Requests a more than 50% increase – totaling $1.4 billion – for program management at the Centers for Medicare and Medicaid Services, of which the vast majority would be used to implement Obamacare.
  • Includes mandatory proposals in the budget that largely track last year’s budget and the President’s September 2011 deficit proposal to Congress, with a few exceptions.  The largest difference between this year’s budget and the prior submissions is a massive increase in savings from reductions to nursing and rehabilitation facilities – $79 billion, compared to a $32.5 billion estimated impact in September 2011.

A full summary follows below.  We will have further information on the budget in the coming days.

Discretionary Spending

When compared to Fiscal Year 2013 appropriated amounts, the budget calls for the following changes in discretionary spending by major HHS divisions (tabulated by budget authority):

  • $37 million (1.5%) increase for the Food and Drug Administration (not including $770 million in increased user fees);
  • $435 million (4.9%) increase for the Health Services and Resources Administration;
  • $97 million (2.2%) increase for the Indian Health Service;
  • $344 million (5.7%) increase for the Centers for Disease Control;
  • $274 million (0.9%) increase for the National Institutes of Health; and
  • $1.4 billion (52.9%) increase for the discretionary portion of the Centers for Medicare and Medicaid Services program management account.

With regard to the above numbers for CDC and HRSA, note that these are discretionary numbers only.  The Administration’s budget also would allocate an additional $1 billion mandatory spending from the Prevention and Public Health “slush fund” created in Obamacare, further increasing spending levels.  For instance, CDC spending would be increased by an additional $755 million.

Obamacare Implementation Funding and Personnel:  As previously noted, the budget includes more than $1.4 billion in discretionary spending increases for the Centers for Medicare and Medicaid Services, which the HHS Budget in Brief claims would be used to “continue implementing key provisions of [Obamacare].”  This funding would finance 712 new bureaucrats within CMS when compared to last fiscal year – a massive increase when compared to a request of 256 new FTEs in last year’s budget proposal.  Overall, the HHS budget proposes an increase of 1,311 full-time equivalent positions within the bureaucracy compared to projections for the current fiscal cycle, and an increase of 3,327 bureaucrats compared to last fiscal year.

The budget includes specific requests related to Obamacare totaling over $2 billion, including:

  • $803.5 million for “CMS activities to support [Exchanges] in FY 2014,” including funding for the federally-funded Exchange, for which the health law itself did not appropriate funding;
  • $837 million for “beneficiary education and outreach activities through the National Medicare Education program and consumer support…including $554 million for the [Exchanges];”
  • $519 million for “general IT systems and other support,” including funding for the federal Exchange;
  • $3.8 million for updates to healthcare.gov;
  • $18.4 million to oversee the medical loss ratio regulations; and
  • $24 million for administrative activities in Medicaid related to “implement[ing] new responsibilities” under Obamacare.

Exchange Funding:  The budget envisions HHS spending $1.5 billion on Exchange grants in 2013.  That’s an increase of over $300 million compared to last year’s estimate of fiscal year 2013 spending – despite the fact that most states have chosen not to create their own Exchanges.  The budget anticipates a further $2.1 billion in spending on Exchange grants in fiscal year 2014.  The health care law provides the Secretary with an unlimited amount of budget authority to fund state Exchange grants through 2015.  However, other reports have noted that the Secretary does NOT have authority to use these funds to construct a federal Exchange.

Abstinence Education Funding:  The budget proposes eliminating the abstinence education funding program, and converting those funds into a new pregnancy prevention program.

Medicare Proposals (Total savings of $359.9 Billion, including interactions)

Bad Debts:  Reduces bad debt payments to providers – for unpaid cost-sharing owed by beneficiaries – from 65 percent down to 25 percent over three years, beginning in 2014.  The Simpson-Bowles Commission made similar recommendations in its final report.  Saves $25.5 billion.

Medical Education Payments:  Reduces the Indirect Medical Education adjustment paid to teaching hospitals beginning in 2014, saving $11 billion.  Previous studies by the Medicare Payment Advisory Committee (MedPAC) have indicated that IME payments to teaching hospitals may be greater than the actual costs the hospitals incur.

Rural Payments:  Reduces critical access hospital payments from 101% of costs to 100% of costs, saving $1.4 billion, and prohibits hospitals fewer than 10 miles away from the nearest hospital from receiving a critical access hospital designation, saving $700 million.

Anti-Fraud Provisions:  Assumes $400 million in savings from various anti-fraud provisions, including limiting the discharge of debt in bankruptcy proceedings associated with fraudulent activities.

Imaging:  Reduces imaging payments by assuming a higher level of utilization for certain types of equipment, saving $400 million.  Imposes prior authorization requirements for advanced imaging; no savings are assumed, a change from the September 2011 deficit proposal, which said prior authorization would save $900 million.

Pharmaceutical Price Controls:  Expands Medicaid price controls to dual eligible and low-income subsidy beneficiaries participating in Part D, saving $123.2 billion according to OMB.  Some have expressed concerns that further expanding government-imposed price controls to prescription drugs could harm innovation and the release of new therapies that could help cure diseases.

Medicare Drug Discounts:  Proposes accelerating the “doughnut hole” drug discount plan included in PPACA, filling in the “doughnut hole” completely by 2015.  While the budget claims this proposal will save $11.2 billion over ten years, some may be concerned that – by raising drug spending, and eliminating incentives for seniors to choose generic pharmaceuticals over brand name drugs, this provision will actually INCREASE Medicare spending, consistent with prior CBO estimates at the time of PPACA’s passage.

Post-Acute Care:  Reduces various acute-care payment updates (details not specified) and equalizes payment rates between skilled nursing facilities and inpatient rehabilitation facilities, saving $79 billion – a significant increase compared to the $56.7 billion in last year’s budget and the $32.5 billion in proposed savings under the President’s September 2011 deficit proposal.  Equalizes payments between IRFs and SNFs for certain conditions, saving $2 billion.  Adjusts payments to inpatient rehabilitation facilities and skilled nursing facilities to account for unnecessary hospital readmissions and encourage appropriate care, saving a total of $4.7 billion.  Restructures post-acute care reimbursements through the use of bundled payments, saving $8.2 billion.

Physician Payment:  Includes language extending accountability standards to physicians who self-refer for radiation therapy, therapy services, and advanced imaging services, saving $6.1 billion.  Makes adjustments to clinical laboratory payments, designed to align Medicare with private payment rates, saving $9.5 billion.  Expands availability of Medicare data for performance and quality improvement; no savings assumed.

Medicare Drugs:  Reduces payment of physician administered drugs from 106 percent of average sales price to 103 percent of average sales price.  Some may note reports that similar payment reductions, implemented as part of the sequester, have caused some cancer clinics to limit their Medicare patient load.  By including a similar proposal in his budget, President Obama has effectively endorsed these policies.  Saves $4.5 billion.

Medicare Advantage:  Resurrects a prior-year proposal to increase Medicare Advantage coding intensity adjustments; this provision would have the effect of reducing MA plan payments, based on an assumption that MA enrollees are healthier on average than those in government-run Medicare.  Saves $15.3 billion over ten years.  Also proposes $4.1 billion in additional savings by aligning employer group waiver plan payments with average MA plan bids.

Additional Means Testing:  Increases means tested premiums under Parts B and D by five percentage points, beginning in 2017.  Freezes the income thresholds at which means testing applies until 25 percent of beneficiaries are subject to such premiums.  Saves $50 billion over ten years, and presumably more thereafter, as additional seniors would hit the means testing threshold, subjecting them to higher premiums.

Medicare Deductible Increase:  Increases Medicare Part B deductible by $25 in 2017, 2019, and 2021 – but for new beneficiaries only; “current beneficiaries or near retirees [not defined] would not be subject to the revised deductible.”  Saves $3.3 billion.

Home Health Co-Payment:  Beginning in 2017, introduces a home health co-payment of $100 per episode for new beneficiaries only, in cases where an episode lasts five or more visits and is NOT proceeded by a hospital stay.  MedPAC has previously recommended introducing home health co-payments as a way to ensure appropriate utilization.  Saves $730 million.

Medigap Surcharge:  Imposes a Part B premium surcharge equal to about 15 percent of the average Medigap premium – or about 30 percent of the Part B premium – for seniors with Medigap supplemental insurance that provides first dollar coverage.  Applies beginning in 2017 to new beneficiaries only.  A study commissioned by MedPAC previously concluded that first dollar Medigap coverage induces beneficiaries to consume more medical services, thus increasing costs for the Medicare program and federal taxpayers.  Saves $2.9 billion.

Generic Drug Incentives:  Proposes increasing co-payments for certain brand-name drugs for beneficiaries receiving the Part D low-income subsidy, while reducing co-payments for relevant generic drugs by 15 percent, in an attempt to increase generic usage among low-income seniors currently insulated from much of the financial impact of their purchasing decisions.  Saves $6.7 billion, according to OMB.

Lower Caps on Medicare Spending:  Section 3403 of the health care law established an Independent Payment Advisory Board tasked with limiting Medicare spending to the growth of the economy plus one percentage point (GDP+1) in 2018 and succeeding years.  The White House proposal would reduce this target to GDP+0.5 percent.  The Medicare actuary has previously written that the spending adjustments contemplated by IPAB and the health care law “are unlikely to be sustainable on a permanent annual basis” and “very challenging” – problems that would be exacerbated by utilizing a slower target rate for Medicare spending growth.  According to the budget, this proposal would save $4.1 billion, mainly in 2023.

Medicaid and Other Health Proposals (Total savings of $41.1 Billion)

Limit Durable Medical Equipment Reimbursement:  Caps Medicaid reimbursements for durable medical equipment (DME) at Medicare rates, beginning in 2014.  The health care law extended and expanded a previous Medicare competitive bidding demonstration project included in the Medicare Modernization Act, resulting in savings to the Medicare program.  This proposal, by capping Medicaid reimbursements for DME at Medicare levels, would attempt to extend those savings to the Medicaid program.  Saves $4.5 billion over ten years.

Rebase Medicaid Disproportionate Share Hospital Payments:  Proposes beginning DSH payment reductions in 2015 instead of 2014, and “to determine future state DSH allotments based on states’ actual DSH allotments as reduced” by PPACA.  Saves $3.6 billion, all in fiscal 2023.

Medicaid Anti-Fraud Savings:  Assumes $3.7 billion in savings from a variety of Medicaid anti-fraud provisions.  Included in this amount are proposals that would remove exceptions to the requirement that Medicaid must reject payments when another party is liable for a medical claim.  A separate proposal related to the tracking of pharmaceutical price controls would save $8.8 billion.

Transitional Medical Assistance/QI Program:  Provides for temporary extensions of the Transitional Medical Assistance program, which provides Medicaid benefits for low-income families transitioning from welfare to work, along with the Qualifying Individual program, which provides assistance to low-income seniors in paying Medicare premiums.  The extensions cost $1.1 billion and $590 million, respectively.

“Pay-for-Delay:”  Prohibits brand-name pharmaceutical manufacturers from entering into arrangements that would delay the availability of new generic drugs. Some Members have previously expressed concerns that these provisions would harm innovation, and actually impede the incentives to generic manufacturers to bring cost-saving generic drugs on the market.  OMB scores this proposal as saving $11 billion.

Follow-on Biologics:  Reduces to seven years the period of exclusivity for follow-on biologics.  Current law provides for a twelve-year period of exclusivity, based upon an amendment to the health care law that was adopted on a bipartisan basis in both the House and Senate (one of the few substantive bipartisan amendments adopted).  Some Members have expressed concern that reducing the period of exclusivity would harm innovation and discourage companies from developing life-saving treatments.  OMB scores this proposal as saving $3.3 billion.

State Waivers:  Accelerates from 2017 to 2014 the date under which states can submit request for waivers of SOME of the health care law’s requirements to HHS.  While supposedly designed to increase flexibility, even liberal commentators have agreed that under the law’s state waiver programcritics of Obama’s proposal have a point: It wouldn’t allow to enact the sorts of health care reforms they would prefer” and thatconservatives can’t do any better – at least not under these rules.”  No cost is assumed; however, in its re-estimate of the President’s budget last year, CBO scored this proposal as costing $4.5 billion.

Implementation “Slush Fund:”  Proposes $400 million in new spending for HHS to implement the proposals listed above.

FEHB Contracting:  Similar to last year’s budget, proposes streamlining pharmacy benefit contracting within the Federal Employee Health Benefits program, by centralizing pharmaceutical benefit contracting within the Office of Personnel Management (OPM), saving $1.6 billion.  However, this year’s budget goes further in restructuring FEHBP – OPM would also be empowered to modernize benefit designs (savings of $264 million); create a “self-plus-one” benefit option for federal employees and extend benefits to domestic partners (total savings of $5.2 billion, despite the costs inherent in the latter option); and adjust premium levels based on tobacco usage and/or participation in wellness programs (savings of $1.3 billion).  Some individuals, noting that OPM is also empowered to create “multi-state plans” as part of the health care overhaul, may be concerned that these provisions could be part of a larger plan to make OPM the head of a de facto government-run health plan.

Other Health Care Proposal of Note

Tax Credit:  The Treasury Green Book proposes expanding the small business health insurance tax credit included in the health care law.   Specifically, the budget would expand the number of employers eligible for the credit to include all employers with up to 50 full-time workers; firms with under 20 workers would be eligible for the full credit.  (Currently those levels are 25 and 10 full-time employees, respectively.)  The budget also changes the coordination of the two phase-outs based on a firm’s average wage and number of employees, with the changes designed to make more companies eligible for a larger credit.  The changes would begin in the current calendar and tax year (i.e., 2013).  According to OMB, these changes would cost $10.4 billion over ten years – down from last year’s estimate of $14 billion over ten years.  Many may view this proposal as a tacit admission that the credit included in the law was a failure, because its limited reach and complicated nature – firms must fill out seven worksheets to determine their eligibility – have deterred American job creators from receiving this subsidy.  Moreover, the reduced score in this year’s budget compared to last year’s implies that even this expansion of the credit will have a less robust impact than originally anticipated.

White House Budget Summary

Overall, the budget:

  • Proposes $362 billion in savings, yet calls for $429 billion in unpaid-for spending due to the Medicare physician reimbursement “doc fix” – thus resulting in a net increase in the deficit. (The $429 billion presumes a ten year freeze of Medicare physician payments; however, the budget does NOT propose ways to pay for this new spending.)
  • Proposes few structural reforms to Medicare; those that are included – weak as they are – are not scheduled to take effect until 2017, well after President Obama leaves office.  If the proposals are so sound, why the delay?
  • Requests just over $1 billion for program management at the Centers for Medicare and Medicaid Services, of which the vast majority – $864 million – would be used to implement the health care law.
  • Requests more than half a billion dollars for comparative effectiveness research, which many may be concerned could result in government bureaucrats imposing cost-based limits on treatments.
  • Includes mandatory proposals in the budget that largely track the September deficit proposal to Congress, with a few exceptions.  The budget does NOT include proposals to reduce Medicare frontier state payments, even though this policy was included in the September proposal.  The budget also does not include recovery provisions regarding Medicare Advantage payments to insurers; however, the Administration has indicated they intend to implement this provision administratively.
  • Does not include a proposal relating to Medicaid eligibility levels included in the September submission, as that proposal was enacted into law in November (P.L. 112-56).

 

Discretionary Spending

When compared to Fiscal Year 2012 appropriated amounts, the budget calls for the following changes in discretionary spending by major HHS divisions (tabulated by budget authority):

  • $12 million (0.5%) increase for the Food and Drug Administration – along with a separate proposed $643 million increase in FDA user fees;
  • $138 million (2.2%) decrease for the Health Services and Resources Administration;
  • $116 million (2.7%) increase for the Indian Health Service;
  • $664 million (11.5%) decrease for the Centers for Disease Control;
  • No net change in funding for the National Institutes of Health;
  • $1 billion (26.2%) increase for the discretionary portion of the Centers for Medicare and Medicaid Services program management account; and
  • $29 million (5.0%) increase for the discretionary Health Care Fraud and Abuse Control fund.

With regard to the above numbers for CDC and HRSA, note that these are discretionary numbers only.  The Administration’s budget also would allocate additional $1.25 billion in mandatory spending from the new Prevention and Public Health “slush fund” created in the health care law, likely eliminating any real budgetary savings (despite the appearance of same above).

Other Health Care Points of Note

Tax Credit:  The Treasury Green Book proposes expanding the small business health insurance tax credit included in the health care law.   Specifically, the budget would expand the number of employers eligible for the credit to include all employers with up to 50 full-time workers; firms with under 20 workers would be eligible for the full credit.  (Currently those levels are 25 and 10 full-time employees, respectively.)  The budget also changes the coordination of the two phase-outs based on a firm’s average wage and number of employees, with the changes designed to make more companies eligible for a larger credit.  According to OMB, these changes would cost $14 billion over ten years.  Many may view this proposal as a tacit admission that the credit included in the law was a failure, because its limited reach and complicated nature – firms must fill out seven worksheets to determine their eligibility – have deterred American job creators from receiving this subsidy.

Comparative Effectiveness Research:  The budget proposes a total of $599 million in funding for comparative effectiveness research.  Only $78 million of this money comes from existing funds included in the health care law – meaning the Administration has proposed discretionary spending of more than $500 million on comparative effectiveness research.  Some have previously expressed concerns that this research could be used to restrict access to treatments perceived as too costly by federal bureaucrats.  It is also worth noting that this new $520 million in research funding would NOT be subject to the anti-rationing provisions included in the health care law.  Section 218 of this year’s omnibus appropriations measure included a prohibition on HHS using funds to engage in cost-effectiveness research, a provision which this budget request would presumably seek to overturn.

Obamacare Implementation Funding and Personnel:  As previously noted, the budget includes more than $1 billion in discretionary spending increases for the Centers for Medicare and Medicaid Services, which the HHS Budget in Brief claims would be used to “continue implementing [Obamacare], including Exchanges.”  This funding would finance 256 new bureaucrats within CMS, many of whom would likely be used to implement the law.  Overall, the HHS budget proposes an increase of 1,393 full-time equivalent positions within the bureaucracy.

Specific details of the $1 billion in implementation funding include:

  • $290 million for “consumer support in the private marketplace;”
  • $549 million for “general IT systems and other support,” including funding for the federally-funded Exchange, for which the health law itself did not appropriate funding;
  • $18 million for updates to healthcare.gov;
  • $15 million to oversee the medical loss ratio regulations; and
  • $30 million for consumer assistance grants.

Exchange Funding:  The budget envisions HHS spending $1.1 billion on Exchange grants in 2013, a $180 million increase over the current fiscal year.  The health care law provides the Secretary with an unlimited amount of budget authority to fund state Exchange grants through 2015.  However, other reports have noted that the Secretary does NOT have authority to use these funds to construct a federal Exchange, in the event some states choose not to implement their own state-based Exchanges.

Abstinence Education Funding:  The budget proposes eliminating the abstinence education funding program, and converting those funds into a new pregnancy prevention program.

Medicare Proposals (Total savings of $292.2 Billion)

Bad Debts:  Reduces bad debt payments to providers – for unpaid cost-sharing owed by beneficiaries – from 70 percent down to 25 percent over three years, beginning in 2013.  The Fiscal Commission had made similar recommendations in its final report.  Saves $35.9 billion.

Medical Education Payments:  Reduces the Indirect Medical Education adjustment paid to teaching hospitals by 10 percent beginning in 2014, saving $9.7 billion.  Previous studies by the Medicare Payment Advisory Committee (MedPAC) have indicated that IME payments to teaching hospitals may be greater than the actual costs the hospitals incur.

Rural Payments:  Reduces critical access hospital payments from 101% of costs to 100% of costs, saving $1.4 billion, and prohibits hospitals fewer than 10 miles away from the nearest hospital from receiving a critical access hospital designation, saving $590 million.  The budget does NOT include a proposal to end add-on payments for providers in frontier states, which was included in the President’s September deficit proposal.

Post-Acute Care:  Reduces various acute-care payment updates (details not specified) during the years 2013 through 2022, saving $56.7 billion – a significant increase compared to the $32.5 billion in savings under the President’s September deficit proposal.  Equalizes payment rates between skilled nursing facilities and inpatient rehabilitation facilities, saving $2 billion.  Increases the minimum percentage of inpatient rehabilitation facility patients that require intensive rehabilitation from 60 percent to 75 percent, saving $2.3 billion.  Reduces skilled nursing facility payments by up to 3%, beginning in 2015, for preventable readmissions, saving $2 billion.

Pharmaceutical Price Controls:  Expands Medicaid price controls to dual eligible and low-income subsidy beneficiaries participating in Part D, saving $155.6 billion according to OMB.  Some have expressed concerns that further expanding government-imposed price controls to prescription drugs could harm innovation and the release of new therapies that could help cure diseases.

Anti-Fraud Provisions:  Assumes $450 million in savings from various anti-fraud provisions, including limiting the discharge of debt in bankruptcy proceedings associated with fraudulent activities.

EHR Penalties:  Re-directs Medicare reimbursement penalties against physicians who do not engage in electronic prescribing beginning in 2020 back into the Medicare program.  The “stimulus” legislation that enacted the health IT provisions had originally required that penalties to providers be placed into the Medicare Improvement Fund; the budget would instead re-direct those revenues into the general fund, to finance the “doc fix” and related provisions.  OMB now scores this proposal as saving $590 million; when included in last year’s budget back in February, these changes were scored as saving $3.2 billion.

Imaging:  Reduces imaging payments by assuming a higher level of utilization for certain types of equipment, saving $400 million.  Also imposes prior authorization requirements for advanced imaging; no savings are assumed, a change from the September deficit proposal, which said prior authorization would save $900 million.

Additional Means Testing:  Increases means tested premiums under Parts B and D by 15%, beginning in 2017.  Freezes the income thresholds at which means testing applies until 25 percent of beneficiaries are subject to such premiums.  Saves $27.6 billion over ten years, and presumably more thereafter, as additional seniors would hit the means testing threshold, subject them to higher premiums.

Medicare Deductible Increase:  Increases Medicare Part B deductible by $25 in 2017, 2019, and 2021 – but for new beneficiaries only; “current beneficiaries or near retirees [not defined] would not be subject to the revised deductible.”  Saves $2 billion.

Home Health Co-Payment:  Beginning in 2017, introduces a home health co-payment of $100 per episode for new beneficiaries only, in cases where an episode lasts five or more visits and is NOT proceeded by a hospital stay.  MedPAC has previously recommended introducing home health co-payments as a way to ensure appropriate utilization.  Saves $350 million.

Medigap Surcharge:  Imposes a Part B premium surcharge equal to about 15 percent of the average Medigap premium – or about 30 percent of the Part B premium – for seniors with Medigap supplemental insurance that provides first dollar coverage.  Applies beginning in 2017 to new beneficiaries only.  A study commissioned by MedPAC previously concluded that first dollar Medigap coverage induces beneficiaries to consume more medical services, thus increasing costs for the Medicare program and federal taxpayers.  Saves $2.5 billion.

Lower Caps on Medicare Spending:  Section 3403 of the health care law established an Independent Payment Advisory Board tasked with limiting Medicare spending to the growth of the economy plus one percentage point (GDP+1) in 2018 and succeeding years.  The White House proposal would reduce this target to GDP+0.5 percent.  This approach has two potential problems:

  • First, under the Congressional Budget Office’s most recent baseline, IPAB recommendations would not be triggered at all – so it’s unclear whether the new, lower target level would actually generate measurable budgetary savings.  (In August 2010, CBO concluded an IPAB with an overall cap of GDP+1 would yield $13.8 billion in savings through 2020 – not enough to make a measurable impact on a program spending $500 billion per year.)
  • Second, the Medicare actuary has previously written that the spending adjustments contemplated by IPAB and the health care law “are unlikely to be sustainable on a permanent annual basis” and “very challenging” – problems that would be exacerbated by utilizing a slower target rate for Medicare spending growth.

According to the budget, this proposal would NOT achieve additional deficit savings.

Medicaid and Other Health Proposals (Total savings of $70.4 Billion)

Medicaid Provider Taxes:  Reduces limits on Medicaid provider tax thresholds, beginning in 2015; the tax threshold would be reduced over a three year period, to 3.5 percent in 2017 and future years.  State provider taxes are a financing method whereby states impose taxes on medical providers, and use these provider tax revenues to obtain additional federal Medicaid matching funds, thereby increasing the federal share of Medicaid expenses paid while decreasing the state share of expenses.  The Tax Relief and Health Care Act of 2006, enacted by a Republican Congress, capped the level of Medicaid provider taxes, and the Bush Administration proposed additional rules to reform Medicaid funding rules – rules that were blocked by the Democrat-run 110th Congress.  However, there is bipartisan support for addressing ways in which states attempt to “game” the Medicaid system, through provider taxes and other related methods, to obtain unwarranted federal matching funds – the liberal Center for Budget and Policy Priorities previously wrote about a series of “Rube Goldberg-like accounting arrangements” that “do not improve the quality of health care provided” and “frequently operate in a manner that siphons extra federal money to state coffers without affecting the provision of health care.”  This issue was also addressed in the fiscal commission’s report, although the commission exceeded the budget proposals by suggesting that Congress enact legislation “restricting and eventually eliminating” provider taxes, saving $44 billion.  OMB scores this proposal as saving $21.8 billion.

Blended Rate:  Proposes “replac[ing]…complicated federal matching formulas” in Medicaid “with a single matching rate specific to each state that automatically increases if a recession forces enrollment and state costs to rise.”  Details are unclear, but the Administration claims $17.9 billion in savings from this proposal – much less than the $100 billion figure bandied about in previous reports last summer.  It is also worth noting that the proposal could actually INCREASE the deficit, if a prolonged recession triggers the automatic increases in the federal Medicaid match referenced in the proposal.  On a related note, the budget once again ignores the governors’ multiple requests for flexibility from the mandates included in the health care law – unfunded mandates on states totaling at least $118 billion.

Transitional Medical Assistance/QI Program:  Provides for temporary extensions of the Transitional Medical Assistance program, which provides Medicaid benefits for low-income families transitioning from welfare to work, along with the Qualifying Individual program, which provides assistance to low-income seniors in paying Medicare premiums.  The extensions cost $815 million and $1.7 billion, respectively.

Limit Durable Medical Equipment Reimbursement:  Caps Medicaid reimbursements for durable medical equipment (DME) at Medicare rates, beginning in 2013.  The health care law extended and expanded a previous Medicare competitive bidding demonstration project included in the Medicare Modernization Act, resulting in savings to the Medicare program.  This proposal, by capping Medicaid reimbursements for DME at Medicare levels, would attempt to extend those savings to the Medicaid program.  OMB now scores this proposal as saving $3 billion; when included in the President’s budget last year, these changes were scored as saving $6.4 billion.

Rebase Medicaid Disproportionate Share Hospital Payments:  In 2021 and 2022, reallocates Medicaid DSH payments to hospitals treating low-income patients, based on states’ actual 2020 allotments (as amended and reduced by the health care law).  Saves $8.3 billion.

Medicaid Anti-Fraud Savings:  Assumes $3.2 billion in savings from a variety of Medicaid anti-fraud provisions, largely through tracking and enforcement of various provisions related to pharmaceuticals.  Included in this amount are proposals that would remove exceptions to the requirement that Medicaid must reject payments when another party is liable for a medical claim.

Flexibility on Benchmark Plans:  Proposes some new flexibility for states to require Medicaid “benchmark” plan coverage for non-elderly, non-disabled adults – but ONLY those with incomes above 133 percent of the federal poverty level (i.e., NOT the new Medicaid population obtaining coverage under the health care law).  No savings assumed.

“Pay-for-Delay:”  Prohibits brand-name pharmaceutical manufacturers from entering into arrangements that would delay the availability of new generic drugs.  Some Members have previously expressed concerns that these provisions would harm innovation, and actually impede the incentives to generic manufacturers to bring cost-saving generic drugs on the market.  OMB scores this proposal as saving $11 billion.

Follow-on Biologics:  Reduces to seven years the period of exclusivity for follow-on biologics.  Current law provides for a twelve-year period of exclusivity, based upon an amendment to the health care law that was adopted on a bipartisan basis in both the House and Senate (one of the few substantive bipartisan amendments adopted).  Some Members have expressed concern that reducing the period of exclusivity would harm innovation and discourage companies from developing life-saving treatments.  OMB scores this proposal as saving $3.8 billion.

FEHB Contracting:  Proposes streamlining pharmacy benefit contracting within the Federal Employee Health Benefits program, by centralizing pharmaceutical benefit contracting within the Office of Personnel Management (OPM).  Some individuals, noting that OPM is also empowered to create “multi-state plans” as part of the health care overhaul, may be concerned that these provisions could be part of a larger plan to make OPM the head of a de facto government-run health plan.  OMB scores this proposal as saving $1.7 billion.

Prevention “Slush Fund:”  Reduces spending by $4 billion on the Prevention and Public Health Fund created in the health care law.  Some Members have previously expressed concern that this fund would be used to fund projects like jungle gyms and bike paths, questionable priorities for the use of federal taxpayer dollars in a time of trillion-dollar deficits.

State Waivers:  Accelerates from 2017 to 2014 the date under which states can submit request for waivers of SOME of the health care law’s requirements to HHS.  While supposedly designed to increase flexibility, even liberal commentators have agreed that under the law’s state waiver programcritics of Obama’s proposal have a point: It wouldn’t allow to enact the sorts of health care reforms they would prefer” and thatconservatives can’t do any better – at least not under these rules.”  The proposal states that “the Administration is committed to the budget neutrality of these waivers;” however, the plan allocates $4 billion in new spending “to account for the possibility that CBO will estimate costs for this proposal.”

Implementation “Slush Fund:”  Proposes $400 million in new spending for HHS to implement the proposals listed above.

On Entitlements and Containing Costs

Before President Obama gives his speech on the budget deficit and entitlements tomorrow, it’s worth examining some of the philosophical and practical questions surrounding entitlement reform in health care.  These issues were exemplified by a letter organized by the Center for American Progress in opposition to the House Republican budget plan.  The letter talks about how the health care law “is mobilizing Medicare’s buying power to encourage delivery system reform,” because “a large buyer [i.e., the federal government] can promote innovation in payment methods…in ways unavailable to small buyers.  That strategy is recommended by physicians’ organizations, hospital organizations, and experts across the spectrum.”

It’s not surprising that the liberal economists who signed that letter would take a broad view of federal power.  Similarly, an appellate brief in the multi-state health suit filed this week by several state legislators argued that the individual mandate is constitutional because “Congress has the power to regulate the nearly 20 percent of the U.S. economy that is the health care industry.”  Such an expansive statement about unfettered federal power may give those who contemplate a limited role for government significant pause.

Perhaps unsurprisingly, the Obama Administration is attempting to do just that – impose new government control on decisions about what procedures and treatments may be covered.  Inside Health Policy reported last week that the director of NIH is engaging with discussions with Medicare Administrator Don Berwick about the “potential to examine the intersection between NIH research and Medicare coverage policy” through the Center for Medicare and Medicaid Innovation.  Using comparative effectiveness research, or even cost-effectiveness research, to determine coverage options may synch with the views of Administrator Berwick, who famously stated that “The decision is not whether or not we will ration care — the decision is whether we will ration with our eyes open.”  But it may not hold the support of the American people.

Yet over and above legitimate concerns about government-imposed rationing, the idea of using the federal government’s spending to “leverage” (some would argue “micro-manage”) private health plans is fraught with practical implications that have yet to be answered:

  • If Medicare is large enough to “leverage” changes that will fix health care nationally, doesn’t that also mean Medicare’s payment model helped break the national health care system in the first place?
  • If Medicare is so efficient, then why did the Congressional Budget Office in June 2010 conclude that over more than thirty years (1975-2008), excess cost growth was higher within the Medicare program than in all other categories of health spending?
  • Why should anyone place faith in the federal government to fix a problem of skyrocketing health care costs that even liberals (implicitly) acknowledge the federal government helped create?
  • What happens if and when most or all of the delivery system reforms don’t work?  In that case, the federal government will be on the hook for covering approximately 30 million new individuals – with more individuals covered on the taxpayer dime driving costs even higher. (Also of note: The Medicare actuary admitted that the coverage expansions could induce demand-driven price rises, exacerbating cost pressures.)

The old axiom holds that “If you’re in a hole, stop digging.”  Some would argue that would apply to creating a new $2.6 trillion entitlement at a time when Medicare and Medicaid face significant unfunded liabilities.  Some would similarly argue that axiom could also apply to the theory that the federal government can reduce health care costs by (over-)regulating the health sector.

Legislative Bulletin: H.R. 307, Christopher and Dana Reeve Paralysis Act

Floor Situation: H.R. 307 is being considered under suspension of the rules, requiring a two-thirds vote for passage. The legislation was introduced by Rep. Tammy Baldwin (D-WI) on January 8, 2009.

Summary: H.R. 307 would give the Director of the National Institutes of Health (NIH) the authority to coordinate research efforts regarding paralysis, and award grants to entities to support basic and clinical paralysis research through newly created Christopher and Dana Reeve Paralysis Research Consortia. The bill also would authorize grants related to clinical rehabilitation research related to care of paralysis, and a new program of grants to states to establish research databases of patients with paralysis and improve patients’ quality of life. The bill would authorize $25 million in annual appropriations for each of Fiscal Years 2010 through 2013.

Background: On October 15, 2007 the House passed a similar bill (H.R. 1727) by voice vote. The Senate never considered the legislation.

Cost: According to the Congressional Budget Office, implementation of H.R. 307 would increase spending subject to appropriations by $10 million in Fiscal 2010 and $95 million over the 2010-2014 period.

Legislative Bulletin: H.R. 1246, Early Hearing Detection and Innovation Act

Floor Situation: H.R. 1246 is being considered under suspension of the rules, requiring a two-thirds vote for passage. The legislation was introduced by Rep. Lois Capps (D-CA) on March 2, 2009.

Summary: H.R. 1246 would amend and reauthorize through Fiscal Year 2015 programs within the Centers for Disease Control (CDC), the Health Services and Resources Administration (HRSA), and the National Institutes of Health (NIH) related to early detection of hearing loss. Specifically, the bill authorizes CDC grants and technical assistance to states for newborn and infant hearing research and surveillance, HRSA grants to support statewide efforts for newborn and infant hearing loss screening and detection, and NIH research on hearing loss and intervention. The bill would also create a new program of NIH post-doctoral research fellows to examine early hearing detection and intervention.

Background: On April 8, 2008, the House passed a similar bill (H.R. 1198) by voice vote. The Senate never considered the legislation.

Cost: According to the Congressional Budget Office, implementation of H.R. 1246 would increase spending subject to appropriations by $14 million in Fiscal Year 2010 and $151 million over five years.

Ten Facts about President Obama’s Health Proposals

President Obama’s budget proposal includes nearly $1 trillion in new health care spending—a $634 billion reserve fund as a “down payment” for expanded coverage, and nearly $350 billion in un-offset increases to physician reimbursements and other government programs.  The fund would be paid for in part through $318 billion in tax increases on filers who itemize, “competitive bidding” for Medicare Advantage plans, and tighter government price controls on drug makers:

  1. More Spending Will Not Control Costs.  At a time when government actuaries projected that health spending will jump from 16.6% to 17.6% of GDP this year alone, President Obama’s plan would propose nearly $1 trillion in new health spending—on top of the $150 billion in health spending already passed in the “stimulus” bill.
  2. Government Spending Means Government Control.  Administration officials confirmed they will seek legislative authority to impose a “least costly alternative” reimbursement policy for Medicare—a policy of rationing access to care consistent with a draft House Committee report saying that “more expensive [treatments] will no longer be prescribed” as the result of research into the effectiveness of various treatments.
  3. “Competitive Bidding” a Sham.  The budget proposes a new “competitive bidding” program for Medicare Advantage plans—but traditional Medicare will not be required to be competitive.  Moreover, this one-sided “competition” will only occur after Medicare Advantage plans receive three years of arbitrary and harmful cuts that will drive plans from this successful program and limit seniors’ choice of insurance options.
  4. Undermines Cancer Agenda.  The budget proposes $6 billion in new cancer funding for the National Institutes of Health—but limits individuals’ ability to deduct donations to charities like the American Cancer Society, and imposes new drug price controls that will discourage companies from developing new cancer therapies.
  5. Weakens Medicare’s Solvency.  Because the budget includes $330 billion in increases to physician reimbursements—without proposing offsets for this new spending, as Congress has done in the past—Medicare spending will actually rise under the President’s proposals, exacerbating Medicare’s nearly $86 trillion in unfunded obligations.
  6. Prolongs Downturn in Housing Market.  In order to pay for the health care reserve fund, the budget proposes to reduce certain individuals’ ability to deduct mortgage interest—even though the Congressional Budget Office predicts that housing starts in 2011 will still be at or below levels last seen in the early 1990s.
  7. Undermines Parental Control.  A proposed expansion of family planning programs through Medicaid would permit children of any income level to qualify for family planning services without parental approval.
  8. Raids Medicare and Medicaid Funds.  The budget includes proposed $24 billion in savings from the Medicare and Medicaid Improvement Funds.  According to current law, the Medicare Improvement Fund is designated specifically “to make improvements under the original Medicare fee-for-service program.”
  9. Harms Medical Innovation.  The budget would generate nearly $20 billion in savings from increased government price controls on the pharmaceutical industry—a one-time savings that would do nothing to slow the long-term growth in health costs, while permanently harming the research on treatments that can cure or improve a myriad of diseases.
  10. Budgetary Gimmick.  The budget presumes that spending on the State Children’s Health Insurance Program will drop by 66% in Fiscal Year 2014—a reduction many Members may consider unrealistic, and therefore intended to mask the true size of the Administration’s spending proposals.