President Obama's Budget Request Includes $828B For HHS

Main Category: Medicare / Medicaid / SCHIP
Also Included In: Public Health;  Regulatory Affairs / Drug Approvals
Article Date: 11 May 2009 - 0:00 PDT

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President Obama on Thursday presented Congress with a detailed budget plan for the fiscal year beginning Oct. 1, which intends to reduce expenditures through changes to the Medicare program and improve federal food safety efforts, CQ Today reports. The plan would allocate $828 billion for HHS in FY 2010, including $78.3 billion in discretionary spending, which is slightly less than the $78.5 billion in discretionary spending granted to the agency in FY 2009. However, the economic stimulus package provides HHS an extra $22.4 billion for FY 2009 and FY 2010, and $109 billion extra in total (Wayne, CQ Today, 5/7). The budget plan also would allocate:

• $3.2 billion for FDA, a net increase of $511 million over FY 2009 -- the largest increase ever requested for the agency -- that includes $295.2 million in budget authority as well as $215.4 million from proposed user fees (Norman, CQ HealthBeat, 5/7);
  
  
• A $300 million decline in funding for CDC, to $6.8 billion, that is offset entirely by federal stimulus money, although the agency also would receive $156 million to prepare for a pandemic flu outbreak;
  
  
• $452 billion in spending for Medicare, a 6% increase from FY 2009, and $290 billion in Medicaid spending, a 10% increase;
  
  
• $30.8 billion for NIH -- a reduction of $10 billion from FY 2009 that would be made up by $10.4 billion in stimulus funds intended for biomedical research (Wayne, CQ Today, 5/7);
  
  
• $112.8 billion for the Department of Veterans Affairs, about $15.1 billion more than this year, of which $47.4 billion in discretionary spending would be made available for veterans' medical care (Johnson, CQ Today, 5/7);
  
  
• An increase of $454 million for Indian Health Services, bringing its FY 2010 budget level to more than $4 billion;
  
  
• $34 million in additional funding, to $169 million total for FY 2010, for the National Health Service Corps, which provides health care to U.S. residents in underserved communities;
  
  
• $73 million in additional funding for initiatives to improve health care in rural areas;
  
  
• $92 million to help remedy the nation's nursing shortage, bringing total funding for the initiative to $263 million in FY 2010; and
  
  
• $59 million to expand drug courts under the Substance Abuse and Mental Health Services Administration (Norman, CQ HealthBeat, 5/7).

Medicare, Medicaid
The budget proposal states that "as part of health care reform, the administration would support comprehensive, but fiscally responsible, reforms" to Medicare's current payment formula, which has a 21% reduction to physician payments scheduled for next year. According to CQ HealthBeat, budget documents indicate that preventing those cuts and maintaining payments to physicians at the same level over the next decade would cost $311 billion. The budget states that the administration will look into numerous options to reform the payment formula, including whether physician-administered drugs should be covered under the formula. CMS figures estimate that eliminating the cost of those drugs would reduce the 10-year cost of staying in line with physician payment targets by $129.6 billion.

The budget proposal also includes proposed Medicare changes that would allow $288 billion over 10 years to be directed to a reserve fund that would help fund health care reform. The changes include linking Medicare payments to hospitals with the quality of care delivered. According to CQ HealthBeat, the money saved would be directed to a fund that would support additional hospital incentive payments and the Medicare trust fund. The changes also include a plan to reduce Medicare spending by $177 billion through a competitive bidding program that would base payments to private firms offering Medicare Advantage plans on the average of their bids. An additional $16 billion in spending reductions would come from bundling payments for hospital and post-hospital care, according to the budget plan. The budget would add $125 million in discretionary spending to the $1.5 billion that already funds the Health Care Fraud and Abuse Control Program, which directs money to Medicare, Medicaid, the Department of Justice and the HHS Office of Inspector General. Total discretionary spending for the HCFAC program in FY 2010 would be $311 million (Reichard, CQ HealthBeat, 5/7).

Reaction
The current economic conditions likely will make it difficult for Obama to find the money needed to address his priorities, including health care reform, without enacting deeper budget cuts, the AP/San Francisco Chronicle reports (Kuhnhenn, AP/San Francisco Chronicle, 5/8). The new plan's proposed savings represent about 1.4% of the $1.2 trillion deficit projected for FY 2010.

Obama administration officials indicated that the $17 billion in savings included in the FY 2010 blueprint are "just a beginning," according to the New York Times (Calmes, New York Times, 5/8). White House Office of Management and Budget Director Peter Orszag said the $17 billion saved under the FY 2010 plan is "real money," adding, "This is an important first step but not the end of the process" (Grier, Christian Science Monitor, 5/7).

Obama also linked his plan to reduce the deficit with his plan to overhaul the health care system, noting that his reform plan would address the rising costs of Medicare and Medicaid. He noted "challenges that will require us to make health care more affordable and to work on a bipartisan basis to address" entitlement programs (Weisman, Wall Street Journal, 5/8). Jared Bernstein, chief economist to Vice President Biden, said, "The big ticket, that's health care. That's where some of our real savings come from in the longer term" (AP/San Francisco Chronicle, 5/8).

However, critics, including Republican lawmakers, complained that more significant cuts are needed, the New York Times reports (New York Times, 5/8). The Christian Science Monitor reports that "Obama's hit list leaves unaddressed what many experts cite as the real U.S. deficit difficulty: fast-growing entitlements, particularly ... Medicare and Medicaid" (Christian Science Monitor, 5/7). House Minority Leader John Boehner (R-Ohio) said, "While we appreciate the newfound attention to saving taxpayer dollars from this administration, we respectfully suggested that we should do far more" (New York Times, 5/8).

The Wall Street Journal reports that the added cost of new programs in the plan "will swamp the $17 billion of potential savings anticipated" from the cuts (Wall Street Journal, 5/8). Orszag acknowledged that more cuts need to be implemented to control the growth of Medicare and Medicaid (Taylor, AP/Boston Globe, 5/8).

Reprinted with kind permission from http://www.kaisernetwork.org. You can view the entire Kaiser Daily Health Policy Report, search the archives, or sign up for email delivery at http://www.kaisernetwork.org/dailyreports/healthpolicy. The Kaiser Daily Health Policy Report is published for kaisernetwork.org, a free service of The Henry J. Kaiser Family Foundation.

© 2009 Advisory Board Company and Kaiser Family Foundation. All rights reserved.

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