POLICY BRIEFINGS


Hart Health Strategies provides a comprehensive policy briefing on a weekly basis. This in-depth health policy briefing is sent out at the beginning of each week. The health policy briefing recaps the previous week and previews the week ahead. It alerts clients to upcoming congressional hearings, newly introduced bills, regulatory announcements, and implementation activity related to the Patient Protection and Affordable Care Act (PPACA) and other health laws.


THIS WEEK'S BRIEFING - APRIL 15, 2013


President's Budget Recommendations Include Significant Entitlement Changes


The FY 2014-2023 federal budget released last Wednesday by the Obama Administration recommends $3.778 trillion in discretionary and mandatory spending in the next fiscal year, an increase of about 6% over FY 2013. While the President’s budget framework would keep the Budget Control Act’s annual spending limits, the specific spending cuts mandated under sequestration ($1.2 trillion) would be replaced by other program increases and decreases. For example, discretionary spending for the Department of Health and Human Services (HHS) would be increased to $80.1 billion, a 4.87% increase over FY 2013. Also, the National Institutes of Health (NIH) would get a boost over FY 2012 of about $472 million to $31.3 billion in FY 2014, with a major boost to mental health/brain research. However, similar to prior budget proposals, the Administration renews proposed 10-year cuts to Medicare providers (about $306.3 billion extending the Part A (Hospital Insurance) trust fund solvency by 4 years) and to Medicaid (about $22.1 billion). The proposal recommends revising Social Security and other federal pension program cost-of-living adjustments (COLAs) to reflect a newly formed “chained” consumer price index (chained CPI), projected to save $130 billion over ten years. In total, the ten-year budget savings are projected to reduce the federal deficit by about $1.8 trillion and down to about 1.7% of gross domestic product (GDP). In testimony before the House Ways and Means Committee, HHS Secretary Kathleen Sebelius said the Administration’s recommendations would help to reduce the deficit in a balanced, sustainable way and ensure the full implementation of the Patient Protection and Affordable Care Act (PPACA). The White House called the comprehensive proposal a “balanced compromise” and hinted that the provisions of the package, particularly the entitlement and health-related changes, should not be cherry-picked and enacted without the proposed $680 billion in new revenues. While Republicans generally criticized the tax increases as “more of the same” and the Medicare changes as falling short of keeping the program solvent in the long-term, House Speaker John Boehner (R-OH) appeared to leave the door open to further negotiations in stating that the President deserves credit for proposing the modest entitlement reforms (although he said these changes should not be “held hostage” to enact additional tax increases). House Budget Committee Chairman Paul Ryan (R-WI) said he is skeptical about the President’s intentions to reduce long-term spending which might lead to some kind of “grand bargain” on taxes and spending this year. Nonetheless, the President appears to be reaching out to a select group of Senate Republicans in order to forge a bipartisan consensus on a package of spending and revenue changes that can be passed first in the Senate. Notable among the health-related changes are the following:

Medicare Physician Payment Reform--The budget suggests the current sustainable growth rate (SGR) physician payment formula should be replaced by an unspecified period of “stable payments” followed by a revised scheme under which physicians would be encouraged to partner with the Center for Medicare and Medicaid Services (CMS) in a scalable, accountable payment model which reflects risk adjustments for providing high quality and coordination of care. The Administration expressed interest in working with Congress to enact legislation to reform the process. The budget does not specify the means for paying for the $250 billion ten-year cost of the proposal. However, the budget does assume that Congress will eliminate the scheduled 25% cut in CY 2014 Medicare physician payments.

Other Major Health Spending Increases/Reallocations for FY 2014/FY 2012-- CMS would get $5.2 billion, an increase of $1.4 billion, plus $0.1 billion, directed to PPACA health exchange implementation (CMS would also get $640 million in combined mandatory and discretionary program integrity funding to implement activities that reduce payment error rates, prevent fraud and abuse, target high-risk services and supplies, and enhance civil and criminal enforcement for Medicare, Medicaid, and the children’s health insurance program (CHIP)); the Internal Revenue Service (IRS) would get $440 million to process PPACA tax credits; the Health Resources and Services Administration (HRSA) would get an increase of $821 million to $9 billion, including $2.4 billion for the Ryan White program; the Centers for Disease Control and Prevention (CDC) would get an increase of $71 million to $11.3 billion; the Substance Abuse and Mental Health Services Administration (SAMHSA) would get an increase of $46 million to $3.3 billion with $130 million allocated to new mental health treatment and prevention programs along with HRSA; the Indian Health Service would get an increase of $244 million to $5.7 billion; the Agency for Healthcare Research and Quality (AHRQ) would get an increase of $29 million to $434 million; and the Office of the National Coordinator for Health Information Technology would receive a $17 million increase. The Food and Drug Administration (FDA) would get an increase of $821 million to $4.7 billion, including new user fees related to generic drug and biosimilar biological reviews. Also, savings of $3.2 billion would accrue by reducing the period of exclusivity from 12 to 7 years to speed up generic biologic drug development. The Transitional Medical Assistance program would be reauthorized at a cost of $1.1 billion over 10 years. In related news, House Majority Leader Eric Cantor (R-VA) said Republicans will introduce legislation to beef up the funding of the Pre-Existing Condition Insurance Plan (PCIP) program and pay for the increase by reallocating funds from the PPACA Prevention and Public Health Fund.

Other Major Health Spending Cuts--Among the ten-year cuts for Medicare--Save $79 billion by reducing payment updates for inpatient rehabilitation facilities (IRFs), long term care hospitals (LTCHs), skilled nursing facilities (SNFs) and home health agencies (HHAs), and $8.2 billion by bundling such payments and an additional $6.7 billion from IRF and SNF changes; save $11 billion by reducing Medicare indirect medical education (IME) add-on payments; save $2 billion by aligning Medicare payments to rural providers with the cost of care; save $25.4 billion by reducing payments to providers when beneficiaries fail to pay for services; save $50 billion by increasing the percentages of total costs paid by Part B and Part D beneficiaries and $2.9 billion in premium cost for those with small Medigap deductibles; save $3.3 billion by modifying the Part B deductible for new beneficiaries; save $730 million by requiring home health service copays; save $123 billion under Part D by among other things providing low-income beneficiaries with Medicaid-level drug rebates for brand name and generic drugs and save another $7 billion by modifying copayments for such beneficiaries; and save $19.3 billion from Medicare Advantage (MA). 

Among the ten-year savings for Medicaid--Save $4.5 billion by limiting durable medical equipment (DME) payments; save $3.6 billion by reducing disproportionate share hospital (DSH) payments; save $8.8 billion by lowering Medicaid drug costs through various means; and save $3.7 billion by enhancing integrity programs. In addition, the Federal Trade Commission (FTC) would be given authority to prevent brand-name drug to generic “pay-for-delay” agreements which would save $11 billion in Medicare/Medicaid and other federal health programs. Also, $4.1 billion would be saved by lowering the trigger point for the Independent Payment Advisory Board (IPAB) to make cost savings recommendations.



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