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President Releases (FY) 2014 Budget

Posted on 4/10/2013 by NTOCC ®

Today, President Obama unveiled his $3.3 trillion Budget proposal for fiscal year (FY) 2014 that aims to reduce the deficit by $1.8 trillion over the next ten years through a combination of mandatory and discretionary program spending cuts, coupled with higher revenues largely through tax increases aimed at the wealthy.

According to the budget, the President’s goal is to use some of the $1.8 trillion to replace the sequester cuts that took effect earlier this year and continue on through the decade.  As stated in the “Overview”:

The President stands by the compromise offer he made to Speaker Boehner during “fiscal cliff” negotiations in December 2012.  The Budget includes all of the proposals in that offer, which would achieve $1.8 trillion in additional deficit reduction over the next 10 years, bringing total deficit reduction to $4.3 trillion. This represents more than enough deficit reduction to replace the cuts required by the Joint Committee sequestration.

For health care providers, that swap would mean the end to the two percent Medicare reimbursement cuts, but it could also mean $400 billion in alternative Medicare cuts.  Exactly how the accounting would all work is unclear.  Also unclear is whether any effort to replace the sequester cuts can succeed. 

As to the specifics, the Administration proposes a budget of $80.1 billion for the Department of Health and Human Services, an increase of $3.9 billion over the 2012-enacted level. This includes $31 billion for the National Institutes of Health (NIH), a 1.5 percent increase over FY 2012.

The Budget includes $400 billion in savings through reductions to both Medicare providers and beneficiary benefits. Many of the specific changes mirror the proposals that the Administration offered to Speaker Boehner (R-OH) during the most recent round of negotiations to avert the sequester cuts, including: extending the Medicaid drug rebate benefit to beneficiaries dually eligible for Medicare and Medicaid ($123 billion); eliminating Medicare reimbursements to hospitals for unpaid deductibles and co-pays ($25 billion); and reductions to indirect graduate medical education (IME) ($11 billion).  Of particular note for NTOCC members, is the proposed adjustment to payments for post-acute providers such skilled nursing facilities and inpatient rehabilitation centers which would generate $94 billion in savings.

The Budget also proposes reforms that would directly impact beneficiaries, including instituting means-testing for Medicare Part B and D premiums ($50 billion), requiring co-pays for home health, increasing the Part B deductible for new beneficiaries, and instituting a Part B premium surcharge for beneficiaries that purchase Medigap policies with low-cost sharing requirements (combined savings of $7 billion). To encourage the use of generic drugs by low-income Medicare beneficiaries the budget proposes to increase co-payments for brand drugs and lowering them for generic drugs ($7 billion).

This year’s Budget proposes only modest changes to Medicaid, which is not surprising given that the Administration had previously stated that they would refrain from making significant changes to the program—previous budgets had proposed changes to the way the federal contribution was calculated—due to the implementation of the Medicaid expansion and some states’ wariness to participate. However, the Budget does call for a one-year delay of the Affordable Care Act’s scheduled reductions in Disproportionate Share Hospital (DSH) payments to safety-net hospitals ($3.6 billion).  This is particularly important to providers in states that have decided not to expand Medicaid eligibility.

The release of the President’s Budget follows the passage in the House and Senate of their respective budgets. 

To view the President’s (FY) 2014 Budget, please click here.

To view the Department of Health and Human Services’ (FY) 2014 Budget, please click here.