Yesterday, the President released a $76.4 billion budget proposal to fund federal health care programs. The FY 2013 budget proposes a $300 million spending increase from FY 2012 funding levels for discretionary spending programs. Of potentially greater significance, however, is that the President’s proposal includes approximately $360 billion/10 years in provider cuts and programmatic changes to Medicare, Medicaid, and other health programs.

Medicare and Medicaid Proposals
The President’s budget proposes significant increases to beneficiary cost-sharing, including a $25 increase to the Medicare Part B deductible in 2017, 2019, and 2021 for new beneficiaries. Already enrolled beneficiaries (and those enrolling prior to 2017) will not be subject to increased cost-sharing. The President’s plan increases Medicare Parts B and D premiums by 15 percent, a policy that will impact one-fourth of all beneficiaries. A new co-payment of $100 per home health encounter targets individuals with five or more visits not proceeded by a hospital or other inpatient post-acute care stay. The President’s budget proposes a 15 percent Part B surcharge for new Medicare beneficiaries that purchase Medigap policies with low cost-sharing requirements in an effort to heighten awareness and curb overutilization of services.

Many of the Medicare and Medicaid provider cuts mirror those proposed by the President in the Fall of 2011 as part of his $3 trillion deficit reduction package, including a decrease in bad debt payments to 25 percent – down from 70 percent for all Medicare providers beginning in FY 2013. The budget proposes to repeal permanently the Medicare Sustainable Growth Rate (SGR) physician payment formula and adjusts payment updates for certain post-acute care providers to create parity among payments for certain conditions commonly treated in inpatient rehabilitation facilities and nursing homes. The proposal increases efforts to curb overutilization of advanced imaging services in Medicare as part of new fraud and abuse initiatives. Payments would be reduced for Critical Access Hospitals (CAHs) from 101% to 100% of reasonable costs and CAH designation would be eliminated entirely for facilities located within 10 miles of an acute hospital. The President’s budget requires drug manufacturers to provide the same rebates to Medicare Part D as provided to state Medicaid programs beginning in FY 2013.

The President’s budget calls for simplifying Medicaid and CHIP payment rates through the adoption of blended payment rate for states starting in FY 2017. The plan calls for reducing Medicaid payments for certain durable medical equipment (DME) to what Medicare pays for the same services. Additionally, the proposal would further limit state intergovernmental transfers from 6 to 3.5 percent; targets irregular prescribing and billing patterns in state Medicaid programs; and further reduces state Medicaid disproportionate share hospital payments by freezing the growth in spending based on 2020 allotments.

Medical Education
The President’s budget provides additional resources to train 2,800 new primary care providers and supports those who choose to train and practice in health care shortage areas. The proposal decreases Medicare Indirect Medical Education (IME) payments by 10 percent beginning in 2014 and recommends $88 million for Children’s Graduate Medical Education, a program the President proposed defunding a year ago, but that received $317.5 million in FY 2011.

Affordable Care Act Implementation
The budget seeks changes to fast-track Affordable Care Act policies through incentive payments for states that implement state health insurance ahead of schedule. States would have until 2013 to get their exchanges certified to avoid federal takeover of the process. The budget recommends tinkering with the controversial Independent Payment Advisory Board (IPAB) – proposing a lower target rate of Medicare growth from the GDP per capita growth rate plus 1 percent to plus 0.5 percent. The President also seeks to provide IPAB with greater flexibility to consider value as part of benefit design. In addition, the proposal eliminates the Preventative and Public Health Fund.

Other proposals include:

• Level funding the National Institutes of Health at $31 billion and implementing new policies aimed at increasing the number of grants, especially those to first-time applicants;
• Reducing funding for the Centers for Disease Control and Prevention by $660 million.
• Increasing funding for the Food and Drug Administration (FDA) by $654 million, including $10 million to improve the safety of food and medical product imports to the United States;
• Supporting efforts to bring generics and biologics to the market faster – shortening the exclusivity for brand biologics from 12 to 7 years;
• Investing $3.1 billion to support the creation of 25 new health centers nationwide; and
• Increasing funding for HIV/AIDS prevention and treatment by $172 million - $75 million in additional resources for the Ryan White program and $67 million of the AIDS Drug Assistance Program.

More information on the President’s Budget can be found here or by contacting one of the professionals above.