Obama budget offers possible common ground with GOP on healthcare
Political and policy observers say President Barack Obama’s 2015 budget blueprint for healthcare is significant because it lays out the administration’s legislative priorities for the rest of the year and for whatever congressional landscape lies beyond the November elections.
Even though it’s widely considered dead on arrival with a polarized Congress, the president’s budget suggests areas of potential common ground with Republicans as Congress searches for a way to pay for a permanent replacement for Medicare’s hated sustainable growth-rate formula for physician payment. One major area Republicans may seize on is Obama’s proposal to increase means-testing of Medicare benefits for higher-income beneficiaries.
The administration’s 2015 budget calls for $73.7 billion in discretionary funding for HHS in 2015—a 7.6% reduction from the current-year budget. But that figure is projected to increase by 8.7% the following year and by nearly a third over the next decade.
The budget also includes more than $400 billion in cuts to Medicare over 10 years. Those reductions are heavily back-loaded, with only $3.5 billion booked for fiscal 2015. Hospitals were quick to criticize the funding cuts, which they say would pile on to the billions of cuts imposed on hospitals since 2010 and could compromise their ability to care for patients.
Obama unveiled his budget last week for lawmakers to consider when they begin work on federal appropriations bills for next year. Many downplayed its immediate relevance given that Congress passed a two-year budget agreement in December. Senate Budget Committee Chairman Patty Murray (D-Wash.) has said she won’t submit a proposed 2015 budget, while House Budget Committee Chairman Paul Ryan (R-Wis.) plans to issue a budget proposal, which is likely to serve as a conservative policy outline.
“The president’s recommendations for the appropriated accounts are relevant because the appropriations committees use that as a benchmark,” said Paul Van de Water, a senior fellow at the Center for Budget and Policy Priorities, a left-of-center research group. “The administration has tried to identify within the limits set by the MurrayRyan agreement where to add and where to take away, and that’s a lot of detail that is below people’s radar.”
Budget and policy analysts emphasized that many of the budget’s proposals for savings were resuscitated from prior-year Obama budgets. For instance, Van de Water noted that more than a quarter of the total Medicare savings in the president’s 2015 budget—about $117 billion over 10 years—would come from requiring drugmakers to offer Medicare rebates on prescription drugs for low-income beneficiaries. The president also proposed that last year.
The administration’s argument is this: Before the Medicare Part D drug benefit program was created, lowincome beneficiaries who were dually eligible for both Medicare and Medicaid got their drugs through Medicaid, which receives rebates from drugmakers. But that changed when Congress created the Part D program in 2003. It was claimed those rebates were not necessary because competition in
drug plans would hold costs down. But now Medicare is on average paying more for drugs than Medicaid is, Van de Water said. The president’s proposal would require drugmakers to pay the Medicare program rebates that they pay to Medicaid.
On the discretionary spending side, Obama calls for the National Institutes of Health to receive $30.2 billion in funding, just 1% above the current budget and short of pre-sequestration funding levels. Research advocates were disappointed with that proposal, pointing out that NIH has lost nearly a quarter of its purchasing power since 2003. They had hoped for about $32 billion as a stay-even level given inflation.
“Fundamentally, it does not bring us back to where we need to be,” said Jennifer Zeitzer, director of legislative relations with the Federation of American Societies for Experimental Biology. “That’s a problem in terms of continuing to grow the research enterprise and take advantage of all the scientific opportunities we have.”
Consumer safety advocates were similarly disappointed with Obama’s call for $2.6 billion in discretionary funding for the Food and Drug Administration, a 1% increase. That includes $25 million more to oversee high-risk compounding pharmacies, which have been implicated in patient deaths and injuries.
“Given that the FDA regulates about 25 cents of every dollar of the gross domestic product, it does not have enough money to fulfill its public health mission,” said Kasey Thompson, vice president of policy, planning and communications for the American Society of Health-System Pharmacists.
Among some of the other Obama proposals:
■ $14.6 billion over 10 years for healthcare training initiatives. That includes $5.2 billion to support 13,000 new residencies for physicians and $3.9 billion over six years to support the National Health Service Corps. That would increase the number of individuals enrolled in the program from 8,900 to 15,000.
■ More than $200 million in increased funding in 2015 for mental health programs for children. That includes $130 million aimed at reducing the use of psychotropic drugs for children in foster-care programs.
■ $770 million in savings by prohibiting pharmaceutical companies from delaying the availability of generic drugs. A similar plan was included in the administration’s 2014 budget plan but was not enacted.
■ Expanding “quality incentives” for Medicare prescription drug plans. This would likely be similar to the starrating system used to determine whether Medicare Advantage plans qualify for bonus payments. However, the budget doesn’t propose any appropriations for the program.
■ $25 million in funding over two years aimed at preventing fraud in the state and federal insurance exchanges.
The president’s budget also says Medicare will continue its transformation “from a passive payer to an effective purchaser of high-quality, efficient care.” It highlights the ACA’s valuebased purchasing program for hospitals and its requirement of the CMS to develop plans to implement value-based purchasing programs for skilled-nursing facilities, home health agencies and ambulatory surgery centers.
Despite criticisms, policy analysts suggest the president’s budget might prove useful as congressional committees search for ways to pay the projected $138 billion,
10-year cost of proposed legislation to repeal and replace the Medicare SGR physician payment formula.
Robert Moffit, senior fellow at the conservative Heritage Foundation, argues one such area of agreement with Republicans is the administration’s proposal to save about $53 billion by increasing income-related premiums for Medicare beneficiaries. Conservatives long have supported expanding means testing to strengthen the long-term financial solvency of the program. “That would take some serious conversations,” Moffit said. “You’re really working in the weeds on this, but it can be done.”
Van de Water also said the presi- dent’s proposals could be used in the SGR talks. The fact that the president has endorsed certain ideas increases the chances that they’ll be adopted. Like Moffit, Van de Water cited the expansion of income-related premiums in Medicare as one possibility.
Whether or not Obama’s budget draws serious consideration on Capitol Hill, it’s expected to help frame the dialogue for 2014 congressional elections. Republicans need to capture six seats to control the Senate. If that happens, it could impede the administration’s efforts to implement the Patient Protection and Affordable Care Act.
“This is an election year and budgets are political documents,” said G. William Hoagland, senior vice president at the Bipartisan Policy Center who served as a budget adviser to former Republican Senate Majority Leader Dr. Bill Frist. “There are proposals in here that clearly lean toward his base as well as what he believes is necessary to improve Democratic chances on Capitol Hill.”
Since the ACA passed in 2010, the main election campaign strategy for Republicans has been to call for repealing the healthcare reform law. But in recent months, they’ve floated more detailed plans to replace the law. Most notably, GOP Sens. Richard Burr of North Carolina, Tom Coburn of Oklahoma and Orrin Hatch of Utah have introduced their own comprehensive healthcare overhaul bill.
But Chris Jennings, who stepped down in January as a senior White House aide on healthcare reform issues, points out that any serious proposal will present complications for Republicans. “If it’s not total repeal, what is it?” Jennings said. “There is no significant consensus there. Some of the very policies that they’re advocating would create far more disruption than anything related to the current law.”
Furthermore, Larry Jacobs, a University of Minnesota political science professor, questions whether healthcare will even be an issue of significant importance to voters this year, unlike it 2010 when Republicans took over the House. He argues that Obamacare is now an animating issue only for the GOP’s hard-right base. “For the voters who are up for grabs and undecided at this point, health reform is not a big issue for them,” he said.