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 - FEBRUARY 21, 2011


President's FY 2012 Budget Receives Senate Love, House Says DOA


Last Monday the President sent his $3.73 trillion FY 2012 budget to the Hill which purports to “freeze” spending.  OMB says the $1.12 trillion in discretionary spending would result in a 2.7% reduction in such costs from the levels initially proposed for FY 2011 by the President.  However, because the FY 2011 appropriations season is not completed the President’s proposal does not take into account the projected FY 2011 spending once the Congress passes a CR for spending beyond March 4th when the current CR expires.  The OMB maintains the budget proposal would reduce the deficit by more than $1.1 trillion over 10 years while making investments in education, infrastructure and technology.  Senate Democrat leaders said they would follow the lead of the President in their budget development.  However, House Speaker John Boehner said the President’s plan would “destroy jobs by spending too much, taxing too much and borrowing too much….and fuel more economic uncertainty and make it harder to create new jobs.” 

Of note, the President’s budget does not include any changes to entitlement programs, including Medicare and Medicaid, notwithstanding the recommendations of the President’s Deficit Reduction Commission.  In this connection, Senate Budget Chairman Kent Conrad said a bipartisan “gang of six” senators are working on a long-term deficit reduction plan similar to the commission recommendations.  House Republicans say they will address entitlement reform in their upcoming FY 2012 budget plan.  The reluctance of the Administration to go “first” on entitlement reform sets up the possibility that the House, Senate, and the President may engage in deficit and entitlement reform discussions later this spring in some sort of budget summit. 

The $1.12 trillion in FY 2012 discretionary spending under the President’s budget includes $79.9 billion for HHS, an increase of $95 million from his initial FY 2011 recommendations.  The president’s budget deals the agencies of this department the following appropriations:

  • CMS--$4.4 billion, up $1 billion;
  • FDA--$2.7 billion (including an increase of $634 million in industry user fees), up $382 million;
  • NIH--$32 billion, up $745 million;
  • CDC--$5.9 billion, down $581 million;
  • SAMHSA--$3.4 billion, down $45 million; HRSA--$6.8 billion, down $672 million;
  • Indian Health Service--$4.6 billion, up $572 million;
  • the Administration on Aging--$2.2 billion, down $151 million;
  • the Administration for Children and Families -- $16.2 billion, down $1.2 billion;
  • Office of the Inspector General--$366 million, up $76 million.     

Under the budget proposal, Medicare physician reimbursements would be frozen for another two years at current levels at a cost of about $62 billion which would be raised from various Medicare changes over ten years.  At a Senate Finance hearing, both Chairman Max Baucus and the ranking Republican, Orrin Hatch, called on HHS to work on a permanent fix to the SGR this year.  Secretary Sebelius said she would. 

Of the HHS total, $465 million would go to implement the PPACA with about $300 million going to CMS. The IRS would receive $119 million in additional funds to enforce the tax portions of the PPACA and about $23 million to educate taxpayers about the new law.  Also, community health centers would receive $3.3 billion, including $1.2 billion from the PPACA. At the same Finance Committee hearing, Republicans pressed the HHS Secretary for flexibility to allow states to deal with the PPACA’s Medicaid maintenance-of-effort requirements for states.  Presaging a likely route Republicans will take in crafting long-term budget reform, Senator Coburn said federal Medicaid funds should be rolled into a block grant.  Under the budget proposal, federal Medicaid spending would total $269 billion in FY 2012, a $7 billion decrease compared with FY 2011 because temporary enhanced federal funding for the program expires at the end of June.  The President’s budget also would limit state use of provider taxes to finance state Medicaid costs over the next 10 years (estimated to raise $18 billion).  The budget also proposes expanding the Medicare durable medical equipment competitive bidding program to Medicaid (a $6.4 billion savings).  Funding for SCHIP would total $9.9 billion.  The budget proposal also anticipates a congressional change to the PPACA 12-year exclusivity period for branded biologic drugs, reducing the period to seven years, while also prohibiting manufacturer “evergreen” extensions (for an estimated savings of $2.3 billion over ten years).  Within the NIH budget, $100 million would go to the PPACA’s Cures Acceleration Network to provide for grants to biotechnology companies, universities and patient advocacy groups to better bring basic research into play in finding new medical treatments.  Medicare Advantage providers would be targeted for $6.2 billion in erroneous payment recoveries.  The proposed budget would also eliminate funding for children’s hospital GME.

Following up on his SOTU remarks, the President would allocate $250 million in grants to help states revise their medical liability laws, such as by: establishing health courts; creating a legal defense for physicians, hospitals and other providers who follow guidelines for best clinical practices and for the use of electronic health record systems; establishing initiatives requiring hospitals and physicians to disclose mistakes early, offer apologies and compensation and to agree to make changes to protect other patients from being harmed in the same way; and revising rules that result in higher malpractice awards.



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