Healthcare Business News

Obama budget trims Medicare, Medicaid

By Rich Daly and Jessica Zigmond
Posted: February 14, 2011 - 12:00 pm ET

In his budget for fiscal 2012, President Barack Obama has proposed $79.9 billion in discretionary spending for HHS, which represents a slight increase from the $79.8 billion discretionary budget authority approved in 2010. Given that none of the full-year appropriations bills for 2011 was enacted, the programs and activities in the president's budget released Monday are operating under a continuing resolution, which results in a comparison with 2010 figures in most cases, but not all.

The president's plan calls for a total of $485.8 billion for Medicare in 2012, which breaks down to $468.5 billion in existing law and a legislative proposal for another $17.3 billion. This compares with $489.3 billion for fiscal 2011.

The budget calls for $279 billion to Medicaid and the Children's Health Insurance Program, compared with $285.4 billion in 2011. That breaks down to $279.3 billion in existing law and a legislative proposal to cut $297 million from Medicaid. The administration said it will focus Medicaid's programs more on lower-cost home and community-based alternatives, rather than institutional settings.

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Obama's plan reiterated the president's proposal for a five-year freeze on all discretionary spending outside of security, which he said will save more than $400 billion over the next decade. This is not an across-the-board cut, but rather an overall freeze with investments in certain areas for long-term growth and job creation, Obama said in a message that accompanied his $3.7 trillion budget for 2012. Savings will be achieved through reductions in the community services block grants and home energy assistance, according to the administration, which also said the budget supports the administration's priorities, such as implementation of the Patient Protection and Affordable Care Act, biomedical research and Head Start.

The Obama budget would delay a 25% cut to physicians' Medicare payment rates for two more years—until the end of 2013—through “specific health savings,” although those were not specified.

The American Hospital Association questioned the plan's impact on Medicaid. “While we are pleased that the president's budget does not include any new major reductions in payments for hospitals services to Medicare beneficiaries, we are deeply disappointed that today's budget reduces Medicaid, which funds services to our most vulnerable patients such as the poor and disabled,” according to Richard Umbdenstock, AHA president and CEO.

Meanwhile, funding for the National Institutes of Health would increase to $31.8 billion from $30.8 billion, in part to foster new collaborations among government, academia, and industry that accelerate the development of medical treatments. The Food and Drug Administration would see an increase to $2.7 billion from $2.6 billion. Funding for the Centers for Disease Control and Prevention would decrease to $5.9 billion from $6.4 billion, while HHS' Health Resources and Services Administration would drop to $6.8 billion from $7.5 billion. The Substance Abuse and Mental Health Services Administration would shrink by $44 million to $3.38 billion.

Efforts to control healthcare fraud and abuse would jump to $581 million from $311 million, while the administration would require state Medicaid agencies to track and monitor prescription drug billing, prescribing, and utilization patterns for indications of fraud.

The administrative budget for the Office of the National Coordinator for Health Information Technology would increase to $57 million from $42 million.

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