Healthcare Business News
Tom Nickels

Obama budget brings quick, critical response from industry

By Jessica Zigmond and Rich Daly
Posted: February 13, 2012 - 5:45 pm ET

Healthcare industry groups were quick to criticize the Obama administration's fiscal 2013 budget, referring to the plan as both shortsighted and unfair to providers.

The proposal—which aims to reduce federal healthcare spending by more $364 billion over 10 years, including about $268 billion in reductions to Medicare spending and about $52 billion to Medicaid—largely mirrors the financial blueprint the president gave to Congress last September. But that was before the deficit-reduction supercommittee failed to achieve its task and sequestration became a reality.

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Tom Nickels, senior vice president of federal relations at the American Hospital Association, said providers, who already are dealing with payment cuts through regulatory and legislative changes, must also face nearly $130 billion in cuts over 10 years when sequestration kicks in next year.

“It ignores the reality that we're all already being cut 2%,” Nickels told Modern Healthcare. “And now they've cut on top of that.”

The AHA was displeased with a host of provisions in the budget, including one that calls for cutting about $770 million in Medicare bad debt payments over 10 years. As Nickels explained, these are federal dollars used to assist low-income Medicare beneficiaries in paying their deductibles.

“To do reduce that dramatically, is not only unfair to these folks, but likely to drive up uncompensated care” costs, Nickels said. “It's both a beneficiary cut and a hospital cut. We don't see the wisdom of doing that in an economy when more people are finding themselves in more difficult financial situations.”

Meanwhile, the Federation of American Hospitals called the president's budget shortsighted and counterproductive. “Not only will they weaken the hospital safety net and reduce access for seniors and other vulnerable citizens, they also threaten the vital role that America's hospitals play as the largest private employers and source of good, new jobs in most communities across the country,” Chip Kahn, the group's president and CEO (PDF), said in a statement.

Meanwhile, the HHS budget also is likely to inspire new partisan conflicts in Congress, where Republicans have repeatedly balked at funding aspects of it directed at implementing the controversial Patient Protection and Affordable Care Act.

One area of conflict may include the new budget's first explicit funding for developing a federal version of state health insurance exchanges, or marketplaces, authorized under the law in states that opt not to develop their own versions of the insurance markets. The budget would direct about $860 million to creation of the federal exchange, although HHS officials said they already have used funding from other sources to do work on it.

“We plan on working with Congress for additional funding and we will go from there,” Marilyn Tavenner, acting administrator for the CMS, said at a Monday news briefing on the budget. The law requires officials to establish functioning exchanges by January 2014.

Elements of the budget are likely to draw the ire of congressional Democrats, as well. For instance, the administration proposed taking about $900 million from a $15 billion fund created by the 2010 healthcare law to pay for new prevention initiatives. The budget would provide that funding to the Centers for Disease Control and Prevention for hospital infection reduction.

“Difficult decisions have to be made,” Dr. Thomas Frieden, director of the CDC, said at the news conference.

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