Dissecting the president's budget

From a healthcare perspective, the release of President Barack Obama's budget last week was extremely disturbing—and not because of the new cuts it would impose on healthcare providers.

The president called for an additional $401 billion in cuts to healthcare programs over the next decade. About 75% of that total would come from Medicare. The biggest reductions would hit the drug industry and post-acute-care providers. Other programs facing sizable cuts included graduate medical education and reimbursement for clinical laboratory services.

But let's put those “cuts” in perspective. Those are reductions in projected increases. Medicare is slated in the president's plan to grow from $524 billion next year to $867 billion in 2023, the end of the 10-year budget window used in Washington. That's a 65% increase over the period, or an average of better than 6% a year. Even after one takes inflation into account, that's still faster growth than the rest of the economy.

Isn't it reasonable to believe, as the president apparently does, that the reforms now underway through the Patient Protection and Affordable Care Act can achieve this goal without harming seniors or undermining the financial viability of providers? The bottom line on entitlement spending is that the president's budget is lean, but it isn't mean.

The same can't be said about the rest of the president's healthcare budget. Discretionary spending bore the brunt of the sequester cuts and the president kept most of those intact in his own budget. Let's trace a few line items over the next decade to judge the president's priorities.

The National Institutes of Health, which is the font of most of the basic and applied science that leads to medical innovation, would receive about a 2% a year increase over the next decade in its current $31 billion budget—barely enough to keep pace with inflation.

The Centers for Disease Control and Prevention does even worse. It would grow from $5.5 billion this year to $6.1 billion in 2023—a cumulative increase of 11% or barely a percentage point increase each year on average. In other words, the president's plan proposes to substantially cut inflation-adjusted spending on prevention, disease monitoring and public health—a foolish long-term strategy if ever there was one if the goal is to reduce healthcare spending in entitlement programs.

The Health Resources and Services Administration, which does everything from promoting primary care to funneling physicians to rural areas, fares only a little better in the budget. It will increase by 21.8%, or about 2% a year on average, to $6.7 billion—again barely keeping pace with inflation.

The debate in Washington has already been twisted by the opposition Republican Party into one where the president is both attacking seniors and not cutting enough. But the reality is that the discretionary portion of the federal budget—the part that invests in the future rather than providing transfer payments or paying for services—will be hammered over the next decade.

Overall, spending on all discretionary domestic programs—on the environment, homeland security, housing and health—will rise a cumulative 7% over the next 10 years under the president's plan. That's substantially less than inflation. The Pentagon, which is winding down two wars in the Middle East, fares about the same.

A few years ago, Grover Norquist, who leads the anti-tax Americans for Tax Reform, declared his goal was to shrink the government to the point where it could be drowned in a bathtub. While Obama likes to talk about investing in the future, Norquist's approach appears to have been embraced by both political parties. In the long run, the biggest losers will be the American people.

Merrill Goozner, Editor

Follow Merrill Goozner on Twitter: @MHgoozner