President’s Proposed Budget Would Boost Mental Health Programs, Inspection of Imported Food and Drugs, Stabilize Medicare Pay to Physicians

As President Barack Obama released his proposed budget for fiscal year 2014 on April 10, 2013, he described it as a balanced approach that combines deficit reduction with investments to grow the economy. The proposed budget would continue implementation of the Patient Protection and Affordable Care Act (P.L. 110-148), stabilize Medicare payments to physicians while a commission studies the alternatives to the current system, and boost funding for mental health programs, research on the causes and prevention of gun violence, inspection of imported food and drugs, and program integrity activities in Medicaid, Medicare, and the Children’s Health Insurance Program (CHIP). The administration’s proposal also would address climate change, energy independence and increasing manufacturing and other jobs to grow the economy.

The budget would reduce Medicare spending by $5.6 billion in FY 2014 and total federal health care spending by $400 billion over the next 10 years.

Physician Payments

The proposed budget would provide for several years of stability while a new system is developed. Physicians would be encouraged to participate in its development. Ultimately, physician payments would be linked to participation in an “accountable payment model” that rewards the use of high-efficiency services and penalizes physicians who consistently deliver poor results at excessive costs.

Medicare Drug Prices

Medicare would take advantage of the same drug manufacturer rebates that apply to Medicaid prescription drugs. The proposed budget also would close the Medicare Part D “donut hole” in 2015 rather than 2020.

Medicare Cost Sharing

Two changes to Medicare cost sharing reflect both policy and budget decisions. Inappropriate billing for home health services is more frequent when the services have not been preceded by an episode of inpatient care. In addition, the administration says, research has shown that beneficiaries with first-dollar or near-first-dollar coverage have little incentive to consider the cost of services. Therefore, beginning in 2017, some Medicare beneficiaries would be required to make “modest copayments” for home health services. In addition, a surcharge would be imposed on Medigap policies that provide first-dollar coverage in order to give beneficiaries an incentive to consider the cost of services. In order to direct Medicare dollars where they are most needed, the Part B deductible would be modified to reduce the subsidy for beneficiaries who have less financial need.

Medicaid Provisions

The mandatory transitional medical assistance (TMA) and qualifying individual benefits would continue. The TMA program preserves Medicaid benefits for parents whose incomes increase due to employment or payment of child support. States that adopt the Medicaid expansion would not be required to continue TMA, so that they would receive the increased federal funding available for newly eligible beneficiaries. Allocations for Medicaid payments to disproportionate share hospitals would be adjusted to account for the decreased costs of uncompensated care.

Mental Health and Gun Violence

HHS would receive an additional $130 million for a program to train teachers and others to recognize the signs of mental illness in young people aged 16 to 25 and help them get the treatment they need. Funding also would provide training for another 5,000 mental health professionals. The Centers for Disease Control (CDC) would receive $30 million for support of research on the causes and prevention of gun violence and a nationwide data base on violent deaths.

Enforcement Efforts

The Food and Drug Administration (FDA) would get $10 million to place additional inspectors in the countries that export food and drugs to the United States. Another $640 million is allocated to program integrity efforts in Medicare, Medicaid and CHIP.

Early Childhood Programs

The proposed budget provides for $1.4 billion to expand early head start to allow free preschool for low- and moderate income four-year-olds. The program would be paid for by an increased tax on tobacco. Additional funding would be provided for state programs for high-quality child care and to continue child care subsidies.

Although President Obama pledged compromise, it is highly unlikely that the Republican-controlled House of Representatives would pass his budget as presented. The House has repeatedly resisted many of the proposals not directly related to health care, and it has insisted on prohibiting the use of CDC funds to study gun violence since 1996.