HHS Sec. Price: Trump’s FY 2018 budget does not ‘confuse spending with success’

On May 23, 2017, President Trump submitted his fiscal year (FY) 2018 budget proposal to Congress. The proposed budget contained the administration’s tax, spending, and policy proposals for FY 2018. The proposed budget was greeted with much criticism due to various program cuts (see $3.6T in cuts spells R-E-S-P-E-C-T in Trump budget, Health Law Daily, May 23, 2017). On June 8, 2017, HHS Secretary Price appeared before the House Ways & Means Committee and discussed the President’s proposals involving HHS programs.

Confusing spending with success

Because the President’s FY 2018 budget was met with so much criticism due to various program cuts, Price began by taking on that issue directly: “President Trump’s budget request does not confuse government spending with government success. The President understands that setting a budget is about more than establishing topline spending levels. Done properly, the budgeting process is an exercise in reforming our federal programs to make sure they actually work—so they do their job and use tax dollars wisely.”

Price continued: “The problem with many of our federal programs is not that they are too expensive or too underfunded. The real problem is that they do not work—they fail the very people they are meant to help. Fixing a broken government program requires a commitment to reform — redesigning its basic structure and refocusing taxpayer resources on innovative means to serve the people that the program is supposed to serve. And sometimes it requires recognition that the program is unnecessary because the need no longer exists or there are other programs that can better meet the needs of the people that the program was originally designed to serve.”

To emphasize this point, Price spoke directly about two federal programs, Aid to Families with Dependent Children and Medicaid.

Aid to Families with Dependent Children

According to Price, the Aid to Families with Dependent Children program undermined self-sufficiency and work. He applauded Congressional action that created the Temporary Assistance for Needy Families (TANF) program that promoted the empowerment of parents through work. He pointed out that TANF caseloads have declined by 75 percent through FY 2016. And that under the TANF program, the employment of single mothers increased by 12 percent from 1996 through 2000, and even after the 2008 recession, employment of single mothers is still higher than before welfare reform.

Medicaid

With regards to the Medicaid program, Price stressed that 20 years ago, annual government spending on Medicaid was less than $200 billion; and that within the next decade, that figure is estimated to top $1 trillion. Despite these investments, Price noted that: (1) one-third of doctors in America do not accept new Medicaid patients; and (2) research shows that enrolling in Medicaid does not necessarily lead to healthier outcomes for the newly eligible enrollee.

To illustrate the failure to achieve healthier outcomes, Price pointed to the results of an Oregon Health Insurance Study that replicated a randomized clinical trial by enrolling some uninsured people in Medicaid through a lottery. Comparing this population to those who remained without coverage, the data showed an increase in emergency room use for primary care, the probability of a diagnosis of diabetes, and the use of diabetes medication. The data also showed no significant effects on measures of physical health such as blood pressure, cholesterol, or average glycated hemoglobin levels (a diagnostic criterion for diabetes).

According to Price, “This mixed impact of Medicaid coverage on health outcomes suggests we need structural reforms that equip states with the resources and flexibility they need to serve their unique Medicaid populations in a way that is as compassionate and as cost-effective as possible.” This is what the President’s FY 2018 budget does, according to Price. It uses state innovation to save and strengthen Medicaid by unleashing state-level policymakers to advance reforms that are tailor-made to meet the unique needs of their citizens. Price estimates that over the next decade, these reforms will save American taxpayers $610 billion.

CHIP

Price further testified that the FY 2018 budget includes provisions to extend funding for the Children’s Health Insurance Program (CHIP). The budget would rebalance the federal-state partnership through a series of reforms, including ending the requirement under section 2001 of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) that states move certain children from CHIP into Medicaid and capping eligibility at 250 percent of the federal poverty level to return the focus of CHIP to the most vulnerable and low-income children.

Health security and preparedness

Price affirmed HHS’ role as “the world’s leader in responding to and protecting against public health emergencies — from outbreaks of infectious disease to chemical, biological, radiological, and nuclear threats — and assisting the health care sector to be prepared for cyber threats.”

To support HHS’ public health emergency preparedness and response, Price noted that the President’s budget provides $4.3 billion for disaster services coordination and response planning, biodefense and emerging infectious diseases research, and development and stockpiling of critical medical countermeasures.

Key Public Health Priorities

In his testimony, Price described three new public health crises: (1) serious mental illness; (2) substance abuse, particularly the opioid abuse epidemic; and (3) childhood obesity. He stressed his commitment to these new challenges and noted that the President’s budget would:

  • invest $5 million in new funding authorized by the 21st Century Cures Act for Assertive Community Treatment for Individuals with Serious Mental Illness;
  • include a demonstration within the Children’s Mental Health Services program to test the applicability of new research from the National Institute of Mental Health on preventing or delaying the first episode of psychosis;
  • provide $811 million — an increase of $50 million above the FY 2017 continuing resolution — in support of HHS’ five-part strategy to combat the opioid epidemic; and
  • establish a new $500 million America’s HealthBlock Grant, which will provide flexibility for states and Tribes to implement specific interventions, including those designed to spur improvements in physical activity and the nutrition of children and adolescents, and to treat leading causes of death such as heart disease.

Women’s health services

Price also testified that the President’s budget would increase funding for the Maternal and Child Health Block Grant and Healthy Start to improve the health of mothers, children, and adolescents, particularly those in low-income families. The budget would also maintain funding for a variety of programs serving women, including, community health centers, domestic violence programs, women’s cancer screenings and support, mother and infant programs, and the Office on Women’s Health.

CMS actuary releases 2016-2025 health care expenditure projections

The growth in national health expenditures is expected to average 5.6 percent annually over 2016-2025, according to a report from the CMS Office of the Actuary. Health care spending is projected to grow 1.2 percentage points faster than gross domestic product (GDP) during this period. As a result, the health share of GDP is expected to rise from 17.8 percent in 2015 to 19.9 percent by 2025. This growth in national health expenditures is driven by a projected faster growth in medical prices, offset by a projected slowdown in the use of medical goods and services. The projections in the report are based on current law and do not assume potential legislative changes by the new administration.

The report also projects health care spending to grow 5.4 percent in 2017, due to faster growth in Medicare and private health insurance spending; and at an average rate of 5.9 percent for 2018-19, as projected growth in Medicare and Medicaid accelerates. For 2020-25, an average growth of 5.8 per year is projected, due to the deceleration in growth in the use of medical goods and services.

ACA-related findings

Although the largest health insurance coverage impacts from the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) have already been observed in 2014-15, the report projects the insured share of the population to increase from 90.9 percent in 2015 to 91.5 percent in 2025. The report attributes this increase to continued growth in private health insurance enrollment, in particular for employer-sponsored insurance, during the first half of the decade.

The report also projects that national health spending growth decelerated from 5.8 percent in 2015 to 4.8 percent in 2016 as the initial impacts associated with the ACA expansions fade. In addition, Medicaid spending growth is projected to have decelerated sharply from 9.7 percent in 2015 to 3.7 percent in 2016 as enrollment growth in the program slowed. Similarly, it is projected that private health insurance spending slowed from 7.2 percent in 2015 to 5.9 percent in 2016.

Payer findings

Additional report findings regarding payers include:

Medicare. Medicare spending is projected to grow at an average rate of 7.1 percent for 2016-25, 7.6 percent for 2020-2025, and 8 percent for 2020.

  • Following consecutive years of expected slow growth of 3.7 percent in both 2016 and 2017, Medicaid spending growth is projected to quicken and average nearly 6 percent through 2025.
  • Private health insurance. Enrollment in private health insurance is projected to average 0.5 percent in growth for 2016-25; 5.7 percent for 2018 through 2019; and at an average rate of 5 percent per year for 2020 through 2025.
  • Out-of-pocket. Out-of-pocket spending growth is projected to accelerate 3.6 percent in 2016 from 2.6 percent in 2015; grow 4.8 percent for 2016 through 2025; steadily increase to a high of 5.8 percent in 2020; and then average 5 percent growth in the final years of the period.

Health sector findings. Major report findings by health sector include:

  • Total hospital spending is projected to grow at an average rate of 5.5 percent per year for 2016-25, compared to 4.9 percent for 2010-15.
  • Physician and clinical services. Growth in spending on physician and clinical services is projected to have accelerated slightly in 2016 to 6.6 percent, from 6.3 percent in 2015. It is projected to slow to 5.9 percent in 2017.
  • Prescription drugs. Prescription drug spending growth is projected to decelerate from 9.0 percent in 2015 to 5.0 percent in 2016 due to reduced use of newly approved specialty drugs, as well as an increase in the number of brand name drugs losing patent protection. It is projected to grow an average of 6.3 percent per year for 2016 through 2025.

Government spending. The report found that health care spending financed by federal, state, and local governments is projected to have grown 4.4 percent to $1.5 trillion in 2016; and is projected to increase to 47 percent of national health expenditures by 2025 (up from 46 percent in 2015).