President’s Budget Outline Calls for Big Changes to Health Care

The budget proposal that President Obama released on Thursday includes a number of broad reforms to the health care system as part of his effort to expand health insurance to all U.S. residents, the New York Times reports (Pear, New York Times, 2/27).

The $3.55 trillion fiscal year 2010 proposal includes $2 trillion in mandatory spending, which includes finds for Medicare and Medicaid (Calmes, New York Times, 2/27). Under the proposal, mandatory spending for Medicare would total $453 billion, and mandatory spending for Medicaid would total $290 billion (Washington Post graphic [1], 2/27).

The proposal also includes $634 billion for a reserve fund to help finance and expand health insurance to all residents (Taylor, AP/Kansas City Star, 2/26). The budget would finance half of the reserve fund with increased revenue from tax changes and half with reduced spending in health care programs (Levey, Los Angeles Times, 2/27).

According to the Christian Science Monitor, the reserve fund "would represent a huge change in national direction, as it implies that the U.S. will move towards some sort of universal health care system" (Grier, Christian Science Monitor, 2/27).

The announcement of the reserve fund likely will prompt a "battle" over "how to finance Mr. Obama's national health insurance plan," which "will significantly expand the cost of government," the Washington Times reports (Lambro, Washington Times, 2/27).

The tax changes "will set off a battle in Congress, where Republicans are bristling at the notion of allowing taxes to rise during a recession," The Hill reports (Alarkon, The Hill, 2/26).

The proposal also would decrease spending for Medicare and Medicaid to help finance the reserve fund, and those reductions are "sure to incite battles with doctors, hospitals, health insurance companies and drug manufacturers," according to the AP/Detroit Free Press (Crutsinger, AP/Detroit Free Press, 2/26).

Obama plans to release a detailed proposal in April, but the plan likely will not include additional details on health care reform, as he hopes to draft legislation with lawmakers, The Hill reports (Young, The Hill, 2/26).

Obama said, "With this budget, we are making a historic commitment to comprehensive health care reform. It's a step that will not only make families healthier and companies more competitive, but over the long term, it will also help us bring down our deficit" (Sanchez, CongressDaily, 2/26).

Health Care Industry Changes

The proposal includes several provisions that would reduce payments to the health care industry. The proposal would revise how Medicare pays health insurers that operate Medicare Advantage plans and implement a competitive bidding process that would pay companies based on the weighted average of bids in different geographic areas (Fuhrmans, Wall Street Journal, 2/26).

In addition, the proposal also would increase the rate of the rebate that pharmaceutical companies pay for medications sold to Medicaid from 15.1% to 22.1%. The proposal also would seek to end agreements under which brand-name pharmaceutical companies pay generic pharmaceutical companies to delay market entry of generic versions of their products.

According to Reuters, although health insurers and pharmaceutical companies "are likely to resist any efforts that would curb their revenues," they might "eventually benefit if the savings are used to provide coverage to those currently without health insurance" (Heavey, Reuters, 2/26).

HHS Funding

The budget proposal would reduce the HHS budget by 2% from FY 2009 to $77 billion (Washington Post graphic [2], 2/27).

Under the proposal, funds for efforts to reduce Medicare and Medicaid fraud would increase by $311 million.

FDA Budget

The proposal would provide more than $1 billion for FDA (Wall Street Journal graphic, 2/27). In addition, the proposal would change FDA policy to allow the reimportation of medications from other nations (Washington Post graphic [2], 2/27).

Research Funding

The proposal also includes a provision that would seek to double cancer research over several years. The proposal would provide more than $6 billion for cancer research at NIH, an increase from the $5.6 billion provided for FY 2009 (Wall Street Journal graphic, 2/27).

In addition, the proposal includes $211 million for autism research.

VA Budget

The proposal also would increase the Department of Veterans Affairs budget by 11% from FY 2009 to $56 billion.

Under the proposal, eligibility for VA health care programs would extend to middle-income, nondisabled veterans. The proposal would increase funds for programs to help veterans of the wars in Iraq and Afghanistan who experience post-traumatic stress disorder or traumatic brain injuries. In addition, the proposal includes additional funds for improvement of health care information technology systems at VA (Washington Post graphic [2], 2/27).

The proposal also would increase mental health screening for veterans (USA Today graphic, 2/27).

Reaction

Congressional Democratic leaders said that they hope to approve the proposal this spring, although House Majority Leader Steny Hoyer (D-Md.) said that he expects difficulty in the effort to find adequate support for passage (Montgomery, Washington Post, 2/27).

According to Dow Jones, reaction to the proposal among lawmakers was "mixed," with "views split on partisan lines" about the provisions that would make tax changes and reduce payments to MA plans to finance the reserve fund (Yoest, Dow Jones, 2/27).

The prospects for health care reform legislation also remain uncertain this year. Neither the House nor the Senate has set dates for debate on health care reform legislation, although the Senate might address such legislation this summer (Espo, AP/Boston Globe, 2/27).

Robert Laszewski, president of consulting firm Health Policy and Strategies, said that, with the lack of specific details on health care reform included in the budget proposal, "I think the Obama administration has really abrogated health reform to Congress" (Reichard, CQ HealthBeat, 2/26).

Broadcast Coverage

ABC's "World News" on Thursday included a discussion on the reserve fund for health care reform included in the budget proposal with ABC medical editor Tim Johnson and ABC anchor George Stephanopoulos (Gibson, "World News," ABC, 2/26).
American Public Media's "Marketplace" on Thursday reported on the reserve fund. The segment includes comments from WBB Securities analyst Steve Brozak; Miller Tabak analyst Les Funtleyder; and Len Nichols, director of the Health Policy Program at the New America Foundation (Babin, "Marketplace," American Public Media, 2/26).
CBS' "Evening News" on Thursday reported on the reserve fund (Reid, "Evening News," CBS, 2/26).
CNN's "American Morning" on Thursday reported on the reserve fund (Malveaux, "American Morning," CNN, 2/26).
CNN's "News Room" on Thursday included a discussion on the reserve fund with CNN senior medical correspondent Elizabeth Cohen (Harris, "News Room," CNN, 2/26).
MSNBC's "1600 Pennsylvania Avenue" on Thursday reported on the budget proposal and the reserve fund. The segment includes comments from Rep. Allyson Schwartz (D-Penn.) and House Minority Leader John Boehner (R-Ohio) (Schuster, "1600 Pennsylvania Avenue," MSNBC, 2/26).
NBC's "Nightly News" on Thursday reported on the budget proposal and the reserve fund (Guthrie, "Nightly News," NBC, 2/26).
NPR's "All Things Considered" on Thursday reported on the budget proposal (Horsley, "All Things Considered," NPR, 2/26). In addition, NPR's "All Things Considered" on Thursday reported on the reserve fund. The segment included comments from Karen Ignagni, president of America's Health Insurance Plans; Charles Kahn, president of the Federation of American Hospitals; American Medical Association President Nancy Nielsen; conservative health columnist John Goodman; and Dan Mendelson, a health budget official in the Clinton administration (Rovner, "All Things Considered," NPR, 2/26).
NPR's "Morning Edition" on Friday included reactions on the budget proposal from several Democratic and Republican congressional leaders (Welna, "Morning Edition," NPR, 2/27).
NPR's "News & Notes" on Thursday included a discussion on the reserve fund with Robert Moffitt, director of the Center for Health Policy Studies at the Heritage Foundation, and Linda Blumberg, a senior fellow at the Health Policy Center at the Urban Institute (Cox, "News & Notes," NPR, 2/26).
PBS' "Online News Hour" on Thursday reported on the budget proposal (Holman, "Online News Hour," PBS, 2/26). In addition, "Online News Hour" on Thursday included a discussion on the reserve fund with Susan Dentzer, editor in chief of the journal Health Affairs, and National Public Radio health correspondent Julie Rovner (Suarez, "Online News Hour," PBS, 2/26).
PBS's "News Hour with Jim Lehrer" on Thursday included an interview with White House Office of Management and Budget Director Peter Orszag, who discussed the reserve fund and other issues (Woodruff, "News Hour with Jim Lehrer,' PBS, 2/26).

This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.