HHS: Trump Seeks Deep Health Funding Cuts and Health Law Repeal

2018-02-13 | , CQ Roll Call

Modest short-term discretionary increases in the Department of Health and Human Services budget that the Trump administration proposed Monday would be dwarfed by long-term cuts to Medicare and Medicaid north of a trillion dollars over the next decade.


The Trump administration on Monday called for a $8.7 billion increase in discretionary spending at the Department of Health and Human Services, a reversal from last year's proposed decreases and the administration's original plan for fiscal 2019. But the administration announced Monday it was seeking more funding after Congress passed a two-year spending deal (PL 115-123) allowing for higher spending. Part of the increase would be because of a $5.7 billion shift in mandatory spending to discretionary funding, according to a letter from the administration to Speaker Paul D. Ryan of Wisconsin. 


The administration requested $95.4 billion in discretionary spending for the largest non-Defense cabinet agency, compared to the estimated $86.7 billion that HHS had to spend for fiscal 2017, according to the budget details published by HHS. The administration initially planned to seek a 20 percent cut in discretionary HHS spending and those figures are still in summary tables at the end of Office and Management and Budget documents. When accounting for mandatory programs like Medicare and Medicaid, overall HHS spending would increase from $1.1 trillion in 2017 to $1.2 trillion in 2019. 


While steep cuts are unlikely to become reality, the evolving HHS budget signals that the administration heard the appeals from lawmakers in both parties who support robust funding for medical research and disease prevention, especially amid public health crises like opioid abuse. 


The HHS increase would almost entirely go toward the administration's efforts to fight opioid abuse. But despite the increase for a highly visible issue that President Donald Trump has prioritized, other areas — such as HIV/AIDS, cancer research, and emergency preparedness — would still see cuts.


Return to Repeal and Replace?
Much of the budget proposal’s long-term spending outlook is predicated by assumptions that Congress would pass a health care overhaul that would significantly cut Medicaid spending growth. The request shows the administration still hopes to overhaul the 2010 health care law and give states block grants to provide coverage.  The administration assumes a cut in growth for Medicaid and exchange subsidies of about $675 billion over the next decade.


It’s the first clear suggestion this year that the administration maintains hope of reviving efforts to dismantle the 2010 health law (PL 111-148, PL 111-152), a step that most lawmakers call unlikely.


The budget calls for replacing the current law with a plan similar to the one proposed last year by Republican Sens. Lindsey Graham of South Carolina; Bill Cassidy of Louisiana; Ron Johnson of Wisconsin; and Dean Heller of Nevada.


That proposal would replace the funding for Medicaid expansion and subsidies that help people afford health coverage with block grants that states could use to finance health coverage, like providing subsidies or setting up reinsurance programs. It also would loosen regulations. The budget calls for $1.2 trillion in grants to states to replace current funding under the law. Senate Republicans debated the so-called “Graham-Cassidy” proposal in September, before announcing it did not have enough support to pass. 


The budget also calls for $812 million to fully fund the health law's risk corridor program, which could allow HHS to repay insurers money they were owed under the law. 


The proposal also calls for funding the law's cost-sharing reduction payments for fiscal 2018 through the end of calendar year 2019. In October, the administration cut off funding for the subsidies, which help lower-income consumers pay for out-of-pocket costs. 


States have faced soaring drug prices, in part because of new, costly medications. Currently, states must pay for any prescriptions as long as the manufacturer participates in Medicaid’s drug rebate program. Trump's plan would give up to five states greater control over which prescriptions they cover, as well as the ability to negotiate with drug companies directly.


The proposal would limit federal Medicaid funding to people with verified immigration status, which would save nearly $2.2 billion over 10 years, and make it easier for states to charge people co-pays for visiting the emergency room when it’s not an emergency, saving $1.3 billion over a decade. 


The proposal assumes major changes to Medicare, resulting in cuts in growth of $554 billion over a decade.


One proposal would institute a single, unified payment system for post-acute care providers such as nursing homes, home health agencies and rehabilitation facilities. Congress already set the wheels in motion on a unified system, which is projected to save $80 billion over 10 years. The Medicare Payment Advisory Board sent Congress an outline in 2016 for a future payment system.


Another proposal would pay hospital-owned doctors’ offices at the lower physician rate, in a nod to industry consolidation. 


One contentious idea would require Medicare plans to pass through a portion of prescription drug rebates to consumers, which OMB projects would save more than $42 billion over a decade. The move is opposed by the insurance industry and pharmacy benefit managers. 


Another major cost saver would exclude patients’ Medicare drug rebates from the calculation of their out-of-pocket costs, which would help prevent them from hitting a catastrophic level of spending where Medicare covers 80 percent of the bill. The change would save $47 billion over a decade. The budget also proposes eliminating low-income patient co-pays on generic drugs.


Another proposal would allow CMS to shift some drugs billed under Medicare Part B outpatient care to the Part D drug program, where private insurance companies could handle price negotiations. The change is a substitute for letting Medicare negotiate drug prices directly, and would shift more business to insurers.


Overall, changes in how Medicare pays for prescriptions and other federal drug spending policies would lead to $5.7 billion in net savings over 10 years.


The budget plan would also reduce spending on medical residency slots by consolidating programs across Medicare, Medicaid and children’s hospitals in a $48 billion cut that would focus on boosting underserved specialties and areas. Another nearly $70 billion cut targets payments to hospitals that treat uninsured patients.


The budget also calls for other potential money-saving changes that Congress would need to authorize, including changing medical liability award laws, but that’s likely going nowhere in the short term although the House narrowly passed a liability bill (HR 1215) this year.


Public Health, Research and Social Services
The administration sought a total of $10 billion in new HHS funding for programs related to opioid abuse. The amount would vary by agency, and comes amid cuts to other discretionary programs.


The Substance Abuse and Mental Health Services Administration would see nearly $700 million in cuts to its signature substance abuse and mental health block grant programs but $1.2 billion more for opioid-specific programs, resulting in an approximately $550 million increase over the agency's $4.2 billion 2017 budget. Most of the new opioid money would likely go to state grants established in 2016 by the "21st Century Cures" law (PL 114-255). While states split $500 million in fiscal 2017 and are due to get the same amounts this year, in 2019 each state could receive twice as much.


The $10.5 billion Health Resources and Services Administration would get $550 million more for opioids, but would see a $744 million cut to health workforce training programs. The Indian Health Service would get an extra $150 million for opioids, on top of another $400 million that would bring the agency's total fiscal 2019 budget to nearly $5.6 billion.


The Centers for Disease Control and Prevention would get an extra $175 million for opioid programs, but during one of the worst recent flu seasons, the administration proposed cutting public health preparedness by $600 million. That would make up the bulk of a $703 million cut to CDC from $6.4 billion in 2017 to $5.6 billion in 2019.


After Congress last year resoundingly rejected the administration’s proposal to cut the National Institutes of Health by $5.8 billion, the 2019 request reverses course and proposes an approximately $500 million increase over the 2017 levels, for a total of $33.8 billion. Cuts to NIH institutes focusing on infectious disease and cancer would come as the NIH would receive a $750 million increase in opioid research spending. Lawmakers may go even further, as the spending agreement signed into law last week provided for a $1 billion increase at NIH in 2019.


The administration abandoned a much-maligned proposal for fiscal 2018 to offset about $1 billion in the Food and Drug Administration’s budget with an increase in fees paid by the pharmaceutical and medical device industries. For fiscal 2019, the administration sought a $5.8 billion FDA budget, nearly a $700 million increase over current levels. Most of that would come from its congressional appropriation. The only new so-called “user fees” in fiscal 2019 would be for over-the-counter drugs and veterinary drugs, totaling about $64 million. That increase was expected, as Congress plans to reauthorize animal drug fees and establish new over-the-counter drug regulations.


The budget proposes eliminating several mandatory and discretionary programs. It would eliminate HHS’s Social Services Block Grant, which would save about $1.4 billion in fiscal 2019 and $16.7 billion over 10 years. It would also reduce the size of the Temporary Assistance for Needy Families block grant by $1.7 billion in 2019, for a total of $21.3 billion saved over 10 years.


For the second year in a row, the administration proposed to eliminate the $3.4 billion Low Income Home Energy Assistance Program, though Congress is likely to respond by continuing to fund it at a similar level.


The administration again proposed moving the $324 million Agency for Healthcare Research and Quality into the NIH, and providing $258 million for its work. The proposal would also move the National Institute for Occupational Health and Safety from the CDC to the NIH, reducing its budget from $335 million to $200 million.


The proposal would also cut the $715 million Community Services Block Grant, reduce funding for health professional training programs from $539 million to $88 million, and cut the office in charge of electronic health records from $60 million to $38 million.

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