The FY 2011 budget unveiled by President Obama yesterday proposes $3.8 trillion in federal spending, with a deficit of $1.3 trillion. The budget includes many Medicare and Medicaid provisions of interest to NASL members, which are described in the HHS Budget in Brief. We will provide further analysis of the budget, but listed below is a recap of key issues:

 

Medicare: Medicare is projected to spend $6.955 trillion over the next ten years (2011-2020).  The budget does not propose provider cuts for FY2011, but it assumes that health care reform legislation will be enacted, which would cut future Medicare and Medicaid spending by about $500 billion.

 

Physician Payments: The proposed budget assumes that Congress will act to maintain the physician fee schedule and that it will not receive a cut in 2011, despite the sustainable growth rate (SGR) formula that mandates such a reduction.  At a press briefing on the budget, the HHS Secretary Sebelius said that she expects Congress will vote to supersede the 21 percent cut that is scheduled to be imposed March 1.

 

The budget includes an adjustment totaling $371 billion over ten years (FY 2011–FY 2020) to reflect the Obama administration’s best estimate of future congressional action based on what the Congress has done in recent years on physician payments. The budget seems to assume that Congress will pass a serious of short-term patches rather than a single permanent fix, and it reflects zero growth in the fee schedule. The budget document points out that the adjustment does not signal a specific Administration policy.

 

Program Integrity: Health care anti-fraud efforts at HHS would receive a boost of $250 million in funding over last year's budget request, and the Medicare Fraud Strike Force program would be expanded. The budget assumes $25 billion in Medicare and Medicaid savings over the next 10 years, as a result of seven program integrity proposals included in the budget. The seven proposals include:

DMEPOS Competitive Bidding: The budget assumes that durable medical equipment competitive bidding will save $80 million in 2011.

 

Data Gathering: The budget includes $110 million for a new, comprehensive Health Care Data Improvement Initiative at CMS that “will transform the CMS data environment from one focused primarily on claims processing to one also focused on state-of-the-art data analysis and information sharing.”

 

Comparable Effectiveness: The budget would provide $286 million for comparative effectiveness research at the Agency for Healthcare Research and Quality, an increase of $261 million over fiscal 2010.

 

New Initiatives: These have yet to be fleshed out, but the CMS budget asks for $30 million for continuing research and new demonstrations and pilot projects, some of which will “better align provider payments with costs and outcomes.”

 

Medicaid: Medicaid is projected to spend $3.602 trillion over the next ten years (2011-2020). The budget request would boost Medicaid spending by $25.5 billion for six months to help states that are struggling to balance budget shortfalls and increased enrollment in public programs because of the recession.

 

Final Note: The president’s budget provides a blueprint for Congress set spending priorities for the coming fiscal year. Congress is not required to follow the president’s recommendations, and often disregards them.