Obama Budget Gets Mixed Reviews from Providers, Advocates

The budget proposal calls for a permanent repeal of Medicare's widely reviled sustainable growth rate funding formula for physicians, but also calls for about $400 billion in cuts, mostly to Medicare and Medicaid, over the next decade.

The reaction from healthcare providers to the Obama Administration's $4 trillion 2016 budget proposal has been mixed, but predictable, with those earmarked for more money praising the president's spending plan, and those facing cuts bemoaning "bad medicine."

The total proposed budget for the Department of Health and Human Services in fiscal year 2016 is approximately $1.1 trillion, up from $1.04 trillion in 2015, and includes about $84 billion in discretionary funding. The proposal calls for a permanent repeal of Medicare's widely reviled Sustainable Growth Rate funding formula for physicians, which would cost about $150 billion over the next decade, and the end of the sequestered 2% reimbursement cuts to providers that are budgeted through 2021.

However, the president's proposal also calls for about $400 billion in cuts, mostly to Medicare and Medicaid, over the next decade. About $350 billion would come from reimbursements to providers, and $84 billion would come from structural reforms that include fraud reduction initiatives.

Summary of Medicare Provisions in the President’s Budget for Fiscal Year 2016

The cuts include $16.2 billion in reductions to fund graduate medical education, and reduced inflation updates for Medicare post-acute care amounting to about $102 billion over the next 10 years. Critical access hospitals would see reimbursements cut from 101% of costs to 100%, amounting to more than $1.7 billion over the next decade.

"Taken together, the President's budget request for HHS makes investments that impact millions of Americans for the better; investments that are good for the health of our families, the American middle class, and our nation's economy," HHS Secretary Sylvia Burwell told the media on Monday.

"They support the broader goals of bringing middle class economics into the 21st Century; helping working families feel more secure with paychecks that go further … helping create the conditions for our businesses to keep generating good new jobs for our workers to fill… and  fulfilling our most basic responsibility to keep Americans safe."

Hospitals Pan Budget Proposal
American Hospital Association President and CEO Rick Umbdenstock disagreed with Burwell's claim.

"The cuts to hospital care are bad medicine for our nation's seniors and other vulnerable patients," Umbdenstock said in statement released by his office. "Hospitals are implementing enormous changes while they continue to improve the quality of care, but the Administration proposes further cuts to hospital care. These reductions are short-sighted at a time when our nation's healthcare infrastructure needs to be strengthened."

An AHA budget analysis found that the proposal would also reduce payments to providers by $29.5 billion by implementing site-neutral policies; cut bad debt payments to providers, including hospitals, by $31.1 billion, and eliminate critical access designation for hospitals closer than 10 miles from the nearest hospital for savings of $770 million. 

Umbdenstock noted that one in three hospitals is losing money, and many hospitals are struggling to maintain access and services.

"With cuts to hospital services approaching $122 billion since 2010, this continued pattern of reductions is no longer sustainable," he says. "Many items in today's proposal would seriously challenge hospitals' ability to keep the promise of maintaining access to quality health care services."

Bruce Siegel, MD, president and CEO of America's Essential Hospitals, said proposed cuts to Medicaid disproportionate share hospitals, enforced site-neutral policies, and reduced bad debt payments would be "particularly hard" on safety net hospitals.

"Essential hospitals, which already operate at a loss on average, cannot withstand more reductions in federal spending," Siegel said in prepared remarks. "These proposed cuts would jeopardize access to care for low-income patients, as well as trauma care and other vital services to entire communities."

Medical, Nursing Colleges Mixed
As expected, medical schools and teaching hospitals for physicians and nurses rejected the president's call for $16 billion in reduced funding over the next decade, saying it poses a threat to public health.

"For example, the administration's proposed $16 billion cut in support for the complex patient care provided at teaching hospitals will have a severe, negative impact on the very institutions that have historically led the way in health crises, most recently the fight against Ebola,"Association of American Medical Colleges) President and CEO Darrell G. Kirch, MD, said in a media statement.

"In fact, those facilities designated as Ebola Treatment Centers would see dramatic cuts under the budget proposal. Medical schools and teaching hospitals depend on federal funding, not only to respond to public health emergencies, but also to provide critical services often not available elsewhere and to train the next generation of physicians and health professionals."

Kirch said AAMC was pleased to see the continued funding for physician training under the National Health Service Corps, but said that would not overcome the cuts to teaching hospitals that may have to cut the number of residency positions. 

"We appreciate the president's vision to improve health care in this country, but remain concerned that the proposals in the administration's budget will jeopardize patient care and exacerbate the doctor shortage," he said.

American Association of Colleges of Nursing President Eileen T. Breslin said her organization was pleased to see that the proposed budget calls for expanding Medicare Accountable Care Organizations to include "a broader set of primary care providers," that would include physician assistants, and clinical nurse specialists.

"This expansion clearly illustrates the value and expertise of these advanced practice registered nurses in the delivery of high-quality, patient-centered, and interdisciplinary care," Breslin said.

Health Centers Embrace New Funding
The budget calls for an additional $2.7 billion in funding over three years for community health centers, along with $1.5 billion in additional discretionary and reserve funding, according to the National Association of Community Health Centers, which praised the spending plan.

NACHC President/CEO Tom Van Coverden said without additional funding community health centers across the national could close.

"We are pleased to see that the budget proposal released by the President acknowledges the need for a multi-year solution to the funding cliff," Van Coverden says. "By proposing three years of additional mandatory funding, the President has clearly signaled that maintaining our nation's investment in health centers must be a priority."