In preliminary budget documents released on February 26, the Obama Administration proposes to create a $634 billion “reserve fund” over the next decade to finance expanded health insurance coverage and other health care investments.  Approximately half of the health reform reserve fund would be generated by increasing taxes on couples earning more than $250,000 a year and individuals earning more than $200,000 a year.  The other source of funding would be savings from Medicare and Medicaid.

 

Of particular importance to physicians, the budget proposal includes $329.6 billion “to account for additional expected Medicare physician payments” over the next 10 years.  The funds are described as the Administration’s “best estimate of what the Congress has done in recent years,” and, if adopted by Congress, would effectively eliminate the enormous deficit and scheduled Medicare physician payment cuts of 40% over the next seven years.  While the full impact is not yet known, this large infusion of funds appears to meet the AMA's repeated call for a realistic budget baseline that assumes Congress will not allow the drastic cuts programmed under the current SGR formula to occur.

 

The document also signals the Administration’s willingness to consider further modifications in the SGR formula, stating that “as part of health care reform, the Administration would support comprehensive, but fiscally responsible, reforms to the payment formula.”  It adds that “Medicare and the country need to move toward a system in which doctors face better incentives for high-quality care rather than simply more care.”

 

The President’s decision to propose a more realistic budget baseline for Medicare spending on physician services responds to a long-time advocacy goal shared by the AMA and other medical organizations.  It followed several top-level meetings between AMA and Administration officials, including most recently a meeting with senior officials at the White House Office of Management and Budget and AMA President Nancy Nielsen’s participation in the White House Fiscal Summit on February 23.

 

Included in the Medicare savings proposals are unspecified restrictions on physician owned hospitals (with negligible savings and no policy explanation), a requirement for the use of radiology benefits managers ($260 million in savings over 10 yrs), and incentives for physicians to administer flu vaccinations (with negligible savings and no policy explanation).

Other Medicare and Medicaid savings provisions in the Obama budget outline include:

 

Competitive bidding for Medicare Advantage plans ($176.6 b)

Bundled payments for hospitals and post-acute care services ($17.8 b)

Reduce payments for hospital readmissions ($8.4 b)

Reduced payments for home health services ($37.1 b)

Increased Medicaid drug rebates ($19.6 b)

Increased Part D drug premiums for higher income beneficiaries ($8.1 b)

Medicare program integrity efforts ($2.0 b)

 

The AMA issued a statement applauding the President’s decision to include an assumption that the SGR-driven physician pay cuts will not occur and his commitment to expanding health insurance coverage for the uninsured.   As is the case every year, however, the President’s budget proposal is just the first step in a lengthy budget process.  The AMA will be closely analyzing all the health care budget proposals from the Administration and Congress and will work to modify or eliminate objectionable provisions (such as restrictions on physician owned hospitals) while continuing to strongly advocate for appropriate funding of Medicare physician services and expansion of coverage for the uninsured.  

 

The full budget document, entitled “A New Era of Responsibility,” can be accessed on the Office of Management and Budget web site, at http://www.whitehouse.gov/omb/budget/ .