President’s Budget Promotes Health Care Delivery and Payment Reform Approaches that Could Reduce Deficits

The president’s fiscal year (FY) 2017 budget is intended to lay out priorities for his last year in office; by all accounts, it was not one expected to be taken up in Congress. The U.S. Department of Health and Human Services discretionary budget authority request of $82.8 billion was 4 percent higher than the FY 2016. Yet the president recommended a number of potential legislative changes estimated to save $375 billion over ten years. While few expect the budget to pass in 2016, policymakers may want to carefully examine some of the budget’s proposed innovations to use in the near future, particularly since the federal deficit has continued to soar and health care costs are growing again.

Highlights

The budget proposes to extend funding for the Children’s Health Insurance Program (CHIP) for an additional two‐years through FY 2019. BPC health leaders have called on policymakers to thoughtfully analyze the role of CHIP within the Medicaid and health insurance marketplace landscape to inform any future extensions. For instance, whenever possible, parents and children should be enrolled in the same insurance plans, and we should examine existing coverage gaps and the so-called “family glitch.” Under the Affordable Care Act, the cost for individual coverage, not for family coverage, determine the affordability of insurance (and thus a family’s eligibility to receive federal subsidies). While the president’s budget proposed a number of private insurance and marketplace administrative fixes, it did not address the family glitch.

Similar to BPC’s health-care cost-containment and delivery system reform proposals from 2013 and 2015, the budget includes a proposal to implement bundled payment for post-acute providers, including long-term care hospitals, inpatient rehabilitation facilities, skilled nursing facilities, and home health providers. It would allow Medicare Accountable Care Organizations (ACOs) to effectively waive beneficiary cost-sharing for primary care visits. BPC has proposed allowing payments to beneficiaries in the form of cost-sharing reductions, but our version was intended to incentivize participation in Medicare Networks (our version of ACOs). The budget provides updates on several initiatives of the CMS Center for Medicare and Medicaid Innovation designed to improve care and reduce costs, some of which have incorporated elements from our health proposals (e.g., the Next Generation ACO Model and Accountable Health Communities Model). Finally, the budget includes a Medicare Advantage competitive bidding model very similar to BPC’s. Plans would be paid the lower of the current law benchmark or the average Medicare Advantage plan bid plus a five percent “buffer” to protect beneficiary rebates. This proposal could save $77.2 billion over 10 years.

On the health information (IT) front, the budget includes an increase of $22 million and new authorities for the Office of the National Coordinator for Health Information Technology. The intent is to strengthen patient safety and quality of care by advancing the interoperability, reliability, and usability of health IT. Sharing data across systems is critical to empower individuals, advance biomedical innovation, and achieve the promise of better, more efficient care. This goal aligns with BPC’s policy recommendations and with legislation passed unanimously by the Senate Health, Education, Labor, and Pensions (HELP) Committee last week. Just as BPC recommended an oversight framework for health IT and connected health, the budget establishes a public-private partnership to encourage reporting of health IT-related safety events and proposes to expand the ability of Medicare Advantage plans to deliver services via telehealth. This would enable rural health clinics and federally qualified health centers to qualify as telehealth sites under Medicare.

The budget also includes several proposals to support biomedical innovation, including: $4 million for FDA (an increase of $2 million above FY 2016) for the Precision Medicine Initiative, which could help reduce the burden of disease by targeting prevention and treatment more effectively; $75 million in mandatory resources over five years for the vice president’s cancer “moonshot” initiative; and increased funding for medical product safety ($116 million above FY 2016) and for infrastructure and facility improvements at the U.S. Food and Drug Administration (FDA) ($4 million above FY 2016). BPC’s initiative FDA: Advancing Medical Innovation, supports similar investments to advance precision medicine, research and infrastructure, as long as mandatory funding for these or similar medical innovation initiatives are offset by spending reductions elsewhere in the budget.

Additionally, the budget proposes programs that promote independence, productivity, and community integration for individuals with disabilities, individuals eligible for both Medicare and Medicaid and those with multiple chronic conditions. It also prioritizes investments in long‐term services and supports that help seniors and individuals with disabilities to remain independent. This includes a proposal to expand eligibility for the 1915(i) Home and Community-Based Services State Plan Option; $151 million for Family Caregiver Support Services, including access assistance, counseling, and training; and a $2 million increase for the Lifespan Respite Care program to address caregiver burden. The budget also provides an additional $10 million, to fund in-home and community-based services to help older Americans live independently and with dignity in their homes and communities. BPC is rolling out a series of reports this year to address these issues: long-term care financing (this month); the connections between senior health and housing (May 2016); and the delivery of long-term care (later this year).

We are encouraged that the president’s FY 2017 budget for health care focuses on care and payment models that reward value over volume and support better, more coordinated care for patients. We urge Congress and the administration to build upon these and other proposals to enhance value-based purchasing programs and alternative payment models; to support health IT and medical innovation; and to invest in the needs of vulnerable and older Americans who seek to live independently and remain in their homes and communities for as long as possible.