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The President’s Budget: Promising Health Care Ideas that Could and Should Go Further

By Katherine Hayes, Brian Collins

Thursday, February 5, 2015

The health section of the Fiscal Year 2016 budget request from President Obama looks a lot like past years.

  • It once again includes a variety of savings proposals, such as increased rebates on Medicare prescription drugs, which Congress is not likely to adopt.
  • While the budget includes a variety of changes to Medicare cost-sharing, such as increased Part B deductibles and a copayment for home health, it could and should go further to simplify and streamline the overly complex Medicare benefit structure and give beneficiaries long-overdue protection from catastrophic out-of-pocket costs without having to buy supplemental insurance. These protections could be structured in a way to assure that beneficiaries have access to care by exempting physician’s office visits from the deductible.
  • The budget proposes a four-year extension of funding for the Children’s Health Insurance Program (CHIP), but provided no substantial analysis of the role of CHIP in a much different health care landscape of Medicaid expansion and exchange plans.

Despite these shortcomings, the budget offers a few intriguing and encouraging signs.

  • It includes proposals to streamline eligibility for Medicaid and encourage states to provide access to home- and community-based services at part of Medicaid-funded long-term services and supports (LTSS).
  • It proposes a demonstration that would offer the well-regarded PACE (Program for All-inclusive Care for the Elderly) to younger populations with both acute and LTSS needs to learn if outcomes could be improved at lower overall cost.
  • The president’s request envisions a permanent reform to the Medicare physician payment formula along the lines of the bipartisan tri-committee bill from 2014, which would tie physician-fee-schedule payment rates to participation in alternative payment models (APMs) as a means to encourage the transition away from volume-based payment and toward systems of payment and delivery that reward better quality outcomes and efficiency.
  • The budget restates the administrations previously announced goal of making 50 percent of Medicare payments to providers through APMs by 2018.

As we await details on many of these proposals, we are encouraged that the president has highlighted the need for health care delivery system reform, and proposals to advance toward this goal are already underway within the Centers for Medicare and Medicaid Services. We hope that Congress and the administration will work together to iron out their differences and make this budget much more than that. In that regard, we’d like to offer a few ideas of our own: strengthen APMs, such as accountable care organizations and bundled payments; create stronger incentives for providers and beneficiaries to participate; modernize the basic Medicare benefit; and move toward a more competitively priced Medicare Advantage program. A lot could be achieved on a bipartisan basis, and Medicare physician-payment reform would be an excellent place to start.

KEYWORDS: MEDICARE, PRESIDENT BARACK OBAMA, MEDICAID, CHILDREN'S HEALTH INSURANCE PROGRAM, LONG-TERM SERVICES AND SUPPORTS, FY 2016 BUDGET, ALTERNATIVE PAYMENT MODELS