President Barack Obama would shift more than $50 billion in Medicare and Medicaid payments to doctors away from states, insurers and drugmakers in the next decade to avert cuts in federal physician reimbursements.
Obama’s budget proposal for fiscal 2012 addresses reimbursements to doctors in Medicare, the U.S. program for the elderly and disabled. A formula Congress enacted in 1997 to limit growth in agency spending on physicians dictates cuts in doctors’ fees that Congress has blocked annually since 2003.
The American Medical Association, doctors’ main Washington lobby group, has said that physicians may refuse to treat Medicare beneficiaries unless further cuts are stopped. Obama would cut federal health spending by $62 billion in the next decade, with about $54 billion of the savings used to boost doctors’ reimbursements beginning in 2012.
While the budget “might move stocks,” Justin Lake, a health-care analyst with UBS AG, wrote in a note to clients today, “it typically has a modest success rate” in Congress, where Republicans control the House and represent “another obstacle in this regard.”
The budget would cut Medicaid payments to states by more than $18 billion in 10 years. The administration also wants to recover $6 billion in payments to private Medicare insurers led by UnitedHealth Group Inc. that the White House describes as “erroneous.” The spending blueprint would prohibit brand-name and generic-drug manufacturers from cutting deals to delay the introduction of less-expensive copies, saving $8.8 billion.
Cut for HHS
Obama’s budget requests $82.2 billion for the U.S. Department of Health and Human Services in fiscal 2012, a 2.6 percent decrease from fiscal 2010. Obama’s fiscal 2011 budget proposal was never enacted, and the government is currently operating at 2010 spending levels.
HHS manages both Medicare and Medicaid, the state-run health program for the poor, as well as agencies including the U.S. Food and Drug Administration, National Institutes of Health, Centers for Disease Control & Prevention and welfare and child-support programs.
Obama proposes cutting spending for some agencies within HHS and increasing the budget in other areas.
The Centers for Medicare and Medicaid Services, which administers the entitlement programs and is implementing large parts of the health-care law, would have an 18 percent increase in its administrative budget compared with fiscal 2010, to $4.4 billion. Headcount at the agency would rise 22 percent compared with 2010, and include more than 900 new full-time employees.
Congressional Republicans have said they will try to block funding for implementation of the health law.
The Indian Health Service, FDA, NIH and the U.S. Administration on Aging would all also have budget increases compared with 2010.
The budget proposes cutting spending by 9 percent, compared with fiscal 2010, for the Health Resources and Services Administration and the CDC; by 7 percent for the Administration for Children and Families, and by 1 percent for the Substance Abuse and Mental Health Services Administration.
Obama’s budget would put off the cuts through the end of the 2013 calendar year at a cost of $54.4 billion. To pay for the fix, he proposes to cut health spending in other areas.
States would take the largest hit, as the budget proposes limiting taxes that state governments assess on health providers in order to boost their Medicaid payments from the federal government. The effect of the tax limit is to save the U.S. government $18 billion in Medicaid payments in a decade.
Drug Industry Hit
Obama proposes to raise money from the drug industry in several different ways.
Authorizing the Federal Trade Commission to bar brand-name drugmakers led by Pfizer Inc. from paying producers of generic medicines to delay their entrance into the market would reduce U.S. health spending by $8.8 billion during 10 years, according to the budget plan. U.S. Senators Herb Kohl, a Wisconsin Democrat, and Charles Grassley, an Iowa Republican, introduced legislation last month to limit such accords.
The proposal is “a misguided public health policy initiative that has repeatedly failed to receive congressional support,” the Generic Pharmaceutical Association in Washington, said in a statement.
Obama seeks to open debate on the first copies of biotech medicines, such as products by Amgen Inc. His budget proposes to allow generic competition to brand-name biologic drugs after seven years, which was the administration’s stance before lawmakers and drugmakers agreed to 12 years of exclusivity in last year’s health-care overhaul. The change is projected to save the government $2.3 billion in a decade.
Paul Hastings, president and chief executive officer of OncoMed Pharmaceuticals Inc., a closely held biotechnology company in Redwood City, California, said the shift was “extremely disappointing.
“If you want to incentivize investors to invest in biotech, particularly venture capitalists, they’re not going to do it with a seven-year window,” Hastings said.
The budget includes proposals to start charging drug companies for follow-up plant inspections after violations are found and for review of new generic drug applications. The programs would generate an estimated $729 million in 10 years.
The budget would raise $6.4 billion in the next decade by requiring suppliers of home medical equipment, such as walkers and hospital beds, to serve Medicaid patients at a lower reimbursement based on Medicare payment rates. Companies involved in the equipment business include Lincare Holdings Inc. and Invacare Corp.