President Bush Submits FY 2006 Federal Budget Proposal With 1.2% Decrease in HHS Discretionary Funds

CAL/AAEM News Service calaaem_news at yahoo.com
Mon Feb 28 23:46:39 PST 2005


President Bush Submits FY 2006 Federal Budget Proposal With 1.2% Decrease in
HHS Discretionary Funds

Source: California Healthline
(http://www.californiahealthline.org/index.cfm?Action=dspItem&itemID=108993&classcd=CL351)
Date: February 8, 2005

 
President Bush on Monday sent to Congress his fiscal year 2006 federal budget
proposal, which includes a 1.2% decrease in discretionary funds for HHS -- with
"big cuts" for CDC and other agencies, a 17% increase in funds for Medicare and
a plan to save $60 billion over 10 years in Medicaid funds through the removal
of state reimbursement "loopholes" and tighter eligibility requirements, the
Wall Street Journal reports (Lueck, Wall Street Journal, 2/8). The budget
proposal would eliminate 150 domestic programs to save the federal government
$20 billion annually (Dodge, Dallas Morning News, 2/7).

HHS would receive a total of $642 billion under the budget proposal (Nesmith,
Atlanta Journal-Constitution, 2/8). According to the AP/Las Vegas Sun, the
budget proposal places HHS "squarely in the bull's-eye" and indicates "modest
new spending at best on health insurance programs and encouraging states to
find $45 billion in savings for Medicaid over a decade."

The budget proposal includes no significant increase in funds for Medicare and
Medicaid in addition to the amount required by federal law (Kellman, AP/Las
Vegas Sun, 2/7). The Bush administration said that the budget proposal would
eliminate "underperforming programs" at HHS, such as training programs for
health care professionals and block grants administered by the Health Resources
and Services Administration (Schuler [1], CQ Today, 2/7).

However, several agencies "in the political crosshairs," such as FDA, were
"spared" in the budget proposal, according to the Journal (Wilde Mathews et
al., Wall Street Journal, 2/8). Congressional debate on the "leanest budget
proposal of Bush's presidency" will begin on Tuesday, when Office of Management
and Budget Director Joshua Bolten will testify before the House Budget
Committee (Taylor/Schatz, CQ Today, 2/7).


Medicare
The budget proposal would provide an estimated $340 billion for Medicare in FY
2006, about $50 billion more than in FY 2005. According to CQ HealthBeat, the
increase in part would result from the new Medicare prescription drug benefit
scheduled to begin on Jan. 1, 2006.

The budget proposal also includes a $10 billion decrease in Medicare
reimbursements to skilled nursing facilities, a $4.6 billion decrease in
reimbursements to inpatient acute care facilities and an $860 million decrease
in reimbursements to inpatient rehabilitation facilities. Under the budget
proposal, the decreases in Medicare reimbursements would occur over a five-year
period.

The budget proposal does not include recommendations for reforms to the formula
for Medicare reimbursements to providers (CQ HealthBeat, 2/7).


Medicaid
The Bush administration also announced plans to work with governors to "chart
far more sweeping changes" in Medicaid than those included in the budget
proposal, which "gave a glimpse of how the administration wants to reshape
Medicaid," the Journal reports (Lueck, Wall Street Journal, 2/8). The budgets
for Medicaid and SCHIP under federal law will increase by 2.2% to about $198
billion for FY 2006 (AP/Las Vegas Sun, 2/7).

HHS Secretary Mike Leavitt last Tuesday said that the federal government could
save $60 billion in Medicaid funds over the next 10 years through the closure
of "loopholes" that allow middle-class seniors to receive benefits, the ban of
"accounting gimmicks" used by states to receive more federal matching funds and
the reduction of spending on prescription drugs.

Leavitt said that the administration will not limit federal expenditures for
mandatory Medicaid beneficiaries. However, he did not directly address whether
the administration would consider a limit on federal expenditures for optional
Medicaid beneficiaries and services, which account for about two-thirds of
Medicaid costs (California Healthline [1], 2/7).

The Medicaid proposal, which is the "centerpiece" of efforts by the
administration to address increased health care costs, would return about $15
billion of the $60 billion saved to the Medicaid and SCHIP programs for
expanded coverage, CQ Today reports. The budget proposal also includes
recommendations for long-term Medicaid reforms to establish a "more sustainable
cost structure."

Although the budget proposal includes few details, administration officials
said that they hope to "build on the success" of SCHIP, which could indicate
that the administration plans to implement a block grant system for Medicaid,
CQ Today reports (Schuler [1], CQ Today, 2/7). According to the Journal, the
budget proposal indicates that the administration might seek to provide states
with more flexibility in Medicaid and "signals the administration may want to
cap funding for certain categories of recipients" (Lueck, Wall Street Journal,
2/8).


Tax Credit Plan
The budget proposal also includes a plan to help decrease the number of
uninsured U.S. residents through tax credits (Kellman, AP/Las Vegas Sun, 2/8).

The plan seeks $142 billion over 10 years to help 12 million to 14 million
uninsured residents purchase health insurance. The plan calls for $74 billion
in tax credits to help some residents without employer-sponsored or
government-funded health insurance pay for high-deductible health coverage and
contribute to health savings accounts or obtain traditional health insurance
plans (California Healthline [2], 2/7).

The plan would provide as much as $3,000 in tax credits to help low-income
individuals and families purchase health insurance (Kellerman, AP/Las Vegas
Sun, 2/7).


VA
The budget proposal would require about two million higher-income veterans
without service-related conditions to pay a $250 annual fee, as well as an $8
increase in copayments for prescription drugs, for FY 2006 (Dodge, Dallas
Morning News, 2/8). Under the budget proposal, total funds for the Department
of Veterans Affairs would increase to $68.2 billion, or by 1%.

The budget proposal would eliminate federal funds for a program that provides
long-term care for veterans and reduce funds for VA nursing home care by $351
million, which could lead to the elimination of about 5,000 nursing home beds
administered by the department. VA officials said that the budget proposal
would increase funds for long-term "noninstitutional" care by 18% to help shift
more veterans from nursing home to in-home care but would not force veterans
from nursing homes.

According to CQ Today, the proposals for VA health care programs, which account
for most of the discretionary budget of the department, likely would cause "the
biggest debate" among lawmakers because they would "require some veterans to
pay substantially more for their health care" (Plummer, CQ Today, 2/7).


FDA
The budget proposal includes an increase in funds for FDA by 4.4% to $1.88
billion for FY 2006, with the additional funds used in part to finance more
medical device reviews (Wilde Mathews et al., Wall Street Journal, 2/8).

The budget proposal also "attempts to answer concerns about the safety of
prescription drugs," according to CQ Today. Under the budget proposal, the FDA
Office of Drug Safety, which monitors medications approved by the agency after
they reach the market, would receive $33 million, a 24% increase from FY 2005
(Schuler [1], CQ Today, 2/7). However, the Journal reports, despite the
proposed budget increase, "the office's funding remains a small share of the
$556 million devoted to all drug oversight."

According to the Journal, the budget proposal provides "an early look" at Bush
administration plans for a "new drug-safety effort." The budget proposal calls
for the FDA Office of Drug Safety to increase staff by 25, to 134 employees,
and use the new workers to establish new policies on safety reviews and
increase communications within the agency, as well as among other agencies.
According to the Journal, "It isn't clear if the new drug-safety efforts,"
which the administration will formally release in the next several weeks, "will
satisfy lawmakers focused on the FDA."

The budget proposal also includes a $30 million increase in funds for FDA
efforts to develop prevention and mitigation strategies in the event of
contamination in the U.S. food supply (Wilde Mathews et al., Wall Street
Journal, 2/8). Total funds for biodefense efforts would increase by 3.6% to
$1.6 billion under the budget proposal (Schuler [1], CQ Today, 2/7).


Research and Development
The budget proposal includes a total of $132.5 billion for research and
development for FY 2006, an increase of less than 1% from 2005. The budget
proposal also includes a 1% reduction in funds for basic research, no change in
funds for applied research and a 2% increase in funds for "development."

Under the budget proposal, NIH would receive $28.8 billion, or a 0.7% increase
from FY 2005. Although funds for the 27 NIH centers would remain the same under
the budget proposal, funds for biodefense would increase by 3.7% to about $1.8
billion, and the National Cancer Institute budget would remain at about $4.8
billion. The National Science Foundation budget would increase by about 2.4% to
$5.6 billion under the budget proposal (Wysocki, Wall Street Journal, 2/8).


CDC, Other Reductions
The budget proposal would reduce funds for CDC by 12% to about $4 billion for
FY 2006 and decrease funds for mental health and substance abuse treatment
programs by 1.6% (Kellman, AP/Las Vegas Sun, 2/7). The proposed $555 million
reduction in the CDC discretionary budget "would be driven largely by what
officials called a 'pause' in new construction in Atlanta and cuts in
preventive health programs," the Atlanta Journal-Constitution reports.

The budget proposal includes a $60 million reduction in funds for CDC
management and a $59 million decrease in funds for prevention of chronic
diseases. The budget proposal also would reduce funds for state and local
government bioterrorism preparedness efforts by $130 million. CDC Chief
Operating Officer William Gimson said that the agency would construct portable
hospital units that could help in early responses to bioterrorist attacks
(Atlanta Journal-Constitution, 2/8).

In addition to CDC programs, the budget proposal would eliminate:
The Department of Education Safe and Drug Free Schools state grants, which
accounted for $437 million in FY 2005;


The HHS Emergency Medical Services for Children, which accounted for $20
million in FY 2005; and


The Homeland Security Department Metropolitan Medical Response System, which
accounted for $30 million in 2005 (CQ Today, 2/8).



Bush Administration Reaction
Leavitt said, "The president has proposed a fiscally responsible budget that
sets priorities and holds government programs accountable for real results. If
we had an unlimited budget, we would spend more on many programs" (Atlanta
Journal-Constitution¸ 2/8).

CMS Administrator Mark McClellan praised the Bush administration Medicaid
proposal, adding, "We can get more coverage and more assistance for the dollars
we're spending and also relieve the burden on the states. ... This is not about
saving money" (Lueck, Wall Street Journal, 2/8).

Bolten said, "The Medicaid proposals do involve asking states to shoulder a
more appropriate share of the burden" (Weisman, Washington Post, 2/8). Rita
Reed, VA deputy assistant secretary for budget, said that proposed reductions
to the department budget "were carefully thought out and part of an integrated
plan, as opposed to simply reacting to resources available" (Plummer, CQ Today,
2/7).


Lawmaker Reaction
Republicans and Democrats on Monday "challenged cuts that would hit Medicaid"
and other health care programs and raised concerns about whether the Bush
administration could significantly reduce the federal budget deficit over the
next five years, the Dallas Morning News reports (Jackson, Dallas Morning News,
2/7). Lawmakers expressed "considerable skepticism" about the proposed budget
reductions and said that "Congress was unlikely to accept many of the cuts,"
according to Pittsburgh Post-Gazette (Reston, Pittsburgh Post-Gazette, 2/8).

According to CQ Today, the budget proposal "triggered discussion Monday" among
lawmakers about the use of "some automatic mechanism to slow the rapid growth
in mandatory spending" for programs such as Medicare and Medicaid "while
minimizing political fallout" (Ota, CQ Today, 2/7). According to the New York
Times, lawmakers expect "a bitter fight" over the proposed reductions in funds
for Medicaid.

Sen. Judd Gregg (R-N.H.) said, "Obviously, this is a budget which is going to
create some significant angst amongst my colleagues, to be kind. But the fact
is that everyone is probably going to be upset by it, because everybody's ox
gets gored, including defense" (Hulse, New York Times, 2/8).

Rep. Jeff Flake (R-Ariz.) said, "I am optimistic that the Congress is going to
take [Bush] seriously, and because that is the case, I think he'll fare all
right. But it still depends on the president. We've proven we can't control
spending, and he's going to have to exert pressure" (Dinan/Lambro, Washington
Times, 2/8).

CQ Today reports that moderate Republicans "are lining up to oppose cuts in
Medicaid." Sen. Lincoln Chafee (R-R.I.) said, "Instead of some of these
spending cuts, I think we should put all the tax cuts on the table" (Ota, CQ
Today, 2/7).


Additional Reaction
House Minority Leader Nancy Pelosi (D-Calif.) called the budget proposal "a
hoax on the American people."

Sen. Dianne Feinstein (D-Calif.) said, "With the extraordinary costs of the war
in Iraq and Afghanistan and making his tax cuts permanent, the only way
President Bush can even provide an appearance of bringing the budget into
balance is to make substantial and dramatic cuts in domestic spending."

However, House Speaker Dennis Hastert (R-Ill.) said that the budget proposal is
"a good starting point" and indicates that "there are tough fiscal challenges
ahead" (New York Times, 2/8).

Sen. Daniel Akaka (D-Hawaii), ranking member of the Senate Veterans' Affairs
Committee, said of the proposals for VA health care programs, "Payroll and
inflation increases for doctors, nurses and medications cost more than $1
billion, but the president has proposed to give VA only half of what it
needed." Akaka added, "So far, 192,260 veterans have been turned away across
the country, including 502 in my home state of Hawaii. This sends the wrong
message to our troops overseas. They need to know that we are there for them
when they return home" (Plummer, CQ Today, 2/8).


Other Reaction
The National Governors Association said in a statement, "Governor's have little
control over these two cost drivers and do not want to be in the position of
having to choose between funding health care programs for grandparents or
programs for their grandchildren" (Lueck, Wall Street Journal, 2/8). NGA said
that Congress must "save both the states and federal government money, as
opposed to shifting costs to the states through budget cuts, caps or other
mechanisms."

The Association of American Universities said that the proposed increases in
funds for NIH "are so modest that the agencies would support less research next
year than they do under the current budget" (Kellman, AP/Las Vegas Sun, 2/7).

Daniel Smith, national vice president for federal and state government
relations at the American Cancer Society, criticized proposed reductions in
funds for CDC, adding, "Cancer doesn't understand budget deficits, and the
research that is currently outpacing this disease has no layaway policy"
(Atlanta Journal-Constitution, 2/8).

Robert Greenstein, executive director of the Center on Budget and Policy
Priorities, said, "If the question is how do low-income families fare under
this budget, the answer is that they ultimately fare very poorly" (Dodge,
Dallas Morning News, 2/7).


Broadcast Coverage
NPR's "Morning Edition" on Tuesday reported on the Medicaid proposal and the
funds included for health care programs in the budget proposal for FY 2006. The
segment includes comments from George Hardy, executive director of the
Association of State and Territorial Health Officials; Dan Hawkins, vice
president for federal, state and public affairs at the National Association of
Community Health Centers; Leavitt; and Rep. John Spratt Jr. (D-S.C.) (Rovner,
"Morning Edition," NPR, 2/8). The complete segment is available online in
RealPlayer at
http://www.npr.org/dmg/dmg.php?prgCode=ME&showDate=08-Feb-2005&segNum=2&mediaPref=RM. 


=====
Cyrus Shahpar & Brian Potts 
Managing Editors, CAL/AAEM News Service 
UC-Irvine


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