AHA Calls Administration’s FY 2016 Budget Request ‘Bad Medicine’ for Nation’s Hospitals

From: AHA News – 2/5/15

President Obama’s call for deep funding cuts to hospital care “are bad medicine for our nation’s seniors and other vulnerable patients,” AHA President and CEO Rich Umbdenstock said in a Feb. 2 statement following release of the president’s fiscal year (FY) 2016 budget request.

The president’s $4 trillion budget request includes $431 billion in proposed reductions to Medicare, of which $350 billion would come from health care providers and $83.8 billion from structural reforms.

Specifically, the budget proposal would reduce payments to providers by $29.5 billion by implementing site-neutral policies; cut bad debt payments to providers, including hospitals, by $31.1 billion; reduce Medicare graduate medical education (GME) payments by $16.3 billion; reduce critical access hospital (CAH) payments from 101% to 100% of reasonable costs for a savings of $1.73 billion; and eliminate the CAH designation for hospitals located fewer than 10 miles from the nearest hospital for savings of $770 million.

It also proposes to reduce the payment updates for post-acute care providers for savings of $102.1 billion and make other post-acute program changes. The proposed cuts are over 10 years. The budget request would increase Medicaid funding overall by $7.7 billion over 10 years, but cut the program in certain areas.

In his statement, the AHA’s Umbdenstock faulted the administration for proposing further cuts to hospital care as the field is carrying out “enormous changes that continue to improve the quality of patient care.” He called the proposed cuts “short-sighted at a time when our nation’s health care infrastructure needs to be strengthened.”  

On a more positive note, the AHA was pleased with the administration’s willingness to pursue structural reforms that could strengthen Medicare’s financial viability, and its call to replace the remaining Medicare sequestration cuts that were imposed under the 2011 Budget Control Act. Under sequestration, Medicare rates are reduced by 2% through 2021.

The budget assumes reforms to the Medicare sustainable growth rate for physician payments would be enacted, but it does not identify a funding source.

Among other Medicare measures, the president’s FY 2016 budget proposes to:

• boost efforts to eliminate waste, fraud and abuse for savings of $1.8 billion;

• raise the “60% Rule” threshold for inpatient rehabilitation facilities back to 75 percent for savings of $2.2 billion;

• implement bundled post-acute care payments for savings of $9.3 billion;

• eliminate the 190-day lifetime limit on inpatient psychiatric care, which costs the federal government $5 billion;

• strengthen the Medicare Independent Payment Advisory Board for savings of $20.9 billion;

• make changes to beneficiary premiums, deductibles and co-pays for savings of $83.8 billion;

• introduce home health co-payments for new beneficiaries for a savings of $830 million; and

• encourage the use of generic drugs by low-income beneficiaries for a savings of $8.9 billion.

Medicaid and CHIP. The president’s plan would reduce Medicaid disproportionate share hospital payments in FY 2025 for savings of $3.29 billion. The budget also would provide $11.9 billion to extend the Children’s Health Insurance Program through 2019, and extend Medicare rates for primary care physicians under Medicaid, but do so in a budget-neutral manner.

Discretionary funding. The president’s budget seeks $83.8 billion in discretionary funding for the Department of Health and Human Services. The Children’s Hospitals GME program would be funded at $100 million, which is $150 million less than the program received in 2015.

In addition, the budget proposes $128 million for rural health programs, including $59 million for rural health outreach grants, $26 million for rural hospital flexibility grants and $15 million for telehealth. Other provisions include $255 million for the Hospital Preparedness Program, the same amount as FY 2015; $2.3 billion for the Ryan White HIV/AIDS Program; $637 million for maternal and child health block grants; and $232 million for nursing workforce development.

Discretionary spending is subject to annual approval by Congress. Legislators have less control over mandatory spending, which is devoted to entitlement programs.

The president’s budget request is the first step in the annual budget process. Based on the president’s proposal, the House and Senate budget committees propose budget resolutions that set targets for spending and tax revenue and identify any policies that will need to move through reconciliation. These are sent to the floor for a vote, and differences are resolved in conference. The House and Senate appropriations committees divide the discretionary spending that is contained in the budget resolution among each of their 12 subcommittees.

For more on the president’s budget, click here.


Toyon Associates Healthcare Finance


Receive a no obligation consultation on how Toyon can help make your cost reporting simpler, easier, and trusted.