Category: Federal Budget

From: CMS Media Relations – 12/2/15

In 2014, per-capita health care spending grew by 4.5 percent and overall health spending grew by 5.3 percent, a study by the Office of the Actuary at the Centers for Medicare & Medicaid Services (CMS) published today as a Web First by Health Affairs. Those rates are below most years prior to passage of the Affordable Care Act. In addition, consumer out-of-pocket spending grew by only 1.3 percent in 2014, as compared to 2.4 percent growth in 2013, reflecting the increased number of individuals with health coverage.

The report concludes that the increase in spending growth from 2013 was primarily driven by millions of new people with health insurance coverage a result of the Affordable Care Act and by rapidly rising prescription drug costs. Overall, spending on prescription drugs grew by 12.2 percent in 2014, compared to 2.4 percent growth in 2013, fueled largely by spending for new medicines, particularly for specialty drugs such as those used to treat hepatitis C. On a per-enrollee basis, overall spending increased by 3.2 percent in private health insurance and 2.4 percent for Medicare and decreased by 2.0 percent in Medicaid.

“Millions of uninsured Americans gained health care coverage in 2014,” said CMS Acting Administrator Andy Slavitt,” And still, the rate of growth remains below the level in most years prior to the coverage expansion, while out-of-pocket costs grew at the fifth lowest level on record.”

The Affordable Care Act allowed 8.7 million individuals to gain coverage in 2014 compared to 2013. As a result, the insured share of the population increased from 86.0 percent in 2013 to 88.8 percent in 2014, the highest share since 1987, according to the authors.

Overall, health care spending grew 1.2 percentage points faster than the overall economy in 2014, resulting in a 0.2 percentage-point increase in the health spending share of gross domestic product – from 17.3 percent to 17.5 percent. In the decade prior to the Affordable Care Act (2000-2009), health care spending grew by an average of 6.9 percent annually, 2.8 percentage points faster than GDP.

“Today’s report reminds us that we must remain vigilant in focusing on delivering better health care outcomes, which leads to smarter spending, particularly as costs increase in key care areas, like prescription drugs costs,” added Slavitt.

Additional highlights from the report:

• Total private health insurance expenditures (33 percent of total health care spending) reached $991.0 billion in 2014, and increased 4.4 percent, faster than the 1.6 percent growth in 2013 (the slowest rate since 1967). The faster rate of growth reflected the impacts of expanding coverage through Marketplace plans, health insurance premium tax credits, new industry fees, and changes to benefit designs. Per-enrollee spending increased by 3.2 percent in 2014. Average growth in per-enrollee spending was 7.4 percent from 2000-2009.
• Medicare spending, which represented 20 percent of national health spending in 2014, grew 5.5 percent to $618.7 billion, a faster increase than the 3.0 percent growth in 2013. The 2014 rate of growth was driven by increased spending growth for retail prescription drugs and in Medicare Advantage. Per-enrollee spending increased by 2.4 percent. Average growth in per-enrollee spending was 7.0 percent from 2000-2009.
• Medicaid spending accounted for 16 percent of total spending on health and grew 11.0 percent in 2014 to $495.8 billion, a faster increase than the 5.9 percent growth in 2013. Medicaid growth in 2014 was driven by coverage expansion under the Affordable Care Act, as 26 states plus the District of Columbia provided coverage for individuals with incomes of up to 138 percent of the federal poverty level. An estimated 6.3 million newly eligible enrollees were added to Medicaid in 2014. Per-enrollee spending decreased by 2.0 percent.
• Out-of-pocket spending (which includes direct consumer payments such as copayments, deductibles, and spending not covered by insurance, excluding premiums) grew 1.3 percent in 2014 to $329.8 billion, slower than annual growth of 2.1 percent in 2013. The slowdown in 2014 was influenced by the expansion of insurance coverage and the corresponding drop in the number of individuals without insurance.
• Retail prescription drug spending accelerated in 2014, growing 12.2 percent to $297.7 billion, compared to 2.4 percent growth in 2013. Rapid growth in 2014 was due to increased spending for new medicines (particularly for specialty drugs such as those used to treat hepatitis C), a smaller impact from patent expirations, and price increases for brand-name drugs. Private health insurance, Medicare, and Medicaid spending growth for prescription drugs all accelerated in 2014.
• In 2014, households and the federal government accounted for the largest shares of spending (28 percent each), followed by private businesses (20 percent), and state and local governments (17 percent). The federal government share increased from 26 percent in 2013 due mainly to Medicaid expansion (which was financed 100 percent by the federal government) and health insurance premium tax credits.

CMS Releases 2014 National Health Expenditures

From: Kaiser Health News – 7/24/15

Article Excerpt:

Medicare, the federal health insurance program for 55 million people ages 65 and over and people with permanent disabilities, helps to pay for hospital and physician visits, prescription drugs, and other acute and post-acute services.  In 2014, spending on Medicare accounted for 14% of the federal budget (Figure 1).  Medicare plays a major role in the health care system, accounting for 22% of total national health spending in 2013, 26% of spending on hospital care, and 22% of spending on physician services.¹  This fact sheet includes the most recent historical and projected Medicare spending data from the 2015 annual report of the Medicare Trustees² and the 2015 Medicare baseline from the Congressional Budget Office.³

Medicare benefit payments totaled $597 billion in 2014; roughly one-fourth was for hospital inpatient services, 12% for physician services, and 11% for the Part D drug benefit (Figure 2).  Another one-fourth of benefit spending was for Medicare Advantage private health plans covering all Part A and Part B benefits; in 2015, 31% of Medicare beneficiaries are enrolled in Medicare Advantage plans.⁴

Both in the aggregate and on a per capita basis, Medicare spending growth has slowed in recent years and is expected to grow relatively slowly in the future compared to historical trends.  Net Medicare spending is projected to grow modestly as a share of the federal budget and the nation’s economy in the coming decade.

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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.