Washington Highlights: February
8, 2008
Bush Releases FY 2009 Budget
Contents
Prior Issues
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President Bush released his FY 2009 budget Feb. 4. The $3.1 trillion
spending plan, which includes a projected deficit of $407 billion
for the coming year, proposes to increase discretionary spending
(i.e., programs that receive funding through annual appropriations)
by $46.2 billion (4.9 percent). But, as in the past several years,
the Administration would direct almost all of this increase toward
"security funding," proposing $594.5 billion for defense,
homeland security, and international affairs, an increase of $44.9
billion (8.2 percent). All other discretionary programs would receive
$393 billion, an increase of $1.3 billion (0.3 percent).
While overall domestic discretionary spending is essentially frozen
at last year's levels, there are winners and losers in the President's
budget plan. The
Department of Health and Human Services (HHS) would be cut by
$1.5 billion (2.1 percent) to $70.4 billion while the Department
of Veterans Affairs is slated for a $5.3 billion (13.5 percent)
increase.
The following is list of the President's proposals for discretionary
programs of interest to medical schools and teaching hospitals.
National Institutes of Health: The President's budget requests
$29.230 billion in discretionary budget authority for the National
Institutes of Health through the Labor-HHS-Education Appropriations,
which is equal to the FY 2008 appropriation. The budget also assumes
$78 million though the Interior Appropriations Subcommittee for
the transfer from the Superfund to the National Institute for Environmental
Health Sciences (NIEHS), $150 million in mandatory appropriations
for type I diabetes, and $8 million in evaluation funds for the
National Library of Medicine (NLM), for a program level of $29.465
billion, the same as in FY 2008.
In addition, the budget proposes to transfer $300 million from
NIH to the Global Fund for HIV/AIDS, Tuberculosis and Malaria. This
is an increase of $5 million over the FY 2008 transfer.
According to the agency's Congressional Justification, the President's
budget would support 9,757 new and competing renewal research project
grants (RPGs), a decrease of 14 from FY 2008, and a total of 36,526
RPGs, an increase of 17 over last year. The budget proposes again
to eliminate inflationary increases for RPGs. While the budget assumes
no inflationary increases are provided for direct, recurring costs
in non-competing RPG's, increases will be provided where NIH has
committed to a programmatic increase in an award. The average cost
of competing RPGs will remain at the FY 2008 level.
The President's budget proposes to increase support for research
centers to $2,963 million, a 0.7 percent increase above the FY 2008
level, to provide program growth for the Clinical and Translational
Science Awards (CTSAs).
For training, the budget proposes modest stipend increases of 1
percent for both pre- and post-doctoral fellows. Pre-doctoral fellows,
who currently receive $20,772, have not seen a stipend increase
since FY 2004. Post-doctoral fellows, who begin at $36,996, have
not seen a stipend increase since FY 2006 (for 0 to 1 year of experience
only). The budget would support 17,586 Full-Time Training Positions
(FTTPs), an increase of 17 FTTPs over the FY 2008 level.
The budget once again proposes to reduce the cap on salaries on
extramural grants to Executive Level II ($172,200 in 2008). Extramural
salaries are currently capped at Executive Level I ($191,300 in
2008).
Health Professions: The President's budget eliminates funding
for all Health
Resources and Services Administration Title VII health professions
programs ($194 million). For Title VIII nursing education programs,
the President proposes $110 million, a $46 million (30 percent)
cut.
Health Professions Student Loans: The President's budget
request proposes a rescission of the "Federal portion of all
the liquid assets" of the Health Professions Student Loan (HPSL),
Primary Care Loan (PCL), Loans for Disadvantaged Students (LDS),
and Nursing Student Loan (NSL). This rescission would require participating
institutions to return the Federal capital contribution of revolving
funds that have not yet been dedicated to students. The Federal
capital contribution amounts to roughly 8/9ths of the institution's
cash-on-hand, or as much as $4 million from participating institutions.
The Administration estimates this proposal will recall over $100
million from the student loan programs. The President proposed this
rescission in FY 2008, but the FY 2008 omnibus appropriations included
a smaller, $15 million-rescission from the Title VII loan programs.
National Health Service Corps: The President's budget request
includes a total of $121 million for the National Health Service
Corps (NHSC), a $3 million (2.4 percent) decrease from the FY 2008
omnibus appropriations. The NHSC Recruitment allocation, which provides
funding for the NHSC Scholarship and Loan Repayment Program awards,
would be increased $11 million (13.1 percent) to $95 million. The
budget proposes to decrease the NHSC Field allocation, which provides
funding for recruitment and retention administrative functions,
by $14 million (35 percent) to $26 million.
Children's Graduate Medical Education: The President's budget
eliminates funding for the Children's Graduate Medical Education,
which was funded at $302 million in FY 2008.
Agency for Healthcare Research and Quality: The President's
budget requests $325.7 million for the Agency for Healthcare Research
and Quality (AHRQ), an $8.9 million (2.7 percent) reduction. This
request includes $30 million for comparative effectiveness research,
as provided in FY 2008, and $32.1 million for patient safety research,
a $2.1 million (6.1 percent) cut. As provided in FY 2008, the President
requests $44.8 million for health information technology.
Veterans Affairs (VA) Medical Care and Research: The President's
budget includes $38.737 billion for Department
of Veterans Affairs medical care, a $2 billion (5.5 percent)
increase over the FY 2008 level. The President's budget incorporates
funds previously allocated under Medical Administration into the
Medical Services account. Within the VA medical care allotment,
the budget allocates $34.076 billion for Medical Services, a $1.5
million (4.5 percent) increase over FY 2008 comparable level; and
$4.661 billion for Medical Facilities, a $561 million (13.7 percent)
increase over FY 2008.
The budget recommends $442 million for VA Medical and Prosthetics
Research, a $38 million (7.9 percent) decrease from FY 2008.
National Science Foundation: The Administration's FY 2009
budget includes $6.3 billion for the National
Science Foundation (NSF), an increase of $202 million (3.3 percent)
over FY 2008. The Administration boosts Research and Related Activities
to $5.6 billion, a $840 million (17.7 percent) increase.
Education: The President's budget for the Department
of Education eliminates the Perkins loan forgiveness program
for a total savings of $65 million. The budget also eliminates $1.1
billion in new Perkins federal capital contributions.
The President's budget also proposes legislative changes to programs
created under the College Cost Reduction and Access Act. In particular,
the budget would limit eligibility for the Public Service Loan Forgiveness
program to loans disbursed after July 1, 2009, instead of the statatory
July 1, 2007, for a total savings of $1.464 billion. Additionally,
the budget would eliminate a provision of the new Income-Based Repayment
(IBR) program that requires the Secretary to pay interest that accrues
on subsidized loans for the first 3 years of participation in IBR.
The budget estimates this change would save approximately $457 million.
Information:
Dave Moore, Senior Director
AAMC Government Relations
dbmoore@aamc.org
(202) 828-0525
Tannaz Rasouli, Senior Legislative Analyst
AAMC Government Relations
trasouli@aamc.org
(202) 828-0525
Matthew Shick, Senior Legislative Analyst
AAMC Government Relations
mshick@aamc.org
(202) 862-6116
President's Medicare Proposal Cuts IME and Other
Hospital Payments
The Administration's Fiscal Year (FY) 2009 budget seeks to slow
Medicare's annual growth rate over 5 years (2009 - 2013) from 7.2
percent to 5.0 percent. It proposes to accomplish this by cutting
$182.7 billion in Medicare funding over the same period. The cuts
include a reduction (over 3 years) of indirect medical education
(IME) add-on payments from 5.5 percent to 2.2 percent, for a savings
of $12.9 billion over 5 years. The budget materials state that such
action "rationalizes Medicare payment policies," and will
"better align" the IME payment "with costs per case
teaching hospitals may face." Similarly, the President's budget
ends duplicate IME payments currently made under the Medicare Advantage
program by eliminating the direct payments to hospitals (a savings
of $8.85 billion over 5 years).
In a Feb. 4 statement
following the budget's release, AAMC President Darrell Kirch, M.D.,
called upon Congress to "immediately reject these short-sighted
recommendations," which threaten the ability of teaching hospitals
"to provide the full spectrum of patient care and treatment."
He also warned that the cuts would "impede the progress"
that teaching hospitals have made "in advancing the health
of all Americans through education and medical research."
Other proposed cuts directly affecting teaching hospitals include:
- A zero percent update for inpatient and outpatient services
in FYs 2009 - 2011, followed by a 0.65 percent market basket
reduction annually thereafter (estimated to saves $64.2 billion
and $6.05 billion, respectively, over 5 years);
- A 30 percent reduction in Medicare disproportionate share
hospital (DSH) payments over 2 years (saves $20.69 billion over
5 years);
- The elimination of bad debt reimbursement for all providers
over 4 years (saves $8.46 billion over 5 years);
- A 5 percent reduction in hospital capital payments in FY 2009
(saves $3.05 billion over 5 years);
- The elimination of payments for "never events" (saves
$190 million over 5 years); and
- Establishment of a hospital value-based purchasing program
(no details available; saves $1.65 billion over 5 years).
The President's budget proposal also reduces updates for long-term
care hospitals, inpatient rehabilitation hospitals, skilled nursing
facilities, hospices, home health agencies, ambulatory surgery centers,
and ambulance services. The Administration's Medicare proposals
do not address the reduction in physician payments scheduled for
July 1.
In a Feb. 4 statement
on the budget, Sen. Finance Committee Chair Max Baucus (D-Mont.)
said that the Medicare cuts were "dead on arrival with me and
with most of the Congress." House Ways and Means Committee
Chair Charles Rangel (D-N.Y.) issued a Feb. 4 press
release stating that the President's proposed Medicare cuts
"would threaten coverage for millions, force the closure of
hospitals, and discourage other healthcare providers from serving
seniors or elderly patients." House Energy and Commerce Committee
Chair John Dingell (D-Mich.) criticized
the budget proposal for including "crippling cuts to the agencies
charged with protecting the health and well-being of our nation."
Information:
Christiane Mitchell, Director, Federal Affairs
AAMC Government Relations
cmitchell@aamc.org
(202) 828-0526
President's Budget Addresses "Medicare Funding
Warning"
As mandated by the "Medicare Modernization Act" (MMA),
President Bush's Fiscal Year FY 2009 budget includes a proposal
to prevent general-fund revenues from exceeding 45 percent of all
Medicare expenditures. Under the MMA, the Medicare Trustees must
issue a "Medicare Funding Warning" if they project that
general-fund revenues will exceed the 45 percent threshold within
the next 6 years. If the Trustees issue two consecutive warnings,
as they did in 2006 and 2007, the President must, in the following
year, include in his next budget (FY 2009) a proposal to prevent
general revenues from exceeding the threshold.
In his FY 2009 budget, President Bush partly addresses the consecutive
Medicare Funding Warnings by cutting $182.7 billion in Medicare
funding (see related article). Additionally, his budget proposes
a 0.4 percent cut to all provider payments once general fund contributions
to Medicare exceed 45 percent of program expenditures. According
to budget
materials from the Office of Management and Budget (OMB), provider
payments would "continue to be reduced by an additional [0.4
percent]" annually until general-fund revenues accounted for
less than 45 percent of Medicare expenditures. The OMB materials
state that the proposal "is intended to encourage the Congress
and the Administration to reach agreement on reforms needed to slow
the growth in program costs."
Congress must consider the President's plan and may also take up
their own legislative alternatives. Ultimately, they are not required
to pass any legislation related to the Medicare Funding Warning.
Information:
Christiane Mitchell, Director, Federal Affairs
AAMC Government Relations
cmitchell@aamc.org
(202) 828-0526
President's Budget Cuts Medicaid, Reauthorizes
SCHIP
The President's FY 2009 budget seeks to slow the growth of Medicaid
expenditures from 7.4 percent to 7.1 percent over 5 years. The budget's
legislative proposals would cut Medicaid funding by $17.4 billion
over 5 years, while its administrative proposals would cut $800
million over the same period. The Administration's wide-ranging
Medicaid proposals address long-term care, prescription drug benefits,
and other aspects of the program, including several of potential
interest to AAMC members:
- Greater state flexibility regarding the enrollment of special
populations in managed care programs (estimated to save $2.1
billion over 5 years);
- Implementation of performance-based payments of Federal Medicaid
grant awards (saves $310 million over 5 years);
- A mandated "National Correct Coding Initiative"
to prevent improper billing by providers (saves $105 million
over 5 years);
- A regulation to "remove ambiguity" about which additional
services may be funded by cost savings associated with Medicaid
managed care plans (saves $800 million over 5 years); and
- A regulation to codify the Medicaid "free care"
policy prohibiting providers from billing for services that
are offered to the public and other payers at no cost (no savings
identified).
Additionally, the FY 2009 budget includes several proposals affecting
the State Children's Health Insurance Program (SCHIP):
- Reauthorizes SCHIP through FY 2013 (at a cost of $19.7 billion
over 5 years);
- Limits coverage to children at or below 200 percent of the
Federal poverty level, which was, according to the budget materials,
what the program "originally intended";
- Establishes outreach grants to support enrollment initiatives
(a cost of $50 million in FY 2009 and $100 million in each of
FYs 2010 - 2014; and
- Clarifies what counts as "income" when determining
enrollment eligibility
According to the budget materials, the SCHIP proposal would cover
5.6 million low-income children by FY 2013 and nearly nine million
at some time during the year.
In a Feb. 4 response
to the budget proposal, House Energy and Commerce Committee Chair
John Dingell (D-Mich.) stated that it "fails to provide sufficient
funding to maintain SCHIP at current coverage levels and does nothing
to reduce the number of uninsured children."
Information:
Christiane Mitchell, Director, Federal Affairs
AAMC Government Relations
cmitchell@aamc.org
(202) 828-0526
FY 2009 Budget Proposal Outlines Healthcare Reforms
The President's FY 2009 budget outlines various reforms that "are
designed to give all Americans access to affordable health care
and to address the cost pressures healthcare places on the economy
and the Federal budget." He proposes elimination of the tax
exclusion for employor-sponsored insurance and the implementation
of a standard health insurance tax deduction ($7,500 for individuals
and $15,000 for families). The President also proposes a restructuring
of the health insurance market by: promoting collective purchasing
of lower-priced coverage through "association health plans";
allowing a multi-state insurance market; and reforming medical liability
law.
The FY 2009 budget assumes a $75 million dollar increase in both
2009 and 2010 funding for state high-risk pools. It also re-proposes
the redirection of certain "subsidies and payments" (presumably
Medicare and Medicaid disproportionate share hospital payments)
to support state-based coverage initiatives. According to materials
from the Office of Management and Budget (OMB), "a portion"
of the "separate payments that subsidize a provider's operating
expenses or...uncompensated care" should be "redirected
to help people with poor health or limited income afford health
insurance."
Information:
Christiane Mitchell, Director, Federal Affairs
AAMC Government Relations
cmitchell@aamc.org
(202) 828-0526
AAMC, Health Professions Groups Hold Title VII
Capitol Hill Day
More than two dozen health professions leaders representing the
range of disciplines supported by the Title VII and VIII programs
Feb. 7 participated in a congressional advocacy day, organized by
the Health Professions
and Nursing Education Coalition (HPNEC). The day centered around
a congressional "open house," in which participants designed
exhibits to help clarify the programs' missions for congressional
staff. Participants also visited congressional offices to urge full
funding for the health professions training programs, which were
cut by 51 percent in FY 2006.
A lunch briefing for participants and Congressional staff featured
a presentation by former U.S. Surgeon General David Satcher, M.D.,
Ph.D., currently at Morehouse School of Medicine. Dr. Satcher emphasized,
"If it weren't for Title VII, if it weren't for Title VIII,
we would not have had providers for existing community health centers,
let alone for their expansion." He continued, "When you
cut programs like Title VII ... you are moving the country closer
and closer to inequity, and chipping away at the commitment to eliminated
health disparities."
Other panelists included: Denise V. Rodgers, M.D., Executive Vice
President, Academic and Clinical Affairs, The University of Medicine
and Dentistry of New Jersey (UMDNJ); Mary H. Hill, DSN, R.N., Associate
Dean, Division of Nursing, Howard University College of Pharmacy,
Nursing, and Allied Health Sciences; and Thomas Cavalieri, D.O.,
Interim Dean, UMDNJ School of Osteopathic Medicine.
The AAMC coordinates HPNEC, which is an alliance of more than 70
national organizations representing providers, institutions, and
community partnerships dedicated to educating the nation's health
personnel.
Information:
Tannaz Rasouli, Senior Legislative Analyst
AAMC Government Relations
trasouli@aamc.org
(202) 828-0525
Abigail Schopick, Legislative Analyst
AAMC Government Relations
aschopick@aamc.org
(202) 828-0525
House Passes HEA Reauthorization
The House of Representatives Feb. 7 passed (354-58)
"College Opportunity and Affordability Act of 2007" (H.R.
4137) to reauthorize the Higher Education Act (HEA) through
2012. H.R. 4137 contains several changes, new programs, and studies
of importance to medical education.
In the area of student financial aid and loan forgiveness, the
House bill provides:
- An increase the annual Perkins loan limit for graduate/professional
students from $6,000 to $8,000 and a corresponding increase
in the aggregate Perkins loan limit for graduate/professional
students from $40,000 to $60,000;
- A new $10,000 loan forgiveness program for "medical
specialists" who have been accepted to, or currently participate
in, an ACGME-accredited graduate medical education training
program or fellowship that requires more than 5 years of total
graduate medical training and has fewer U.S. medical school
graduate applicants than the total number of positions available
under these programs;
- A 6-month grace period for repayment of GradPLUS loans;
- Direction for the Department of Education to work with the
Department of the Treasury to enhance the financial literacy
of students at institutions of higher education through the
development of initiatives, programs, and curricula;
- A requirement that institutions to certify private educational
loans and to provide information on available federal alternatives;
and
The "student loan sunshine" language that addresses
financial aid administrator-lender relationships [see
Washington Highlights, Nov. 17, 2007].
The House bill also includes a Government Accountability Office
study on education related indebtedness of medical school graduates
that was offered by Rep. Tom Price (R-Ga.) and Rep. Charles Boustany
(R-La.) during the House Education and Labor Committee mark up.
H.R. 4137 authorizes new education funding and grant programs,
including:
- Expanded eligibility for Graduate Assistance in Areas of National
Need (GAANN) institutional grants that would require the Secretary
of Education to consider "an assessment of current and
future professional workforce needs of the United States,"
which is expected to allow medical and nursing education to
now qualify;
- A requirement that States provide financial support for public
institutions of higher education at a level equal or greater
than either the State's average contribution during the 5 most
recent preceding academic years, or the amount provided in the
previous academic year; and
- New grants to medical and nursing schools to "assist
in providing courses for instruction that specifically equip
students to understand the causes and remedies for medical error,
medically-induced patient injuries and complications, and other
defects in medical care; engage effectively in personal and
systemic efforts to continually reduce medical harm; and improve
patient care and outcomes, as recommended by the Institute of
Medicine."
H.R. 4137 also requires accrediting agencies to apply and enforce
standards that "respect the stated mission of the institution
of higher education, including religious missions." However,
report language accompanying the bill states the intent of the Committee
that "this amendment does not change or alter current accreditation
requirements, and the exemptions included in those requirements,
for training professionals in the practice of medicine and other
health care professions."
Rep. Peter Welch (D-Vt.) withdrew an amendment
he planned to offer that would have required institutions of higher
education (including medical schools) with endowments valued greater
than $500 million to spend at least 5 percent of their endowment
assets each year. The House approved a second amendment offered
by Rep. Welch that will require "annual reporting on how much
of these endowment is paid out each year for the purpose of containing
college costs."
The Senate July 24, 2007, unanimously passed their version of the
reauthorization bill [see
Washington Highlights, July 27, 2007]. Current authority
for the HEA expired on Sept. 30, 2003; however, several extensions
have been enacted, making few policy changes but allowing uninterrupted
administration of the programs authorized under the law. The most
recent extension (P.L. 110-109) is set to expire on March 31, 2008.
The White House Feb. 6 issued a Statement
of Administration Policy that "strongly opposed" H.R.
4137, but stopped short of threatening a veto. The White House cited
numerous objections, foremost among them a prohibition of the U.S.
Education Department from issuing federal regulations governing
higher education accreditation.
Information:
Matthew Shick, Senior Legislative Analyst
AAMC Government Relations
mshick@aamc.org
(202) 862-6116
Negotiated Rulemaking Committee Examines CCRAA
Proposed Regulations
The Department of Education's Negotiating
Rulemaking Committee on student loans Feb. 4-6 met to discuss
the draft proposed regulations for certain provisions of the "College
Cost Reduction and Access Act of 2007" (CCRAA, P.L.
110-84). Carrie Steere-Salazar, Chair of the AAMC Committee
on Student Financial Assistance (COSFA), represents the AAMC and
graduate/professional schools on the committee.
The draft regulations retain the debt-to-income ratio (20/220)
pathway of the Economic Hardship Deferment, despite its statutory
elimination under the CCRAA. Committee members also examined the
implementation of the new income based repayment and public service
loan forgiveness programs, both of which are effective July 1,
2009. The Department of Education agreed to revisit the following
issues:
- The definition of "full time" and "public service"
employment that qualifies for loan forgiveness;
- The monthly loan payment distribution for joint-filing married
borrowers that participate in the income-based repayment; and
- The definition of a not-for-profit lender.
Additional information is available on the Department's negotiated
rulemaking website. The Department has scheduled the final negotiated
rulemaking session for March 3-5 in Washington, DC.
Information:
Matthew Shick, Senior Legislative Analyst
AAMC Government Relations
mshick@aamc.org
(202) 862-6116
Higher Education Associations Issue New Statement
on Patent Reform
A coalition of the AAMC, the Association of American Universities
(AAU), the National Association of State Universities and Land Grant
Colleges (NASULGC), the Council on Governmental Relations (COGR),
and the American Council on Education (ACE), Feb. 5 released a revised
statement
and reaffirmed support for legislative reform of the U.S. patent
system in line with recommendations by the National Academies in
2004. In a Feb.5 letter
to Senate Judiciary Committee Chair Patrick Leahy (D-Vt.) and Ranking
Member Arlen Specter (R-Pa.), the coalition commended the legislators
for revising the Patent Reform Act (S.
1145) to be more compatible with the needs of publicly supported
academic research and the transfer of university research into commercial
applications.
The coalition further notes that certain provisions of S. 1145
remain problematic for universities. These provisions include:
- An extensive "second window" for challenging new
patents within the U.S. Patent and Trademark Office (PTO);
- A revised formula that would tend to minimize the calculation
of economic damages from patent infringement (thus making some
university patents less attractive to potential licensees);
and
- A statutory mandate that patent applicants complete exhaustive
searches of "prior art" with increased liability for
failure to identify all relevant prior art.
The coalition statement responds to another organization's claims
that recent revisions to S. 1145 in committee had satisfactorily
addressed all of the coalition's concerns.
Senate leadership has indicated that it would like the bill to
move for a vote early in the current session. The House passed a
companion bill (H.R.
1908) [see
Washington Highlights, Sept. 14]. The higher education
associations urge "all parties to continue to work in good
faith to seek effective, balanced resolutions to the relatively
few, but critical, remaining issues so that this important legislation
can be passed into law."
Information:
Stephen Heinig, Lead Science Policy Analyst
AAMC Biomedical Health Sciences Research
sheinig@aamc.org
(202) 828-0488
Susan Ehringhaus, Sr. Director & Regulatory Counsel
AAMC Biomedical Health Sciences Research
sehringhaus@aamc.org
(202) 828-0543
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