AAMC Reporter: March 2009

With Stimulus Complete, Attention Turns to Budget

After President Obama signed the economic stimulus package, which contained several new rules and pieces of funding important to academic medicine, Washington began to turn its attention to the president's fiscal year (FY) 2010 federal budget proposal.

The stimulus package contained more than $100 billion in health care spending designed to help revive the ailing economy.

A detailed budget for fiscal year (FY) 2010 is not expected until April, but on Feb. 26 the White House released an overview of the president's budget priorities,which included what Obama described in his Feb. 24 speech to Congress as "an historic commitment to comprehensive health care reform" that will be "paid for in part by efficiencies in our system that are long overdue." Obama said that making the health care system more efficient was "a step we must take if we hope to bring down our deficit in the years to come." The budget overview established eight principles for health care reform, including expanding coverage and coverage choices, investing in prevention and wellness, improving safety and quality, and maintaining the health care system's long-term fiscal sustainability.

"America's medical schools and teaching hospitals are pleased that President Obama views health care reform as one of the nation's top priorities this year," said AAMC President and CEO Darrell G. Kirch, M.D., in a statement. "We agree that the current challenges of cost, quality, and access facing our health care system must be addressed immediately."

It is unclear how stimulus funding will affect budget proposals. The budget process was complicated further this year by delays in passing many of the budget appropriations for fiscal year 2009.

"It's like the dance of the seven veils," said David Moore, the AAMC's senior director of government relations.

"The new administration has only had a couple of months to work on the budget, and they were hamstrung because they were going off of what is in the 2008 budget because of uncertainty over funding levels in the 2009 budget. Moving into the 2010 budget cycle, it's hard to know what will happen."

The $787 billion stimulus package, which the president signed Feb. 17, contains $10.4 billion for the National Institutes of Health (NIH) for health research and construction projects, of which $7.4 billion is designated for transfer to the NIH's institutes, centers, and the agency's common fund.

"The life sciences are a differentiator for the American economy," said Gary L. Gottlieb, M.D., M.B.A., president of Brigham and Women's Hospital in Massachusetts. "Some investments are kind of like black holes, but with science there's a peer-review process that can show that nothing is being wasted... There is plenty of fundable research that is sitting there waiting to go. We should fund projects that will yield enough discovery over two years so that more funding would be available subsequently."

Under the NIH's National Center for Research Resources, $1 billion will be available for the construction, repair, and renovation of research facilities around the country. A new Challenge Grants initiative will provide individual investigators with $1 million awards to address within two years areas of major scientific challenge. NIH officials said details are still being worked out, but all stimulus funds must be distributed to grantees by September 2010, with grantees strongly encouraged to spend the stimulus funds by this time whenever possible.

"NIH will be using multiple approaches to distribute these funds wisely," said Acting NIH Directory Raynard S. Kington, M.D., Ph.D., in a statement. "For example, we will choose among already reviewed, highly meritorious R01 applications that have a reasonable expectation of making progress in two years. NIH will also support research through supplements to existing grants and a new Challenge Grants program."

Teaching hospital leaders lauded portions of the law that suspend or impose moratoria on several controversial hospital regulations, including an Oct. 1, 2008 rule that cut by 50 percent the fiscal year (FY) 2009 indirect medical education (IME) adjustment made under Medicare's capital reimbursement system. Under the new law, the FY 2009 cut is reversed.

"Our ability to generate dollars is affected by the economy, so the capital IME cut would have made a bad situation even worse," said Peter Slavin, M.D., president of Massachusetts General Hospital. "Teaching hospitals will now be able to fund more of their capital budgets, which are used for IT and equipment as well as bricks and mortar projects, and that will ultimately lead to well-paying and highly productive jobs."

The stimulus package provides $86.6 billion for temporary increases in each state's federal medical assistance percentage (FMAP). Such a change will temporarily increase the level of federal Medicaid funding available to each state. Each state will receive a 6.2 percent increase in FMAP payments and potentially a bonus based on growth in the state's unemployment rate.

The stimulus package also contained an estimated $17.2 billion in Medicare and Medicaid incentive payments for hospitals and "eligible professionals" to promote the "meaningful use" of health information technology (HIT), an area of health care that touted for its potential to improve health care and create jobs.

A total of $2 billion in grants and loans will now be available through the U.S. Department of Health and Human Services Office of the National Coordinator for Health Information Technology. These funds include matching grants for demonstration projects to develop curricula integrating certified electronic health records into health professionals' clinical training.

Written fundraising communications sent to potential donors must now allow recipients to "opt out" of receiving such communications, and privacy requirements created under the Health Insurance Portability and Accountability Act (HIPAA) must be extended to "business associates" of health care and other entities that directly access protected health information.

Several other programs important to academic medicine received funding infusions through the legislation. The Health Resources and Services Administration received $500 million for health professions workforce development, with $300 million allocated for the National Health Service Corps and much of the remainder funding the primary care, public health, and scholarship and loan repayment programs authorized through Title VII, as well as grants to training programs for equipment. The Agency for Healthcare Research and Quality received $700 million for comparative effectiveness research.

—By Scott Harris