President’s FY 2015 Budget Proposes Workforce Program Alterations, Nearly Flat NIH Funding
March 7, 2014—President Obama March 4 released his fiscal year (FY) 2015 budget, which calls for $3.9 trillion in spending. The budget adheres to the FY 2015 discretionary (appropriated) spending levels agreed to in the Bipartisan Budget Act (P.L. 113-67), which provide less than a $1 billion increase for non-defense programs. Overall, the administration proposes $71.8 billion for discretionary programs under the Department of Health and Human Services (HHS), a decrease of $206 million (0.3 percent) from FY 2014.
The president proposes a new workforce initiative to expand residency training in “primary care or high-need specialties;” however the president’s budget includes $402 billion in health-related cuts over 10 years, including cuts to providers and cuts in payments to teaching hospitals for doctor training and complex patient care [see related story].
AAMC President and CEO Darrell G. Kirch, M.D., March 4 released a statement expressing concern with the president’s new workforce initiative and the proposed funding level for the National Institutes of Health (NIH). In the statement, Dr. Kirch notes the AAMC’s gratitude that the budget recognizes the physician shortage facing the nation, however, he states “the funding for these important programs should not come at the expense of existing support for teaching hospitals.”
Dr. Kirch also urged lawmakers to “find a path forward for medical research funding that allows NIH and the nation’s research community to continue to be leaders in pioneering the discoveries that offer hope for America’s patients and their families.”
National Institutes of Health (NIH): The president’s budget requests $30.126 billion through the Labor-HHS Appropriations Subcommittee for FY 2015, an increase of $200 million (0.7 percent) over FY 2014.
The proposed FY 2015 program level for NIH, which includes $77 million from the Interior Appropriations Subcommittee for the National Institute of Environmental Health Sciences (NIEHS), $150 million in mandatory funds for type I diabetes research, and an $8.2 million transfer to the National Library of Medicine (NLM), is $30.362 billion, an increase of $211 million.
According to the HHS Budget in Brief, the president’s budget proposes:
- $100 million for the Brain Research through Advancing Innovative Neurotechnologies (BRAIN) Initiative;
- $30 million for the Cures Acceleration Network;
- $100 million for High-Risk High-Reward projects funded through the institutes and centers; and
- $30 million for Common Fund projects modeled after the Defense Advanced Research Projects Agency (DARPA).
The budget also would:
retain the salary cap at Executive Level II of the Federal Executive Pay scale ($181,500 in 2014);
increase National Research Service Award (NRSA) pre- and post-doctoral stipends by 2 percent; and
implement a modified version of last year’s proposal to reorganize government-wide Science, Technology, Engineering, and Mathematics (STEM) education programs.
Health Professions: The president’s budget proposes $214.9 million for the Health Resources and Services Administration’s (HRSA) Title VII health professions programs, a $30.5 million (12.4 percent) decrease below the FY 2014 level.
As the president proposed in FY 2014, the budget recommends eliminating funding for the Title VII Health Careers Opportunity Program (HCOP), a diversity pipeline program, and the Title VII Area Health Education Centers (AHEC) program.
The budget requests $10 million to support a new Clinical Training in Interprofessional Practice program to “increase the capacity of community-based primary health care teams to deliver quality care” and $4 million to fund new Rural Health Physician Training grants to “help rural-focused training programs recruit and graduate students most likely to practice in underserved rural communities.” Both programs are authorized under Title VII. The budget proposes funding all remaining Title VII programs at the FY 2014 level.
The president proposes $223.8 million for the Title VIII nursing workforce development programs, which provides funding for all Title VIII programs at their FY 2014 levels. Within this total, the president requests a $62 million transfer from the Public Health Service (PHS) Evaluation tap to the fund the Title VIII Advanced Education Nursing program.
Proposed Graduate Medication Education (GME) Grant Program: The administration requests legislative authority for a new program, “Targeted Support for Graduate Medical Education,” to be funded through the Medicare Hospital Insurance Fund [see related story] and administered by HRSA to “fund teaching hospitals, children’s hospitals, and community-based consortia of teaching hospitals and/or other health care entities to expand residency training in primary care or high-need specialties not supported by GME payments.”
According to budget materials, the program will support residency positions “using a competitive approach in which applicants demonstrate how their training of residents addresses key workforce objectives, such as: training and retaining residents in primary care; training and retaining residents in rural settings and in underserved areas; and, providing comprehensive primary care that includes oral health, behavioral health, prevention, and population health.”
Budget documents note that funds “will be targeted to training programs that feature concepts such as team-based care, the effective incorporation of health information technology into clinical practice, population health, and telemedicine.”
The program incorporates HRSA’s Teaching Health Center Graduate Medical Education program and the Children’s Hospitals Graduate Medical Education (CHGME) program. The budget proposes eliminating the appropriation for CHGME and setting aside $100 million for children’s hospitals in each of FYs 2015 and 2016.
For this initiative, the budget requests a transfer of $5.23 billion for FYs 2015-2024 from the Medicare Hospital Insurance Fund. Within this total, the budget requests $530 million in FY 2015. According to the budget justification, “Over ten years, the program is expected to support approximately 13,000 residents to complete their training in community-based ambulatory care settings that provide a range of training experiences to address key health care workforce development needs.” According to budget materials, the program will “encourage innovation in training models and greater accountability in the use of GME funds”
Children’s Hospitals Graduate Medical Education (CHGME): The president proposes to eliminate the current $265 million appropriation for the CHGME program in FY 2015. Instead, the administration requests a $100 million set aside for each year in FYs 2015 and 2016 from the proposed new “Targeted Support for Graduate Medical Education Program.”
National Health Service Corps (NHSC): For FY 2015, the president’s budget requests a total of $810 million for the NHSC, a $505 million (166 percent) increase over the $305 million provided by the mandatory Affordable Care Act (ACA) NHSC Fund.
While the NHSC has been fully funded by the ACA NHSC fund since FY 2011, the president’s request for NHSC includes $100 million in discretionary appropriations. The remaining mandatory funding proposed includes $310 million from the ACA fund and $400 million from a new mandatory fund. The president’s budget also indicates that the NHSC only spent $283 million of the $305 million provided under the ACA fund in FY 2014.
The president’s proposed $4 billion in mandatory funding for the NHSC through FY 2024 will require additional legislative action. The majority of the proposed funding ($3.9 billion) is frontloaded for fiscal years 2015-2020. Starting in FY 2015, the administration projects a field strength of 15,400 primary care clinicians compared to 8,899 in FY 2013.
Agency for Healthcare Research and Quality (AHRQ): The president’s budget proposes $334 million in Public Health Service Evaluation tap funds for AHRQ in FY 2015, a $30 million (8.2 percent) cut below FY 2014. The agency also is scheduled to receive $106 million transferred from the Patient-Centered Outcomes Research Trust Fund (PCORTF) in FY 2015, bringing AHRQ’s total proposed program level to $440 million, $24 million (5.2 percent) below the comparable FY 2014 level.
Within the total, the administration proposes to end support for a set of research and dissemination activities included within the “Prevention and Care Management” portfolio; to eliminate the “Value” portfolio; to reserve $15 million in investigator-initiated grants to support health economics research; and to dedicate $15 million for a new multi-year initiative for “Expanding Patient Safety Improvements to All Health Care Settings,” with the goal of extending patient safety activities to primary care practices, nursing homes, and other settings beyond hospitals.
National Health Care Workforce Commission: Unlike past budget proposals, the president’s budget does not request funding for the National Health Care Workforce Commission, which was established as an independent advisory body in the Affordable Care Act (ACA, P.L. 111-148 and P.L. 111-152). In past years, the budget has requested $3 million for the commission. Though the Government Accountability Office appointed commissioners Sept. 30, 2010, [see Washington Highlights, Oct. 1, 2010] to date, Congress has not approved an appropriation to fund the commission’s activities.
Centers for Disease Control and Prevention (CDC): The president proposes $5.399 billion in base budget authority for CDC. In addition, the budget assumes a transfer of $810 million from the Prevention and Public Health Fund (PPHF) and $397 million from the Public Health Service (PHS) evaluation tap in FY 2015, bringing the president’s proposal for CDC to $6.606 billion. This funding level represents a $243 million (3.5 percent) decrease below the FY 2014 level.
Department of Veterans Affairs (VA): The president requests $588.9 million for VA Medical and Prosthetic Research, a $3.2 million (0.6 percent) increase over FY 2014. Due to decreases in other federal, and non-federal support, the budget estimates total VA research resources at $1.86 billion in FY 2015, a decrease of 19 million (1 percent).
While not providing new dedicated funding, the VA congressional budget justification addresses the physical condition of VA’s research facilities. The administration highlights the 2006 congressionally requested report on VA research infrastructure, and notes that “sixty percent of the campuses at which assessments were performed have received or are in the pipeline to receive funding for renovation and/or construction projects affecting research space.”
The president’s budget and the Strategic Capital Investment Planning (SCIP) process include a number of current and future-year VA research facility projects in major construction, minor construction, and non-recurring maintenance.
The president’s budget requests $58.7 billion in VA medical care advance appropriations for FY 2016, a $2.7 billion increase over the FY 2015 comparable level.
National Science Foundation (NSF): The president requests $7.255 billion for NSF, an $83.1 million (1.2 percent) increase over the FY 2014 level. For research and related activities, the president’s budget requests $5.807 billion, a $1.5 million (0.3 percent) decrease below the FY 2014 level.
Food and Drug Administration (FDA): The president requests $2.584 billion in base budget authority for FDA, a $23 million (0.9 percent) increase over the FY 2014 level. In addition, the FDA budget is supplemented by industry user fees, proposed to generate $2.161 billion in FY 2015. This addition brings the total request to $4.745 billion, a $358 million (8.2 percent) increase over the FY 2014 level.
Senior Director, Government Relations
Director, Government Relations
Matthew Shick, J.D.
Senior Legislative Analyst, Government Relations
Telephone: (202) 828-0525
President’s FY 2015 Budget Once Again Cuts Medicare Providers
March 7, 2014—President Obama March 4 released the fiscal year (FY) 2015 budget request calling for $402 billion in health-related cuts over 10 years. The budget proposes $354 billion in Medicare provider cuts, including nearly $15 billion in Medicare Indirect Medical Education (IME) payments, $68 billion in Medicare structural reforms, and $7 billion in Medicaid savings.
AAMC President and CEO Darrell G. Kirch, M.D., responded in a March 4 statement saying, “America’s medical schools and teaching hospitals are deeply concerned about the president’s FY 2015 budget proposal. At a time when the nation’s growing aging population is creating an urgent need for new physicians, this budget represents a nearly $15 billion reduction in payments to teaching hospitals for doctor training and complex patient care.”
Among the cuts of interest to AAMC members, the president’s budget includes $14.64 billion in reductions to Medicare IME payments. The policy reduces IME payments by 10 percent starting in 2015. Additionally, the Health and Human Services Secretary “would be granted the authority to set standards for teaching hospitals receiving Graduate Medical Education payments to encourage training of primary care residents and emphasize skills that promote high-quality and high-value health care.”
The administration proposes a $30.8 billion dollar cut in Medicare bad debt reimbursement. Phased in over three years, the budget would reduce reimbursement from 65% to 25% of bad debt. The administration also proposes a “clarification” related to Medicare Disproportionate Share Hospital (DSH) policies with no associated savings.
The clarification reiterates the Centers for Medicare and Medicaid Services’ (CMS) position that patients who exhaust Medicare Part A benefits or enroll in Part C should be included in the “Medicare Fraction” used to calculate a hospital’s DSH Payment Percentage (DPP). In November 2012, the Federal District Court of the District of Columbia ruled in Allina v. Sebelius that CMS must exclude those patients. The case is under appeal.
The president’s budget also assumes a net Medicaid savings of $7.3 billion over 10 years, largely through improved program integrity, reduced spending on prescription drugs, and an extension of DSH cuts scheduled under the Affordable Care Act (ACA, P.L. 111-148 and P.L. 111-152) (“DSH rebasing”). The budget assumes a 10-year savings of $3.3 billion under the rebasing proposal, which would have DSH allotments revert to pre-ACA levels, adjusted for inflation, in FY 2025.
The president’s budget assumes $5.4 billion in new Medicaid spending to extend by one year (through Dec. 31, 2015) the ACA’s “payment floor” for primary care services. Originally established for services provided in 2013 and 2014, the “payment floor” prohibits Medicaid payment rates for primary care services from falling below Medicare rates for the same services. Under the president’s plan, the “floor” would also apply to primary care services provided by mid-level providers, but not apply to emergency room codes (to “better target primary care”).
The administration also proposes $14.62 billion to fund three health workforce initiatives including a $5.23 billion transfer from the Medicare Hospital Insurance Trust Fund to establish a new graduate medical education grant program at the Health Resources and Services Administration (HRSA) [see related story], a $3.9 billion funding increase for the National Health Service Corps [see related story], and the previously mentioned $5.4 billion to extend the Medicaid “payment floor.”
Dr. Kirch praised the president’s recognition of the looming national physician shortage and need to invest in future physician training, but expressed great concern about using reductions from programs that currently support teaching hospitals as a pay-for stating, “As the nation’s hospitals are already required to absorb billions of dollars in funding cuts, these additional reductions to teaching hospitals would make it very difficult for them to carry out their missions.”
Dr. Kirch further highlighted the possibility of financially exhausting the ability of teaching hospitals to train additional resident positions stating, “These institutions already are supporting 10,000 residents per year above the federal residency training position cap, at a cost of more than $1 billion annually.”
Finally, the budget also supports a permanent repeal of the sustainable growth rate (SGR) and recognizes the bipartisan efforts of Congress over the past year. Although the budget assumes the SGR repeal cost at $110 billion, the Congressional Budget Office recently estimated the cost of full repeal at $121 billion. The president’s budget does not identify offsets to pay for SGR repeal.
Director, Government Relations
Director, Federal Affairs, Government Relations
President’s Budget Proposes Graduate-Professional Student Aid Reforms
March 7, 2014—President Obama March 4 released his fiscal year (FY) 2015 budget, proposing significant changes to federal student aid and repayment programs under the Health Resources and Services Administration (HRSA) and the Department of Education.
Of interest to primary care physicians, the budget proposes to more than double funding for the National Health Service Corps (NHSC) with a $4 billion mandatory fund [see related article]. The NHSC provides scholarship and loan repayment awards to primary care clinicians in exchange for practicing in a federally designated underserved area.
Starting in FY 2015, the HRSA congressional budget justification projects a field strength of 15,400 clinicians compared to 8,899 in FY 2013. The creation of the new mandatory fund for NHSC will hinge on congressional approval.
Impacting graduate and professional student aid programs under the Department of Education, the president’s budget proposes:
- Capping Public Service Loan Forgiveness (PSLF) at the aggregate loan limit for independent undergraduate students ($57,500);
- Preventing payments made under non-income driven repayment plans from being applied toward PSLF;
- Calculating payments for married borrowers filing separately on the combined household Adjusted Gross Income;
- Eliminating the 10-year Standard monthly payment cap under Pay-As-You-Earn (PAYE);
- Increasing from 20 years to 25 years the maximum repayment period under PAYE for borrowers with federal loan balances above $57,500 (e.g., graduate and professional students); and
- Capping the amount of interest that can accrue when a borrower’s monthly payment is insufficient to cover interest costs.
AAMC President and CEO Darrell G. Kirch, M.D., March 4 released a statement expressing gratitude for the NHSC investment, but disappointment “that the president proposes curtailing Pay-As-You-Earn and Public Service Loan Forgiveness in a way that disproportionately targets graduate and professional student borrowers.”
Dr. Kirch continues, “Medical students graduate and begin residency training with an average of $175,000 in student loan debt, and urgently need certainty in federal repayment and forgiveness programs in order to make career decisions.”
As in prior years’ budgets, the president proposes to reform the Perkins Loan and increase funding to $8.5 billion, a $7.5 billion (750 percent) increase over current levels. Rather than operating through institutional revolving funds, the federal government would originate and service Perkins Loans. Perkins Loans would carry the same interest rate as unsubsidized Stafford Loans.
The president’s budget also requests $52 million in new spending on data collection to better inform the proposed Postsecondary Institution Ratings System (PIRS) [see Washington Highlights, Feb. 14] and $4 billion for a grant program aimed at encouraging states to maintain support for higher education, similar to the unfunded Race to the Top proposal in previous budgets.
In contrast to House Ways and Means Chair Dave Camp’s (R-Mich.) Feb. 26 tax reform proposal [see Washington Highlights, Feb. 28], the president proposes to exclude PAYE loan forgiveness from taxable income in addition to PSLF. The budget also would make permanent the American Opportunity Tax Credit (AOTC).
Matthew Shick, J.D.
Senior Legislative Analyst, Government Relations
Telephone: (202) 828-0525
Bipartisan Senate Legislation Introduced to Delay CMS “Two Midnight” Rule
March 7, 2014—AAMC President and CEO Darrell G. Kirch, M.D., sent a March 6 letter to Sens. Robert Menendez (D-N.J.) and Deb Fischer (R-Neb.) thanking them for introducing bipartisan legislation to delay enforcement of the Centers for Medicare and Medicaid Services’ (CMS) “two midnight” rule so that appropriate criteria of medically necessary short inpatient hospital stays may be developed.
CMS finalized the “two midnight” rule, which establishes new rules regarding how short hospital stays will be paid under Medicare, as part of the fiscal year (FY) 2014 Medicare inpatient prospective payment system (IPPS) final rule [see Washington Highlights, Aug. 9].
According to the new standard, effective Oct. 1, 2013, hospital stays lasting “two midnights” or longer can continue to be billed as typical Medicare Part A inpatient care. However, the new rule requires, with a few limited exceptions, hospital stays that are shorter than “two midnights” to be categorized as outpatient care and billed under Medicare Part B.
The Two-Midnight Rule Coordination and Improvement Act of 2014 (S. 2082) would delay enforcement of the Medicare “two midnight” rule until Oct. 1, 2014, require CMS to develop new criteria and payment methodology to account for medical necessity and appropriateness of short hospital stays, and instruct CMS to consult with interested stakeholders regarding newly developed methodology.
The legislation further requires the Health and Human Services Secretary to develop general equivalency maps referred to as “cross-walks” after two years of enactment that would link ICD-10 codes to relevant CPT codes to permit comparisons of inpatient and outpatient department services.
CMS Jan. 31 issued additional guidance and delayed enforcement of the “two midnight” through Sept. 30, 2014.
Director, Government Relations
MedPAC Convenes to Discuss Site Neutral Payments for IRFs and SNFs and Quality Measurement Across Medicare
March 7, 2014—The Medicare Payment Advisory Commission (MedPAC) March 6-7 met to discuss site-neutral payments for inpatient rehabilitation facilities (IRFs) and skilled nursing facilities (SNFs), measuring quality across Medicare’s delivery systems, payment policies that would promote the use of services based on clinical evidence, per beneficiary payment for primary care, synchronizing Medicare’s benchmarks across payment systems, and improving risk adjustment in the Medicare program. The commissioners did not make any recommendations.
The meeting commenced with a discussion on the possibility of implementing site-neutral payments for IRF and SNF patients with select conditions, including joint replacements, hip and femur procedures, and strokes. The presentation highlighted the fact that while IRFs are licensed as hospitals and are subject to several more stringent regulatory requirements, the characteristics of beneficiaries admitted to IRFs and SNFs in the same market are actually quite similar.
The commissioners generally found IRFs and SNFs suitable for site-neutral payments because there are not significant differences between IRFs and SNFs in beneficiary characteristics, such as the prevalence of comorbidities and functional status at admission. MedPAC staff estimated that making SNF-level payments to IRFs for the selected cases would reduce Medicare payments to IRFs by four percent, an impact that was similar across non-profit, for-profit, hospital-based, and freestanding IRFs.
Under the staff models, reductions would not be applied to IRF add-on payments such as indirect medical education (IME), disproportionate share hospital (DSH), and outlier payments. There was a general consensus to move forward on site-neutral payments for SNFs and IRFs, and that elective joint replacements would be a good place to start.
Next, the commission focused on the future of measuring quality across Medicare’s delivery systems. This was a follow-up from the November discussion on refocusing the quality strategy to enable comparisons of fee-for-service (FFS), Medicare Advantage (MA), and accountable care organizations (ACOs) in health care market areas [see Washington Highlights, Nov. 8].
MedPAC staff outlined concerns with the current quality strategy, which reinforces incentives for quantity over quality of care, and highlighted an alternative strategy focusing on outcomes and measures of overuse for the FFS community and measures of underuse for the MA and ACO populations. As examples of inappropriate overuse in clinical care, staff highlighted three imaging measures currently being publicly reported: patients receiving an MRI for low back pain without first attempting conservative treatments, CT combination scans, and the use of cardiac imaging stress tests before low-risk outpatient surgery.
The commissioners cited the high prevalence of imaging tests between 2010 and 2012, and concluded that many patients inappropriately received repeats of these tests within a three-year period. The commissioners discussed whether overuse and underuse measures belonged in a comprehensive quality strategy, and whether to apply these measures in all three payment systems. The commissioners will discuss how to properly define the measurement areas for these three populations during the April meeting.
Commissioners also continued their discussion from November on the impending end of the primary care bonus payment in 2015 that was enacted under the Affordable Care Act (ACA, P.L. 111-148 and P.L. 111-152). This topic is in direct relation to concerns the commission has that primary care providers are not adequately reimbursed compared to specialist physicians under the current Medicare fee schedule.
The commissioners discussed whether to support an extension of the bonus payment, which would require congressional action, or if a per-beneficiary payment would be a more appropriate direction to consider. The commission was more in favor of the per-beneficiary payment option and will consider this in future discussions regarding payment adequacy for primary care services under the fee schedule.
The meeting continued with a discussion on the feasibility of synchronizing financial benchmarks across MA and ACO payment models and whether financial neutrality could be applied across all payment models including FFS (i.e., ACO and MA benchmarks = 100% of local FFS spending). Currently, MA is paid a risk-adjusted capitation payment based on MA benchmarks and ACOs are paid at FFS rates with a potential bonus or penalty based on quality and spending targets.
Options discussed include budget neutral payment adjustments for ACOs and MA plans based on quality and moving ACOs to a prospective benchmarking system currently used by MA plans, the CMS-Hierarchical Conditions Category (HCC) risk adjustment model. The commission considers this topic to be in the very early stages of discussion and plans to continue moving forward with next steps to develop guidelines for future policy recommendations based on the principles of quality, beneficiary access, efficiency, and provider viability. They also believe future data on each payment model will be needed before pursuing any policy recommendations.
The next MedPAC meeting is scheduled for April 3-4.
Allison M. Cohen, J.D., LL.M.
Senior Policy and Regulatory Specialist, HCA
Telephone: (202) 862-6085
Evan Collins, MHA
Specialist, Clinical Operations and Policy
Program Specialist, Health Care Affairs
On the Agenda in Washington
March 11: Health IT Policy Committee Meeting
9:30 a.m.; 10 Thomas Circle N.W., Washington, D.C.
The Office of the National Coordinator (ONC) Health Information Technology (HIT) Policy Committee will meet to discuss recommendations to the National Coordinator for Health HIT on a policy framework for the development and adoption of a nationwide health information infrastructure, including standards for the exchange of patient medical information.
March 11: Senate Subcommittee Hearing on Health Care Access and Cost
10 a.m.; 430 Dirksen Senate Office Building, Washington, D.C.
The Senate Health, Education, Labor and Pensions Primary Health and Aging Subcommittee will hold a hearing to examine what the United States health care system can learn from other countries.
March 12: Ways and Means Hearing on President’s HHS Budget Proposal
10 a.m.; 1100 Longworth House Office Building, Washington, D.C.
The House Ways and Means Committee will hold a hearing on President Obama’s fiscal year (FY) 2015 Health and Human Services (HHS) budget proposal. HHS Secretary Kathleen Sebelius is expected to testify.
March 13: House Subcommittee Hearing on Biomedical Research
10:00 a.m.; 2358-C Rayburn House Office Building, Washington, D.C.
The House Labor, Health and Human Services, Education and Related Agencies Appropriations Subcommittee will hold an oversight hearing on the future of biomedical research. National Institutes of Health (NIH) Director Francis Collins, M.D., Ph.D., is scheduled to testify.
March 13: House Subcommittee Hearing on Medicare Advantage
10 a.m.; 2123 Rayburn House Office Building, Washington, D.C.
The House Energy and Commerce Health Subcommittee will hold a hearing on allowing seniors to keep their Medicare Advantage plans.
Washington Highlights, a weekly electronic newsletter, features brief updates on the latest legislative and regulatory activities affecting medical schools and teaching hospitals.
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Senior Director, Government Relations