Expect health spending slowdown in 2005

Washington -- A sense of austerity has arrived with President Bush's proposed 2005 budget. A pledge to halve the deficit over the next five years might mean that many agencies, including those within the Dept. of Health and Human Services, will get little more, if not less, money than they have now.

"There's no question that this is a slowdown," said HHS Secretary Tommy Thompson. "But when you have the deficit that we have, you need to be fiscally responsible."

Although Congress has to draft and approve a final budget, the president's proposal often serves as a guide or starting point for those negotiations.

Mandatory HHS spending will still increase 5.7% -- mainly due to the Medicare and Medicaid programs -- to just over $500 billion for fiscal year 2005, which starts in October of this year. Discretionary spending, such as medical research and public health, totals $68.2 billion in the proposed budget. That is $1.1 billion less than in fiscal 2004.

While the National Institutes of Health would get 2.5% more money than this year, that increase is small enough to mean that its budget is growing slower than costs both from inflation and the addition of new research projects.

"The huge increases that NIH has received over the last three years of the Bush administration, in fact doubling it -- you can see that this is one area where we felt we could tighten the belt a little bit," said Thompson.

He said that NIH officials will make the most of the money they get by, for example, giving grantees with several years of completed research a larger piece of the pie than those who are just getting started.

Research advocates have urged a 10% to 12% increase for NIH, closer to the increases that were seen while the budget was being doubled.

"The president's fiscal year 2005 budget ... may well slow the translation of science into better health and an improved quality of life for all Americans," according to a statement from the Ad Hoc Group for Medical Research Funding, a coalition of health groups, medical and scientific societies, academic and research organizations, and industry.

Renewed focus

The proposed budget would make virtually no changes in Medicare spending. HHS will focus this year on implementing the changes passed in the Medicare reform law last year. The most significant changes, including the outpatient prescription drug benefit, are scheduled to go into effect in 2006.

"Our challenge at HHS over the next several years will be adding these new benefits and choices to Medicare in an efficient and cost-effective manner, as well as educating seniors about the new benefits available to them," Thompson said. HHS has launched a $12.6 million ad campaign to explain the new benefits to seniors and disabled beneficiaries.

Meanwhile, Thompson discounted criticism caused by a new Bush administration cost estimate that shows the Medicare reform bill's 10-year price tag could exceed congressional projections by $139 billion. He said the discrepancy stemmed from different assumptions of how many beneficiaries would opt for the new prescription drug benefit, how much they would spend on drugs and how many private insurers would participate in the Medicare Advantage program.

"We must remember that these estimates are for a completely new program," he said. "Both sides are making their best guesses. They're good-faith efforts by good people working for Congress and the administration."

Also worth noting is what the president left out of his budget, said Jeanne Lambrew, associate professor of health policy at George Washington University's Dept. of Health Policy.

The document does not include money for Medicaid reform or financial relief for states struggling with the program's costs. However, some references are made to a plan that would change the federal government's financing arrangement with states in exchange for more flexibility over how they run their programs.

The budget is also silent on an estimated $1.2 billion in State Children's Health Insurance Program funds that are set to expire and be sent back to the U.S. Treasury this year, she said.

According to the budget proposal, the Bush administration hopes to recapture about $1.5 billion in federal contributions to Medicaid that states received in past years through several loopholes in the law.

Administration priorities

Bush's budget also included several legislative priorities, including $70 billion to finance individual health insurance tax credits for an estimated 4.5 million Americans.

In addition, the president plans to promote health savings accounts and push for passage of association health plan legislation.

The budget calls for an increase of $219 million in funding to community health centers as part of an effort to double their capacity. That would allow the centers to care for 1.6 million more people than the 15 million they already serve, according to the National Assn. of Community Health Centers Inc.

However, the budget would significantly reduce funding for community access, rural health outreach and health professionals training programs. These programs help ensure that physicians and others are trained in primary care and that they spend time working in rural and other underserved areas. This has raised questions among their supporters about whether the administration is giving with one hand while taking away with the other in terms of the health care safety net.

As in previous years, these proposed cuts may meet with resistance in Congress, especially because the programs are a priority for Senate Majority Leader Bill Frist, MD (R, Tenn.), said Bill Hoagland, Dr. Frist's director of budget and appropriations.

Other Bush administration priorities, such as abstinence education and substance abuse treatment, would be given large funding increases in the budget. The proposal also would allow faith-based organizations to provide these services.