Bush budget cuts hospital funding but silent on Medicare doctor pay

Washington -- President Bush's fiscal 2009 health budget, with steep Medicare spending cuts as a main highlight, sets the stage for a tough fight with Congress in the months ahead.

The proposal, part of a wider $3.1 trillion plan, is just the first step in this year's health care budget debate. Health care organizations and congressional Democrats have found a lot not to like. Bush proposes reducing Medicare and Medicaid spending anticipated under current law by $196 billion over five years, with hospitals as the main target. The plan would do nothing to prevent Medicare physician payment cuts.

The American Medical Association expressed disappointment that Bush didn't tackle the Medicare payment problem. If nothing is done, physician reimbursement will fall 10.6% from today's levels beginning July 1 through the rest of 2008, and an additional 5% in 2009.

"The reality is that current Medicare law provides for annual payment updates for hospitals and other health care providers based on increases in the cost of providing care, and only physicians face real cuts that require yearly congressional intervention to stave off a breakdown in the Medicare program for patients," said Edward L. Langston, MD, chair of the AMA Board of Trustees.

Health & Human Services Secretary Michael Leavitt said the administration will not remain silent on the pay issue as the July 1 deadline approaches. "We intend to be a full participant in that debate."

Bush soon could unveil a proposal that addresses physician payment and other parts of Medicare. Last year's Medicare trustees report triggered an alarm that requires Bush to submit a plan to address the program's long-term fiscal health. Bush's proposal is due within 15 days of Feb. 4, the day he submitted his budget plan. The president is considering his options to satisfy that requirement, said Kerry Weems, acting administrator for the Centers for Medicare & Medicaid Services.

Hospitals face the brunt of Bush's efforts to rein in Medicare spending growth. Hospitals and other facilities would face three years of pay freezes followed by 0.65% annual pay cuts. Bush also proposed reducing extra payments to hospitals with high levels of charity care by 30% over two years and eliminating Medicare private plans' payments to hospitals for medical education.

"Today's budget blueprint would have a disastrous impact on the health care that millions of patients and families depend on," said American Hospital Assn. President and CEO Rich Umbdenstock. "At a time when physicians are in short supply, this budget calls for cuts to teaching hospitals that prepare tomorrow's physicians. At a time when our economy is faltering, this budget cuts hospitals serving some of America's poorest patients."

Bush did not ask for payment cuts to Medicare private health plans, which on average received 12% more than the average amount traditional Medicare spent per beneficiary in 2006. The AMA has supported doing away with the extra health plan pay as a way to finance elimination of the Medicare physician payment cuts.

Democrats come out swinging

Sen. Max Baucus (D, Mont.), chair of the powerful Senate Finance panel, called the Bush budget request unrealistic. "This administration ought to know that five years' worth of Medicare and Medicaid cuts ... are dead on arrival with me and with most of the Congress."

Rep. John Dingell (D, Mich.), House Energy and Commerce Committee chair, expressed disappointment that the president again has targeted the nation's public health safety net. "When our country faces an economic downturn and 47 million Americans are uninsured, President Bush should be assisting state efforts to protect the health of more of our citizens. Instead, he's created a plan that will result in more state budget shortfalls, more uninsured Americans and an even more severe national health care crisis."

HHS' Leavitt justified the cuts to hospitals and others by noting Medicare Part A's deteriorating financial situation. Its trust fund is scheduled to be exhausted by 2019. "Real change is required in the Medicare system, and it's required soon. ... It's very clear to me that members of Congress don't want to deal with this."

House Minority Leader John Boehner (R, Ohio) called for a bipartisan effort to save Medicare and Medicaid from collapsing under the weight of their own costs. "The president's budget is an important starting point for this conversation."

Although Democrats vowed to block Bush's plan, the president has proven himself a formidable opponent on budget matters. Last year, Bush and Republicans sharing his priorities forced Democrats to shrink the fiscal 2008 HHS spending bill by billions and scuttle a Democratic five-year State Children's Health Insurance Program expansion in favor of a status-quo program reauthorization through March 2009.

Medical research, drug safety worries

The president's proposal to keep the National Institutes of Health budget at last year's $29.5 billion level drew criticism from the research community. His plan would make 2009 the sixth straight year that the cost of medical research grew faster than the NIH budget, said Robert Palazzo, PhD, president of the Federation of American Societies for Experimental Biology. "Although President Bush has given lip service to supporting the search for treatment for diseases like cancer, Alzheimer's and pandemic influenza, this budget again reveals his failure to uphold that commitment."

The Food and Drug Administration would receive a 5.7% increase over current funding under the president's proposal. Some observers, including former FDA officials, questioned whether the amount is sufficient to shore up the agency's often-criticized performance at ensuring the safety of the nation's supply of food and medicines. The proposal also includes $628 million in industry user fees -- a 14.4% increase over current levels. Former FDA administrators and some lawmakers have questioned the wisdom of having drug makers fund the agency that oversees them.

SCHIP reversal

In an about-face, Bush asked to add $2.1 billion to SCHIP's existing $6.1 billion fiscal 2009 funding in an effort to cover more eligible low-income children and account for increased state spending, CMS' Weems said. Last year, Bush proposed an essentially flat fiscal 2008 SCHIP budget that some experts said would not cover the program's 6 million existing enrollees. Then in December 2007, he signed an 18-month SCHIP extension with enough funding to preserve but not increase enrollment.

But the administration still intends to limit most SCHIP enrollment to children from the neediest families, Weems said. An August 2007 CMS rule bars program eligibility expansions beyond 250% of poverty unless the state covers 95% of eligible children at or below 200% of poverty.

The American Academy of Pediatrics praised the president's increased support for SCHIP. But Bush's budget should not attempt to cut Medicaid spending growth anticipated under current law by $1.9 billion in fiscal 2009, said AAP President Renee R. Jenkins, MD. "President Bush is moving in the right direction by acknowledging we need to invest in SCHIP and work toward taking it off the critical list. But it's like robbing Peter to pay Paul."

Sen. Charles Grassley (R, Iowa), the top Republican on the Senate Finance Committee, was surprised that the administration proposed more dollars for SCHIP. "It's good they got religion, but I wish they'd seen the light last fall. We might have avoided a lot of time and trouble and gotten far better policies instilled in the program."