Budgets underscore wide health policy gulf between parties

Contentious issues include Medicare and Medicaid restructuring, but both sides aim to disband Medicare's SGR funding formula.

By , Charles Fiegl amednews staff — Posted March 25, 2013

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Competing federal budget blueprints advanced by Senate Democrats and House Republicans feature major policy differences over health care entitlements and health system reforms that congressional observers say portend another intense year of debate on Capitol Hill.

Leaders of the majority parties in both chambers unveiled their respective fiscal 2014 budget proposals the week of March 11. Even if both houses were to come to a deal reconciling their versions of the budget, the measures would be only guidelines for lawmakers, who subsequently must authorize and appropriate any federal spending for the next fiscal year, which starts Oct. 1. Still, the budgets serve as a good indication of where each party stands when it comes to federal fiscal priorities.

The House GOP proposal, drafted by House Budget Committee Chair Paul Ryan (R, Wis.), renews many of the major entitlement program reform ideas that he has floated in the past amid strong Democratic opposition.

For Medicare, the House budget would preserve the current program for individuals 55 and older, while those 54 and younger would choose from several health plan options through a Medicare exchange beginning in 2024. The exchange would include the Medicare fee-for-service option along with private health plans. Future seniors would receive set federal subsidies to buy their coverage — instead of set benefits under the current structure — and wealthier seniors would pay more.

Medicaid also would undergo a major overhaul in the House budget. The program would be converted into a block-grant model that would reduce federal assistance but give states significant leeway in how they spend the set amount of federal dollars to cover the poor and disabled.

The House budget would retain Medicare savings incorporated into the Affordable Care Act but would repeal the remainder of the 2010 health system reform law, including the Medicare Independent Payment Advisory Board provision that would direct an outside panel to keep program spending below predetermined growth targets. Instead, the proposal would require Congress to cap the growth of Medicare spending per beneficiary to 0.5% above the nation's gross domestic product.

House Republicans argued that their plan uses market forces and competition to contain out-of-control health spending.

“Our budget saves and strengthens Medicare, protects our national security, cares for the poor and sick by repairing America's 'safety net' programs and expands economic opportunity for every single American,” said Tom Price, MD (R, Ga.), vice chair of the House Budget Committee, in a statement. “Republicans will protect these vital programs while we control spending and solve our nation's debt crisis. Our hope is that Democrats see these vital programs as something that they want to save and strengthen, not simply to demagogue.”

The Senate Democratic budget proposal, drafted by Senate Budget Committee Chair Patty Murray (D, Wash.), largely would preserve the current structures of Medicare and Medicaid, as well as allow the implementation of the health system reform law — including the Medicare IPAB — to continue. It would, however, pursue a projected $275 billion in savings from federal health programs, in part from expanding on health system reforms and implementing other longtime Democratic priorities, such as allowing the federal government to negotiate directly on prices Medicare pays for prescription drugs. Many of the plan's details would need to be filled in by the lawmakers authorizing the policy changes.

“Going forward, we must continue to vigorously encourage delivery system reforms that improve quality and reduce costs for taxpayers and patients,” the Senate budget plan states. “It only makes sense to aggressively expand practices when they are working.

“Such practices might include introducing bundled payments more broadly or other pay-for-performance programs, such as hospital readmissions and value-based purchasing, and re-evaluating whether current payment policies continue to appropriately reflect the services provided and outcomes achieved,” according to the budget document.

Opening bids in a long debate

For the first time in several years, congressional observers have two competing budget proposals to compare. The Senate has not produced a budget since 2009, and Congress is not required to operate under one. A Jan. 1 deal that temporarily delayed the automatic, across-the-board federal spending reductions known as sequestration also threatened to withhold lawmakers' paychecks if the chamber leaders didn't put out such a blueprint.

Because the authorization and appropriation process is required to implement federal fiscal policy, the major differences between the budget blueprints should be considered more in a strategic light than a practical one, said Joe Antos, PhD. He's the Wilson H. Taylor Scholar in Health Care and Retirement Policy at the conservative American Enterprise Institute in Washington.

“This is a positioning exercise to guarantee that the president is in the middle somewhere,” Antos said. “Both the Senate Democrats and the House Republicans know with absolute certainty that their budget resolutions would never become law. So this exercise is important, but it makes it far less informative about where policy is likely to go than it should be.”

Lawmakers will have to wait until the week of April 8 to learn President Obama's position. That's when the White House plans to release the administration's fiscal 2014 budget proposal.

“The president believes that there is an opportunity for Democrats and Republicans to come together around a balanced plan to grow the economy and shrink the deficit by investing to create jobs, cutting wasteful spending, and strengthening programs like Medicare and Medicaid,” White House press secretary Jay Carney said. “This approach will require both parties to compromise and make tough choices.”

The odds that the Senate and the House will reach an agreement on a fiscal 2014 budget resolution are slim, but that doesn't preclude a fiscal deal later in the year, when Congress has moved beyond the budgeting process, said Paul Van de Water, PhD. He's a senior fellow with the liberal Center on Budget and Policy Priorities in Washington. The architects of the Senate blueprint realize that they will not be not be able to get the level of revenues that they want through higher taxes, and the House approach of relying solely on spending cuts to reduce federal deficits will not proceed in Congress, either, he said.

Some accord on Medicare SGR repeal

One area in which there is a notable measure of agreement between the parties is on Medicare physician payment. Both Democrats and Republicans said the sustainable growth rate formula that helps determine doctor pay must be repealed.

The Senate Democratic budget proposal assumes the cost of SGR repeal in its calculations — a change that would be paid for using part of the $275 billion in proposed health program savings — and it would rescind the sequestration cuts that will cut Medicare pay to doctors by 2% starting April 1. The House budget would allow the sequester to continue but would establish a 10-year, deficit-neutral reserve fund to prevent cuts to physician pay required by the SGR.

Antos said lawmakers seemed to realize that a recent Congressional Budget Office cost projection that significantly reduced the estimated 10-year cost of an SGR repeal — from $244 billion to $138 billion — gave them a much better opportunity to get a permanent Medicare physician pay solution in place by the end of 2013. He said Congress might attempt to include such a provision on appropriations legislation that it will consider in the fall to keep the government operating after the start of fiscal 2014.

At this article's deadline, both chambers had approved a measure to wrap up last year's unfinished appropriations business, sending the bill to Obama for his signature. Because a year-end deal kept the government operating only through March 27, lawmakers needed to pass a continuing resolution that extends funding through the end of this fiscal year.

Organizations representing sectors affected by sequestration cuts in Medicare and other federal programs had pushed for Congress to rescind those reductions as part of the continuing resolution. But to avoid a government shutdown and move to the next stage of the long debate over federal spending and revenues, congressional leaders decided to leave the sequestration process largely intact for the time being.

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2 very different approaches to health entitlements

The House and Senate fiscal 2014 budget resolutions chart paths for future Medicare and Medicaid spending that are significantly different. The House GOP plan would overhaul both programs and cap spending on them. The Senate Democratic plan would leave the program's structures largely intact but pursue $275 billion in health program savings. Here's how the two plans compare, with projected spending in billions.

House plan 2014 2015 2016 2014-2023
Medicare $509 $527 $574 $6,656
Medicaid and other health $321 $295 $303 $3,349
Senate plan 2014 2015 2016 2014-2023
Medicare $536 $541 $587 $6,832
Medicaid and other health $416 $494 $560 $6,559

Sources: “The Path to Prosperity: A Responsible, Balanced Budget,” House Budget Committee, March (link); “Foundation for Growth: Restoring the Promise of American Opportunity,” Senate Budget Committee, March (link); Senate Fiscal Year 2014 Budget Resolution charts (link)

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External links

“The Path to Prosperity: A Responsible, Balanced Budget,” House Budget Committee, fiscal 2014 (link)

“Foundation for Growth: Restoring the Promise of American Opportunity,” Senate Budget Committee, fiscal 2014 (link)

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