Medicare Payment and Reimbursement

Administration’s Budget Proposals for Fiscal Year 2019

February 22, 2018 12:39 pm

The Trump Administration released its budget proposals for FY19 on February 12, 2018. While many of these proposals would require congressional action to become law, the proposals offer insight into the Administration’s position on healthcare policy issues.

Read Full Summary of Budget Proposal

Overview

The Administration’s budget proposal estimates $4.4 trillion in reductions to the federal deficit over the next 10 years (FY19 – FY28). This includes $3.6 trillion in reductions in federal spending and an estimated $813 billion associated with economic growth anticipated from fiscal, economic, and regulatory policies. Of the $3.6 trillion in reduced spending, $1.8 trillion would be cuts to mandatory spending, $1.5 trillion would be cuts to discretionary programs, and about $319 would be reduced payments on the federal debt. Reductions in Medicare, Medicaid, and other federal healthcare spending represent a significant portion of the total proposed reductions in spending. 

Proposals Related to Medicare

Proposed reductions in Medicare spending total $532 billion over 10 years (FY19 – FY28); about $333 billion of these reductions (involving elimination of Medicare payments for graduate medical education and uncompensated care payments to disproportionate share hospitals) would be partially offset by new spending for these purposes outside the Medicare program, totaling $216 billion. Some $38 billion of the proposed savings would come from administrative actions and the balance ($494 billion) would require legislation. Further details on the proposed Medicare savings are provided below. The budget also proposes reforms intended to address the pending backlog of Medicare appeals and prioritizes reducing provider burden.  

Proposals Related to Medicaid

A total of $1.389 trillion in Medicaid savings is incorporated into the budget’s proposal for repeal and replacement of the Affordable Care Act (ACA). Other Medicaid proposals in the budget are estimated to reduce Medicaid spending by almost $50 billion – although HHS indicates that interactions with repeal and replacement of the ACA would reduce of some of those savings. The repeal and replace proposal has a government-wide net 10-year savings of about $680 billion; this is the result of the $1.4 trillion in Medicaid savings plus about $475 billion in other program savings offset by $1.2 trillion in funding for a new Market Based Health Care Grant Program for states. The $1.4 trillion in Medicaid savings reflects both repeal of the ACA Medicaid expansion and establishing per capita limits on program spending.  

Proposals Related to Other Healthcare Spending

The budget includes $95.4 billion in FY19 discretionary funding for the Department of Health & Human Services (HHS), $13.5 billion above the FY18 level. A budget addendum issued after enactment of the Bipartisan Budget Act supplements the spending levels proposed in the FY 2019 budget and provides an additional $15.8 billion for HHS.1 Some $10 billion in HHS discretionary funding is proposed for FY19 for opioids and serious mental illness. Proposed agency funding levels vary; the Agency for Healthcare Research and Quality would be eliminated and it activities folded into the NIH, with a reduction in funding of about 10 percent.

The budget also includes initiatives to address the opioid epidemic and to reform medical liability. Further, the budget proposes that the federal government, along with state and local governments receiving federal financing for health-related activities, would be prohibited from penalizing or discriminating against health care providers who refuse to be involved in or provide coverage for abortion services.   

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