On February 14, President Barack Obama released his FY2012 budget proposal to Congress. President Obama claims his budget includes $1.1 trillion in deficit reductions over the next 10 years, with two-thirds coming from domestic spending.

Of particular interest to ASA members are sections of the budget proposal regarding Medicare payments and medical liability reform.

SGR Fix

The budget, as proposed, contains a two-year $54.4 billion “fix” to Medicare’s Sustainable Growth Rate (SGR) formula. This SGR “fix” provides a 0 percent increase in Medicare payment rates through fiscal year 2013. This SGR “fix” would be paid for by cuts in other areas of Medicare and Medicaid.

To pay for this temporary fix, budgets cuts would be made in other areas. 

• $18 billion by ending mechanisms that state governments use to boost Medicaid reimbursements from the federal government

• $18.7 billion over 10 years by reducing the Medicare provider tax threshold beginning in 2015

• $8.8 billion over 10 years by banning brand and generic manufacturers from partnering to delay availability of generic drugs

• $6.4 billion over 10 years by limiting the Medicaid reimbursement for durable medical equipment (DME) to Medicare rates

• $3.2 billion over 10 years by recommitting Medicare Electronic Health Record (HER) penalties to the Medicare Trust Fund

President Obama’s proposal does not propose a permanent fix to the failed SGR payment model. ASA continues to support permanent repeal and replacement of the SGR formula with a payment system that accurately reflects the costs of providing care. Short of full repeal, ASA supports proposals that 1) provide for appropriate payment updates; 2) do not exacerbate projected future payment cuts; and 3) begin to address the magnitude of the projected payment cuts – the “SGR debt.” 

Medical Liability Reform

The president’s budget also includes funding for states to experiment with medical liability reform alternatives. The health care reform law passed last year included $250 million over five years in demonstration grants for states to develop and implement alternatives for medical liability reform. The funds necessary to implement the provision had yet to be made available. The president’s proposed budget requests $100 million to jumpstart the demonstration grants in fiscal 2012, with $50 million allocated per year through year 2015. 

Click here to view the “FY2012 HHS Budget in Brief” document.