President Obama Releases Budget Proposal for Fiscal Year 2016

On February 2, the White House released a $4 trillion proposed budget for Fiscal Year (FY) 2016.  It is estimated this budget would cut deficits by $1.8 trillion over the next 10 years with a combination of spending, revenue and cuts.

The budget exceeds the spending limits created in a 2011 budget deal, which President Obama proposes to pay for with cuts in mandatory spending, closing tax loopholes, and limiting tax benefits, as well as revenue from immigration reform.  Significant spending increases are proposed for education programs, job training, cybersecurity and climate change programs.

In the Department of Health and Human Services (HHS), the budget proposes saving $399 billion over the next 10 years from Medicare, Medicaid and other programs to “build on the Affordable Care Act.”  Among the changes suggested by President Obama’s budget:

• Introduction of a co-payment for new Medicare beneficiaries receiving home health care
• A surcharge on premiums for new beneficiaries who buy private insurance to supplement Medicare
• A reduction in scheduled Medicare payments to teaching hospitals, nursing homes and health maintenance organizations that care for older Americans and people with disabilities
• Reduction of $16 billion in projected growth of Medicare payments over 10 years for Graduate Medical Education (GME)
• Savings of $116 billion in Medicare payments to drug companies for medicines prescribed for low-income patients
• More than $100 billion savings over 10 years by reducing inflation updates for health care providers that care for Medicare beneficiaries after they are discharged from hospitals
• A cut of $43 billion over 10 years from the projected growth of federal payments to Medicare Advantage plans
• Collection of $66 billion over 10 years by charging higher premiums to higher-income Medicare beneficiaries, for coverage of doctors’ services and prescription drugs
• Banning deals between brand-name and prescription drug manufacturers to save Medicare and Medicaid more than $11 billion over 10 years
• Extension of Children’s Health Insurance Program (CHIP) through 2019
• Reduction in Medicare payments to hospitals for “bad debt” and cut in Medicare payments to hospitals for the training of doctors

Of particular relevance to the American Society of Anesthesiologists, the President’s budget would further reduce the target rate for triggering action by the yet-to-be appointed Independent Payment Advisory Board (IPAB), an unelected and unaccountable body of 15 individuals tasked with designating Medicare spending cuts, for 2018 onward.  This would reduce the rate from gross domestic product (GDP) per capita growth plus 1 percentage point to GDP per capita growth plus 0.5 percentage points.  The budget estimates this would save $20.9 billion in savings over 10 years. ASA continues to oppose IPAB and supports legislation to repeal this board.

Additionally, the budget proposes to repeal the Medicare Sustainable Growth Rate (SGR) formula and reform Medicare physician payments to “accelerate physician participation in high-quality and efficient health care delivery systems.”

With a Republican-controlled House of Representatives and Senate, the President’s budget is not expected to receive much traction.  The GOP is expected to introduce a budget blueprint of its own before April 15.

Review President Obama’s FY 2016 Budget.
Review HHS Summary of FY 2016 Budget Proposal.
Read a New York Times summary of the HHS proposals.