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Focus on Regulation

Obama Releases Budget Proposal

On April 10, 2013, President Obama released his Fiscal Year (FY) 2014 budget proposal.  As reported widely in the days leading up to the budget’s release, it included numerous health proposals that would together generate approximately $400 billion in savings over the next 10 years.

Many of these proposals also appeared in the President’s FY 2013 budget proposal.  The new proposals to reduce the deficit are below (the anticipated deficit decreases over the next 10 years are in parentheses).

  • Move up to 2015 the closure of the Medicare Part D coverage gap (“donut hole”) that was set to occur in 2020.  This would increase manufacturer discounts for brand name drugs from 50 to 75% in 2015. ($4.5 billion)
  • Adopt bundled payment for post-acute care providers, including long term care hospitals, skilled nursing facilities, inpatient rehabilitation facilities, and home health providers starting in 2018 ($8.2 billion).
  • Change Medicaid drug rebate and payment policies by (a) excluding authorized generic drugs from average manufacturer price calculations; (b) making a technical correction to the Affordable Care Act’s alternative rebate for new drug formulations; and (c) calculating Federal upper limits based only on generic drug prices ($8.8 billion).
  • Exclude radiation therapy, therapy services, and advanced imaging services from the in-office ancillary services exception to the Stark law ($6.1 billion).
  • Reduce Part B payments for physician administered drugs from average sales price (ASP)+6% to ASP+3% and require manufacturers to provide specified rebates in certain instances ($4.5 billion).
  • Revise payments for clinical laboratory services, including lowering the Clinical Laboratory Fee Schedule (CLFS) payment rates to make Medicare payments more comparable to the private sector, providing the HHS Secretary with authority to adjust CLFS payment rates, and supporting policies to promote electronic reporting of laboratory results. ($9.5 billion).
  • Reduce payments to Medicare Advantage by increasing the minimum Medicare Advantage coding intensity adjustment, and aligning employer group waiver plan payments with average Medicare Advantage plan bids ($19.4 billion).
  • Modernize the Federal Employees Health Benefits Program ($6.8 billion).

In addition to these new proposals, the Budget includes several notable recycled proposals.  These include:

  • Authorizing the Federal Trade Commission to block reverse settlements (also known as pay for delay settlements).
  • Applying the Medicaid drug rebate policies to drugs provided under Medicare to low-income beneficiaries.
  • Introducing a Part B premium surcharge for new Medicare beneficiaries who purchase Medigap policies with first-dollar or close to first-dollar coverage.
  • Shortening the length of exclusivity for brand name biological to 7 years from 12 years.
  • Limiting Federal reimbursement for state Medicaid spending on certain DME services.

Detailed information about President’s Proposed Budget for the Department of Health and Human Services (HHS) is available here.

A high level summary of the Proposed Budget’s provisions relating to the HHS is available here.