Last week was a two-ring circus over budget issues. First, the 2011 budget for government for THIS year is not approved, and the entire federal government will be devoid of funding March 1 if they don’t get that done. Then, they are also of necessity now reviewing the 2012 budget, which was released last week. For 2012, the newly elected members of Congress obviously plan to make HUGE cuts in federal programs. 

Here are some of the highlights (or should I say ‘lowlights?) of the proposed 2012 budget:

• Medicare and Medicaid: Proposes $62 billion in savings over 10 years to Medicare and Medicaid, while Medicare costs increase by an estimated $54 billion. This will be done by saving in Quality Improvement Organizations and dedicating penalties for failing to enact electronic health records into the Medicare trust fund. This all seems kinda nebulous to me.
  
  
• SGR: The 2012 Budget provides $54 billion to temporarily freeze physician payments at current levels for 2 years. This 2-year fix is paid for by squeezing payments to hospitals and physicians (kind of ironic?) as well as increased usage of generic drugs. The specific offsets include:
  • Reducing the Medicaid provider tax threshold starting in 2015
  • Strengthening Medicaid third-party liability 
  • Tracking high prescribers and high prescription drug users in the Medicaid program to reduce waste, fraud, and abuse
  • Recovery of inappropriate payments to Medicare Advantage plans
  • Creating a system to validate high-risk services ordered by physicians and practitioners

• Tort Reform: The ACA included grants to states for implementing medical malpractice reform initiatives beginning in FY 2011, although Congress has yet to allocate funding for the full year.  The President’s budget proposes $100 million for these grants in FY 2012, followed by $50 million each year through FY 2015.  
  
  
• Medical Research and Public Health: Increasing NIH funding by $1 billion (from $30.8 billion to $31.8 billion); cutting CDC funding by 9% (from $6.5 billion to $5.9 billion); cutting AHRQ by 8% (from $397 million to $366 million), but transferring $24 million from Patient-Centered Outcomes Research Institute to bring AHRQ to $390.4 million.

HHS Secretary Kathleen Sebelius has been busy testifying to the various committees about the proposed budget. Last Tuesday, she testified before the Senate Finance Committee and on Wednesday before the House Ways and Means Committee. At both committee hearings, the SGR came up multiple times. Chair Max Baucus (D-MT) opened the Senate Finance Committee hearing by emphasizing the importance of enacting permanent repeal of the SGR and noted the negative effects uncertainty in physician payment has on physician practices and Medicare beneficiaries’ access to quality health care. Senator Orrin Hatch (R-UT) echoed the Chairman’s remarks, clarifying the need to find responsible ways to pay for a permanent solution.

Medical liability reform was also a heavily discussed topic at both hearings. Senator Tom Carper (D-DE) discussed during the Senate Finance Committee hearing the importance of reducing instances of defensive medicine and the impact medical liability reform can have on reducing overall health care costs. Sec. Sebelius referred to the provision in the budget that would establish cost saving measures within medical liability programs. When asked her position on medical liability reform in the Ways and Means hearing, the Secretary said she does not support caps but supports the President’s goal of exploring other reforms.

Sec. Sebelius at the Ways and Means hearing said the budget reflects the point that you “cannot build prosperity on a mountain of debt.” Duh.