President’s Budget Meets with Predictable Response in Unpredictable Year – Say Ahhh! A Children’s Health Policy Blog

With the release of the President’s fiscal year 2013
budget proposal yesterday, CCF staff have begun the annual ritual of digging
through lengthy documents and tables to untangle what it might mean for the
health care coverage of children and families.  It is a challenging task in the best of times, but even
harder this year when the refrain coming from Washington pundits that the
President’s budget is not going anywhere (at least prior to the fall elections)
keeps up a steady background noise as we try to concentrate on the task at

Even with all the election year distractions, there are
some ideas and policies that rise above the noise.  Some of them have been proposed in past budget negotiations
with Congress and seem to have “stickiness” to them and so, are worth delving
into deeper.  While we don’t think
most of them are going anywhere for now, they could pop up again in the lame duck
session of Congress after the fall elections or in future years.


For the big picture, we encourage you to check out the
Center on Budget and Policy Priorities statement, which suggests that the
President’s budget “would, if enacted, make significant progress in reducing
deficits, although policymakers would have to take further steps, especially
for future decades.”


As in last year’s budget, the Administration is targeting
Medicaid for some budget savings — $56 billion over ten years. For the most part, they are
relying on the same proposals as they put forth last year, many of which
created endless trouble with Governors and Congress during negotiations over
the debt ceiling.  And, just as
last year, they aren’t likely to go anywhere in the near future.  Some of the more significant proposals

  • Least favorite re-run return of the blended matching
      The Administration proposes
    to cut $17.9 billion in federal Medicaid funding through creation of a “blended
    matching rate” for states. Instead of providing states with different matching
    rates for Medicaid, CHIP and the ACA Medicaid expansion, the Administration
    would like to provide each state with a single “blended” rate, beginning in
    2017.  If you skipped reading our
    blog from last
    year on the gory details of “blended matching rates” in the hopes that they
    would just go away, this seems to be one of those sticky ideas that keeps popping up so you may want to read some background on it. 

Then, as now, we don’t object in principle to creating a
simpler financing structure for Medicaid and CHIP.  But, the problems with the Administration’s proposal still
include: 1) it would be used to cut federal support for Medicaid and CHIP, not
just to simplify the financing system; 2) the Administration still has never
outlined how it would ensure that eliminating the enhanced matching rate for
CHIP will not result in children missing out on coverage; and 3) no one seems
to have any details on how the concept would actually work, making it very hard
to fully assess the proposal.  All
of these issues could perhaps be addressed, but, in its current form, the
blended matching rate proposal is little more than a gussied up cut in federal
support for Medicaid and CHIP that is very unlikely to go anywhere for now.

  • Cut in provider taxes:  The other “big ticket” item making a reappearance is a
    proposal to limit states’ use of provider taxes to finance their share of
    Medicaid spending.  At $21.8
    billion over ten years, this is the single largest source of Medicaid savings
    in the proposed budget.  As
    occurred last year, look for states to respond to this proposal with the same
    enthusiasm that Boston fans would welcome Eli Manning to their favorite
    watering hole. 
  • Anti-fraud and abuse provisions: In the
    Medicaid/Medicare universe this year, one topic is about as popular as Adele
    was at the Grammys – fraud and abuse.   There’s a plethora of anti-fraud initiatives in
    Medicare, Medicaid and CHIP again front and center in the President’s
    budget.  These include measures to
    1) crack down on pharmaceutical companies that are skirting their obligations
    to pay Medicaid drug rebates; 2) require states to monitor and respond to
    potentially abusive prescribing patterns; and 3) make it more difficult for
    fraudulent providers to continue to participate in Medicare and Medicaid.  Not lots of money here – about $3.6
    billion in Medicaid and Medicare savings over 10 years – but, unlike almost all
    of the other Medicaid and CHIP items in the budget, Congress might just take
    these ideas for a spin down the red carpet this year.
  • Other cuts: The budget also includes further cuts to disproportionate share hospital
    payments ($8.3 billion in savings over 10 years) and a proposal to save $3
    billion by limiting federal reimbursement for durable medical equipment (e.g,.
    wheel chairs, hospital beds, nebulizers). 
  • The good stuff:  Last, but not least, there are some helpful improvements to Medicaid and
    CHIP for families and children included in the budget.  Most notably: 
    • Extension of Transitional Medical Assistance through
      December 31, 2013:
       TMA provides 6
      to 12 months of transitional Medicaid coverage to low-income families leaving
      welfare for work.  Slated to expire
      February 29th of this year, the Administration proposed to continue it until
      the ACA coverage expansions are operational on January 1, 2014.  Congress routinely extends TMA (but
      also routinely likes to wait until the last minute to do so) so we expect to
      see at least a temporary extension, most likely as part of larger negotiations
      over an extension of the payroll tax cuts, SGR, and unemployment insurance.
    • Preventing inflation-based reductions in the federal
      poverty guidelines:
        To prevent
      people from losing Medicaid if inflation is negative, the budget proposes a
      “hold harmless” provision that would allow the federal poverty guidelines to be
      adjusted only if there is an increase in inflation (as measured by the Consumer
      Price Index for all Urban Consumers). 
      There is no cost to this one, but it is also unclear that Congress has
      interest in making small, helpful improvements to Medicaid. 
    • Eliminating duplicative error rate measurement programs: In a move that IS likely to be as popular with states as a Jeremy Lin
      three-pointer is with Knicks fans, the Administration proposes consolidating
      the two major audit programs it uses to evaluate Medicaid programs – the
      Medicaid Eligibility Quality Control and Medicaid Payment Error Measurement
      programs.  There is no budget
      impact, but a good idea nonetheless.
    • State flexibility to provide benchmark benefits to
      adults over 133 percent of the federal poverty line:
         In an effort to “clean up” a quirk in the ACA, the
      Administration has proposed allowing states that elect to provide adults above
      133 percent of the federal poverty level with benchmark benefits.  As currently written, the Medicaid
      statute requires states to provide benchmark benefits to many adults below 133
      percent of the federal poverty level, but requires them to provide “full”
      Medicaid benefits to those above 133 percent of the federal poverty line.  Since we don’t expect states to elect
      to cover any adults above 133 percent of the federal poverty line once
      subsidized Exchange coverage becomes available, I’d put this in the camp of
      useful, but of little or no relevance to most states.


Most of the budget materials on the ACA are designed to
explain the progress that already has been made in implementation, and only a
handful of legislative changes related to the law itself are proposed. 

  • Request for additional ACA implementation funding: The Administration is requesting
    $1 billion more in administrative funding for HHS, largely to implement the
    Affordable Care Act.  If Congress
    acceded to the request — which it surely will not —  administrative funding for HHS would rise from $3.8 billion
    to $4.8 billion.  The ACA itself
    included $1 billion in administrative funding for federal agencies to implement
    the law, but an HHS spokesperson said Monday that about half of this money
    already is obligated and the rest will be spent by the end of the year. 

As for how the administrative funds would be used, the
Administration says $574 million is needed to help HHS operate
federally-facilitated Exchanges (FFEs) and oversee state-based Exchanges in
2013.  Moreover, the agency cites
the need for ACA-related consumer and beneficiary education and outreach (some
$290 million), ACA-related IT systems, continued work on health, and
oversight of ACA private insurance reforms. 

As hard as it is to imagine the current Congress
providing more funding to implement the ACA, it is even harder to imagine that
the Obama Administration will throw up its hands if its funding request is
denied.  To the contrary, as Lester
Feder reported in Politico
earlier this week, even if Congress does not grant
the president’s request for more health reform funding, HHS is determined to
find a solution.  “We are going to
get it done, yes,” he quotes Secretary Sebelius as saying.  But, expect it to be harder than ever
to get emails and phone calls returned from the already-overworked staffers at
HHS in the months ahead.

  • Provide states with sweeping authority to waive ACA
    requirements beginning in 2014:
      The Administration proposes moving up the ability of states to seek
    sweeping waivers of the Affordable Care Act from 2017 to 2014.  There is no fiscal impact, but it is still a potentially controversial
    idea.  We are missing guidance on
    how the waivers would work, including on the extent to which consumer advocates
    will be involved in their development. It is easy to see them working well in
    states, such as Vermont, that are deeply committed to goals of the ACA.  At the same time, antagonistic states
    might use the waivers to avoid health reform, especially if they are available
    “right off the bat,” before a state even has a track record with the ACA. 


Just like last year, we can expect most of these
proposals to go nowhere in the short-run, but to return in future years.  A bit like “Downton Abbey” — minus the
gorgeous clothing  — where we
again and again get to wonder whether Cousin Matthew and Lady Mary will EVER
get together.  (For obvious and
very sad reasons, I’m on a temporary hiatus from Tom Brady analogies.)  Chances are that in future years, we’ll
still be wondering about Cousin Matthew and Lady Mary, and, if President Obama
wins re-election, again contemplating the fate of blended matching rates and
other Medicaid cuts.  Of course, if
he does not, we’ll likely be facing far more dire proposals, such as repeal of
the Affordable Care Act and/or transforming Medicaid into a block grant.

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