Proposed Budget Would Reduce HHS Spending

Miranda Franco is a senior policy advisor in Holland & Knight's Washington, D.C. office

President Trump's budget was released yesterday as the fiscal year (FY) 2020 appropriations process ramps up. The FY 2020 budget requests $87.1 billion in discretionary funding for the Health and Human Services (HHS) Department, down 11.9 percent from fiscal year (FY) 2019.

HHS Secretary Alex Azar and Acting Office of Management and Budget Director (OMB) Russell Vought testified on March 12, 2019 before the health subcommittee of the House Committee on Energy and Commerce and will testify on March 13 before a subcommittee of the House Committee on Appropriations to justify the President's request. A budget resolution doesn't have the force of law, so it traditionally serves as an aspirational document. The budget is unlikely to advance in Congress. However, it does provide a blueprint on how the administration seeks to handle healthcare issues. Notably, it is likely; the administration will seek to advance some of these proposals through rulemaking, e.g., site neutrality.

Regarding Medicare, the budget proposal calls for significant cuts in federal Medicare spending over ten years. These cuts would in part stem from lower payments to hospitals and a renewed focus on targeting fraud and abuse in the program. Also, the budget proposal calls for reducing Medicare's uncompensated care payments for services provided to non-Medicare beneficiaries beginning in FY 2021. Medicare typically reimburses 65 percent of hospital providers' bad debts that come from beneficiaries' deductibles and coinsurance that go unpaid. The budget includes a proposal to reduce that reimbursement over three years to 25 percent. Rural hospitals with fewer than 50 beds, critical access hospitals, rural health clinics and Federally Qualified Health Centers (FQHCs) would be exempt.

The budget proposal also calls for "realigning incentives through site-neutral payment reform," including removing current exemptions for site-neutral payments implanted under the Bipartisan Budget Act of 2015. The budget-in-brief contains a proposal to pay all off-campus hospital outpatient facilities under the physician fee schedule in 2020 for services also performed in a doctor's office -- including emergency departments, cancer hospitals and those exempted from current site neutrality requirements.

Meanwhile, the budget proposes increasing Medicare payments for certain primary care services through a...