On February 9, 2016, the Obama administration released its proposed budget for 2017. The 2017 budget includes a host of health care-related proposals, including new initiatives to increase access to mental health care, expand opioid abuse treatment, fight antibiotic resistance, address the Zika virus threat, and fund a “cancer moonshot.”
The budget proposes providing 100 percent federal funding for state Medicaid expansions for three years regardless of when the state decides to expand, allowing states to make 12-month continuous Medicaid eligibility determinations for adults, expanding Medicaid funding for Puerto Rico and the territories, and extending Children’s Health Insurance Program (CHIP) program funding through 2019. The budget document would standardize the definitions of Indian and Alaskan Native for federal health care programs.
To control Medicare spending, the budget proposal would reduce the target growth rate for Medicare enforced by the Independent Payment Advisory Board to 0.5 percentage points above per-capita GDP growth. It also contains a host of Medicare payment and delivery reform proposals.
The Department of Health and Human Services (HHS) Budget in Brief contains details on a number of legislative proposals affecting private insurance. One proposal would attempt to curb surprise balance bills by out-of-network providers by requiring hospitals to take steps to match patients with in-network providers and requiring physicians who regularly provide services in a hospital to accept an appropriate in-network rate as payment in full.
Another proposal would allow HHS to develop uniform definitions and principles for standardizing medical billing and making it more transparent. Self-insured non-federal governmental plans would be prohibited from opting out of various federal consumer protection laws, such as the Mental Health Parity Law.
The Affordable Care Act
The Cadillac Tax
The budget contains a number of proposals relevant to Affordable Care Act provisions. It would modify the high-cost employer health plan (“Cadillac”) tax to take account of geographic differences in health care costs; specifically, it would set the threshold when the tax begins to apply at the greater of the current statutory dollar threshold or a state’s “gold plan average premium.” It would change the method of calculating the premium subject to the tax to take into account the average amount contributed to flexible spending accounts by similarly situated employees rather than the FSA contributions of specific employees. It would also fund a Government Accountability Office (GAO) study of the effect of the excise tax on employers with unusually sick employees.
Funding For The Marketplaces And Other ACA Functions
The HHS Budget in Brief includes a request for $2.1 billion to fund the federally facilitated marketplaces and oversight of the state marketplaces. This includes $659 million for marketplace operations, $456 million for eligibility and enrollment functions, $744 million for consumer information and outreach (including the navigator program), and $657 million for information technology. The budget anticipates funding this amount through $1.6 billion in user fees and $535 million included in the Centers for Medicare and Medicaid Services (CMS) program budget.
The budget anticipates the collection of $4.335 billion and expenditure of $4.560 billion in 2017 for the transitional reinsurance program. These payments are for 2016, the final year of the program. Collections of $4.639 billion and payments of $4.560 billion are anticipated for the risk adjustment program. The budget projects $362 million in anticipated collections for the risk corridor program and $2.870 billion in obligations, but the budget documents note that obligations for the risk corridor program are uncertain and funding for the program is if anything even less certain.
The HHS budget-in-brief and the HHS budget appendix document the winding up of a number of early transitional ACA programs. The preexisting condition high-risk pool, the early retiree reinsurance program, and the initial $1 billion in ACA implementation funds are essentially exhausted. Approximately $39 million of funding that remains from state rate review grants will be used for consumer protection and insurance reform activities.
The final state health insurance exchange planning and establishment grants were awarded in 2014, but $319 million in already awarded grants remain to be spent. No new loans are being made under the Consumer Operated and Oriented Plan (CO-OP) Program, although significant amounts have been loaned through the program that will, it is hoped, be repaid over time, and a small amount remains for program oversight and assistance.
The budget proposal would give CMS access to the National Directory of New Hires to improve marketplace financial assistance eligibility determinations
The IRS Budget Request
The Internal Revenue Service budget request includes $402 million in ACA funding, including $105 million for taxpayer services, $20 million for enforcement, and $277 million for operations support. The Treasury budget appendix estimates that $47 billion will be spent in 2017 for premium tax credits (in addition to a reduction in tax collections of $3.5 billion), $7.6 billion for cost-sharing reductions, and $2.6 billion for Basic Health Programs.
Of course, the budget request of a president in his final year of office—particularly a president facing a hostile Congress—is unlikely to lead to enacted legislation. Congress in unlikely to expand the authority of the IPAB or increase funding for the Medicaid expansions. But many of the expenditures identified in the budget—for the risk adjustment, reinsurance, premium tax credit, and (subject to the court decision in House v. Burwell) cost-sharing reduction payment programs—are mandated by law and are unlikely to be changed by Congress. It is also unlikely that this Congress will defund the marketplaces or the IRS’s administration of the premium tax credits and enforcement of the mandates. Some of the budget proposals enjoy bipartisan support and may go somewhere.
The 2017 president’s budget at least offers an insight into the operating costs of the ACA and interesting proposals that the next president might, if sympathetic to the ACA, pursue.