On Feb. 13, President Obama submitted to Congress his fiscal fiscal year 2013 budget proposal, which would reduce the deficit by $4 trillion over the next decade.
The short-term bottom line would be a reduction in the annual deficit from $1.33 trillion this fiscal year to $901 billion (5.5 % of GDP) in budget year 2013, which starts in October.
Budget Sections
In his HHS budget request, the president called for increased integrity in the Medicare and Medicaid programs as well for continuing efforts to crack down on waste, fraud and abuse. The Obama administration indicates that many of the proposals submitted to the deficit reduction supercommittee last fall are incorporated into this budget.
The following are of particular concern:
Medicare
- Reduce market basket updates for SNFs and home health agencies by 1.1% annually in fiscal years 2014 through 2021. This reduction in the market basket adjustment would be in addition to the cut in the market basket required under the Affordable Care Act. Under the President's budget proposal, the market basket update first would be reduced by 1.1% and then by a factor computed on the basis of the increase in productivity in the nation's economy over the past year.
- Reduce Medicare coverage of bad debt, from 70% now to 25% in 3 years.
- Equalize payments for certain conditions commonly treated in IRFs and SNFs - applies to 3 conditions involving hips and knees.
- Reduce Medicare payments by up to 3% for SNFs with high rates of rehospitalizations.
- Require new Medicare beneficiaries to make co-payments for home health care services.
- Lower the trigger for the Independent Payment Advisory Board to step in with recommendations on cutting Medicare spending. IPAB recommendations may not increase beneficiary payments or restrict coverage, therefore would have to come mainly from health care providers.
- Continued implementation of Patient Protection and Affordable Care Act (PPACA) requirement that CMS develop a value-based purchasing program for SNFs and home health.
- Continued emphasis on reducing waste, fraud and abuse.
- Continued work on implementing ACA demonstration programs and initiatives including innovation grants, ACOs, bundled payments, and home- and community-based long-term care alternatives.
Medicaid
- Again calls for a blended federal matching rate. Would reduce federal Medicaid funding for all states, according to an analysis by the Center on Budget and Policy Priorities.
- Federal cap on provider taxes would be phased down from 6% currently to 4.5% in 2015, 4% in 2016, and 3.5% in 2017 and beyond.
Older Americans Act/HCBS
The president’s proposed budget in general requests a continuation of the funding for Older Americans Act funding from 2012.
- Lifespan respite program funding in the proposed budget continues to be at $2 million.
- The chronic disease self management program remains at $10 million.
- Social Service Block Grants remain the same at $1.7 billion. Social Services block grants fund in-home care, adult day services and transportation services for the elderly in a number of states.
- No change in funding for the Title III E National Family Caregiver Support Program that also funds adult day services and in-home services in a number of states. The President proposed funding this program at $154 million.
- Title IIIC Congregate Nutrition Services also showed no changes. The funding would remain at $440 million.
- Title IIIC Home-Delivered Nutrition Services remained at $217 million.
- Title III B HCBS Supportive Services in the proposed budget for FY2013 would receive the same funding level as the 2012 budgeted amount.
- No funding was allocated for program innovations. In 2011, there was $12 million for program innovation projects. Most of the funding for program innovations was shifted to the CMS Innovation Center.
Senior Housing
The good news is that the administration requested funding for new development, the bad news is that it may be difficult to access the funds if appropriated because changes in statutory authority would have to be legislated.
While we appreciate the administration's request for $475 million, including $100 million for new Section 202 housing, we are concerned that the proposals may result in at least a two-year hiatus until new units are developed. Under the proposed budget the funding for new units would be allocated as “operating assistance” and the states would be tapped to handle the processing (to include award selection). The proposal is based on changes that would require new legislative authority to fund only operating assistance, instead of capital advances and project rental assistance contracts (PRAC), and it is unclear what this change would mean for fair share requirements to make sure projects are funded in metro and non-metro communities. The current program defines PRAC as operating subsidy only and does not provide for debt service. Although the budget suggests that other sources of funding be used for the development of projects, namely the Low Income Housing Tax Credit (LIHTC) program, few states now give priority to supportive senior housing. While the budget provides $90 million for service coordinator grants, it is unclear how service coordinators would be funded under the new paradigm in the Section 202 PRACs.
We are also concerned that the budget’s reduction in project based rental assistance will have a devastating impact on providers by “short funding” contracts and providing less than a full 12 months of subsidy. A similar move was made in 2007, which destabilized projects and was roundly criticized by members of the multifamily industry and Congress.
Finally, the budget proposed changes in the medical deduction for unreimbursed medical expenses, increasing the threshold from 3% to 10% of income. This change would severely burden those residents with the lowest incomes and the highest medical expenses.
Working with Congress
As Congress considers 2013 budget and spending bills over the coming months, we will work with them and the Obama administration to ensure appropriate resources for a healthy, ethical and affordable system of aging services.