In recent weeks, Congress passed another in a series of short-term budget resolutions for the 2018 Federal Fiscal Year (FFY) and the President announced his blueprint for the 2019 FFY budget. These federal developments will substantially affect health care programs, including the Affordable Care Act (ACA), Medicare and Medicaid, and highlight areas of continuing federal debate and potential action. Both the 2018 short-term continuing resolution and the President’s proposed FFY 2019 budget contain important health care provisions with real and potential impacts for health care and coverage in California.
The Bipartisan Budget Act of 2018
The U.S. Senate continues to fall short of the sixty votes needed to finalize a comprehensive 2018 budget, months into the 2018 FFY which began on October 1, 2017. To date, Congress has passed several short-term continuing resolutions, or stopgap measures, to keep the federal government in operation and fund key federal programs, including some federal health care programs.
On February 9, President Trump signed the latest continuing resolution, the Bipartisan Budget Act of 2018 (H.R. 1892), extending FFY 2018 funding through March 23, 2018. This stopgap measure reflects progress toward a final FFY 2018 budget deal; however, many issues that will impact the ability of Congress to reach agreement on a final budget remain unresolved, including the fate of youth and young adults in the Deferred Action for Childhood Arrivals program and border security.
Unlike previous short-term continuing resolutions, the more extensive 650-page budget resolution includes a bipartisan agreement on defense and other discretionary spending, signaling progress toward finalizing a comprehensive FFY 2018 budget.
The budget resolution allocates federal funding for many federal health care programs, including:
- Extends funding for the Children’s Health Insurance Program, recently extended through 2023, for an additional four years through 2027;
- Provides two years of federal grant funds for community health centers ($7.8 billion), the National Health Service Corps, and teaching health centers that operate graduate medical education programs;
- Extends the delay in ACA payment cuts to Medicaid disproportionate share hospitals (DSH) for an additional two years, allowing California hospitals to retain an estimated $167 million for FFY 2018 and $250 million for FFY 2019. Reinstates the ACA mandated cuts in FFY 2020 and increases the DSH payment reductions for FFY 2021-2025. The original ACA DSH reductions totaled $18.1 billion over seven years (FFYs 2014-2020). H.R. 1892 more than doubles the DSH reductions to $44 billion over six years (FFYs 2020-2025);
- Appropriates funds to address the opioid epidemic ($6 billion);
- Funds through 2022 the Maternal, Infant, and Early Childhood Home Visiting Program, a federal-state partnership used by counties to enhance early childhood development;
- Cuts $1.35 billion (a 10 percent reduction) from the ACA Prevention and Public Health Fund over 10 years;
- Accelerates the closure of the so-called “donut hole” for seniors in the Medicare Part D prescription drug coverage program. The donut hole requires Medicare recipients to pay all of the out-of-pocket costs for prescriptions once the recipient and the drug plan have spent a certain amount of money for covered drugs, until the recipient’s share reaches a yearly limit;
- Repeals the ACA Independent Payment Advisory Board (IPAB). The ACA authorized the IPAB to help slow the growth in Medicare costs, but no members have been appointed and the Board is not operational.
- Delays for two years the ACA “Cadillac Tax,” a 40 percent excise tax on high-premium employer health coverage plans; and
- Implements the Chronic Care Act which increases flexibility in the care for chronically ill Medicare beneficiaries, including allowing Medicare managed care plans to cover long-term social services and supports and expanding coverage for telemedicine services.
The President’s Proposed FFY 2019 Budget
Just days after signing H.R. 1892, President Trump issued his proposed FFY 2019 budget. Significantly, the President’s proposed FFY 2019 budget incorporates provisions from the Graham-Cassidy-Heller-Johnson (Graham-Cassidy) amendment to H.R. 1628, an ACA “repeal and replace” proposal that failed passage in the Senate in September 2017. (See ITUP Blog and Summary of Graham Cassidy.) According to U.C. Berkeley Labor Center estimates from September 2017, 6.7 million Californians could lose coverage if provisions from the Graham-Cassidy proposal were implemented.
The proposed FFY 2019 budget redirects and combines enhanced federal funding for the ACA Medicaid adult expansion, ACA premium tax credits for individual coverage through exchanges, and payments to exchange health plans for cost sharing reductions into a new state block grant, referred to in the proposal as “market-based” state grants. Under the proposal, states would receive less federal funding than under current law and in 2027, the proposal eliminates federal funds for the grants.
The new market-based grant program hits California especially hard because the allocation formula redistributes funds from states that expanded Medicaid under the ACA to states that did not. When this approach was proposed as part of Graham-Cassidy, 20 states, including California, faced cuts ranging from 35-60 percent of existing funds in the redirected programs. (See ITUP Blog and Summary of Graham-Cassidy for more information.)
The President’s proposed FFY 2019 budget, among other things, also proposes the following:
- Adopts the Medicaid per capita cap and block grant proposals included in Graham-Cassidy;
- Adjusts the market-based state grants, Medicaid per capita cap, and block grant growth rates based on the Consumer Price Index (CPI-U), rather than the Medical CPI, which more accurately captures growth in health care costs;
- Allows state flexibility in Medicaid benefit design, eligibility, and cost sharing, including allowing states to adopt work requirements in Medicaid, deny Medicaid coverage to those unable to prove their immigration status, increase beneficiary copayments for improper use of the emergency room, and reinstate asset testing (a process that considers the value of an individual’s assets, such as a home or a car, in the Medicaid eligibility determination);
- Builds on the increased level of DSH reductions in H.R. 1892 and proposes an additional $24 billion in DSH reductions over three years (2026-2028);
- Allows up to five pilot states to negotiate directly with drug manufacturers and create a Medicaid drug formulary, a system that gives preferential treatment to certain drugs over others and provides some leverage in negotiating drug prices with manufacturers;
- Makes various changes to the Medicare prescription drug benefit, including providing recipients with more predictable annual drug expenses through the creation of a new out-of-pocket spending cap and elimination of cost sharing on generic drugs for low-income beneficiaries;
- Increases Medicare Part D prescription drug formulary flexibility, establishing an inflation limit for reimbursement of Medicare Part B drugs, and other changes related to Medicare prescription drug coverage;
- Provides nearly $10 billion in new funding over ten years to combat the opioid epidemic and to fund substance abuse and mental health services; and
- Prohibits certain abortion providers (unspecified in the budget document) from receiving federal funding under the federal Health and Human Services Department, including providers that receive funding under the Title X Family Planning program and Medicaid.
Congress rarely acts on the budgets proposed by the President – especially in an election year. However, the President’s proposed FFY 2019 budget reveals the Administration’s priorities, indicating potential areas of debate and activity on the budgets for both FFY 2018 and FFY 2019.