The National Association for the Advancement of Orthotics & Prosthetics (NAAOP) has issued the following legislative alert:
On April 10, President Obama released his fiscal year (FY) 2014 budget, two months after the official deadline by which the president is legally obligated to offer a spending proposal for the next fiscal year. His budget totals $3.77 trillion for 2014 and includes $580 billion in tax increases and more than $1 trillion in spending cuts over the next ten years to achieve a total of $1.8 trillion of additional deficit reduction. While the president’s proposal brings the deficit down to 1.7 percent of the gross domestic product (GDP) by 2023, it does not eliminate the annual deficit entirely.
There are two major provisions in the president’s budget that Republicans are suggesting will increase the possibility of reaching a “grand bargain” on deficit reduction later this year. The budget calls for nearly $400 billion of savings over ten years through entitlement reforms-primarily a combination of Medicare cuts and delivery reforms-some of which are listed in detail below. It also includes $230 billion in savings achieved by recalculating how cost-of-living adjustments are applied to Social Security and other programs across the federal government (better known as the chained consumer price index (CPI) proposal). Both of these proposals are very controversial.
The good news is that neither the president’s budget, nor the House or Senate budget, propose policies that would cut reimbursement for orthotics and prosthetics. Many other providers are slated for budget cuts, but not O&P, at least not yet. This is not to say that, in the end, O&P will not receive its share of the budget ax, but being excluded at this point is very encouraging news.
Sequestration: The president’s budget replaces the across-the-board cuts under sequestration, which would result in the elimination of the 2 percent cut in Medicare reimbursement that went into effect April 1. The cost of eliminating sequestration would be offset in part through nearly $400 billion in healthcare savings over ten years. This savings includes $371 billion in Medicare payment cuts to providers and drug companies, further means-testing of Part B and Part D premiums for more affluent Medicare beneficiaries, and many other proposals.
Medicaid: The president’s proposed Medicaid cuts are relatively small (about $22.1 billion over ten years) compared with previous budgets where he proposed $100 billion in Medicaid cuts. However, even these more modest proposals are significant for those providers and patients who are affected. For instance, the president’s budget would apply Medicare competitive bidding of durable medical equipment (DME) to Medicaid, saving about $4.5 billion.
House and Senate Budgets: The House and Senate have already passed their own budgets with significant differences between them and the president’s proposal. For instance, the Republican-led House passed a budget proposal in March that directs Congress to cut $4.6 trillion from programs such as Medicaid, food stamps, other entitlements, and discretionary domestic spending. The House budget would raise no new revenues (i.e., taxes) and would repeal the Affordable Care Act (ACA) but leave the savings achieved by the ACA (more than $700 billion) in the budget. It would also leave the $1.2 trillion sequestration cuts in place but would add significant new money for defense spending. In addition, the budget would overhaul Medicare for people 54 years old and younger by changing the program to a “premium support” model and eliminating the “entitlement” to Medicare.
The Democratic-controlled Senate also passed a budget proposal that would replace the sequestration cuts and realize $1.85 trillion in savings through a combination of tax revenue increases and spending cuts, about $750 billion of each over ten years. The Senate budget explanation proposes $275 billion in cuts from healthcare programs but offers little detail of these cuts other than to say that they would “not harm seniors or families.” There are indications that the Medicaid cuts would be limited to about $10 billion over ten years.
Budget Prospects: The next phase in the budget process is for the House and Senate to agree to a joint budget resolution that could frame the parameters of a grand bargain budget compromise. The House and Senate budgets are so different from each other that many expected this would not occur. But recent developments suggest that negotiations may actually move forward.
If a joint budget resolution is achieved, it is possible that it would include reconciliation instructions, which would establish the process for achievement of a major deficit reduction deal later this year. However, given the political polarization in Washington DC, this is still considered a tall order. Whether or not Congress agrees to a joint budget resolution, it will also have to tackle the annual appropriations bills for FY 2014, which will likely include additional health spending cuts other than entitlement cuts.
Medicare Spending Reductions Proposed in the President’s Budget:
- Post-Acute Care: Reduce inflation updates by 1.1 percent each year for inpatient rehabilitation hospitals and units (IRFs), long-term acute care hospitals (LTCHs), skilled nursing facilities (SNFs), and home health agencies ($80 billion over ten years).
- Bundling of Post-Acute Care Services: Beginning in 2018, implement bundled payment for post-acute care providers, including LTCHs, IRFs, SNFs, and home health providers; rates would be decreased by an aggregate -2.85 percent by 2020 (saves $8.2 billion over ten years). This proposal is not new, but additional detail has been added to this year’s proposal. O&P will likely be impacted by this proposal eventually, likely in a negative way.
Conclusion: Many of the president’s proposals are repeated from his earlier annual budgets and a few of these provisions are new. It is important to note that these proposals will not become law unless Congress and the president strike a legislative compromise.
NAAOP will continue to keep its membership informed of developments as they occur. For more information, visit www.naaop.org or e-mail [email protected]