By Jocelyn Guyer

With the release of the President’s fiscal year 2013 budget proposal yesterday, CCF staff have begun the annual ritual of digging through lengthy documents and tables to untangle what it might mean for the health care coverage of children and families.  It is a challenging task in the best of times, but even harder this year when the refrain coming from Washington pundits that the President’s budget is not going anywhere (at least prior to the fall elections) keeps up a steady background noise as we try to concentrate on the task at hand.

Even with all the election year distractions, there are some ideas and policies that rise above the noise.  Some of them have been proposed in past budget negotiations with Congress and seem to have “stickiness” to them and so, are worth delving into deeper.  While we don’t think most of them are going anywhere for now, they could pop up again in the lame duck session of Congress after the fall elections or in future years.

OVERALL

For the big picture, we encourage you to check out the Center on Budget and Policy Priorities statement, which suggests that the President’s budget “would, if enacted, make significant progress in reducing deficits, although policymakers would have to take further steps, especially for future decades.”

MEDICAID & CHIP

As in last year’s budget, the Administration is targeting Medicaid for some budget savings — $56 billion over ten years. For the most part, they are relying on the same proposals as they put forth last year, many of which created endless trouble with Governors and Congress during negotiations over the debt ceiling.  And, just as last year, they aren’t likely to go anywhere in the near future.  Some of the more significant proposals include:

• Least favorite re-run – return of the blended matching rate:  The Administration proposes to cut $17.9 billion in federal Medicaid funding through creation of a “blended matching rate” for states. Instead of providing states with different matching rates for Medicaid, CHIP and the ACA Medicaid expansion, the Administration would like to provide each state with a single “blended” rate, beginning in 2017.  If you skipped reading our blog from last year on the gory details of “blended matching rates” in the hopes that they would just go away, this seems to be one of those sticky ideas that keeps popping up so you may want to read some background on it. 

Then, as now, we don’t object in principle to creating a simpler financing structure for Medicaid and CHIP.  But, the problems with the Administration’s proposal still include: 1) it would be used to cut federal support for Medicaid and CHIP, not just to simplify the financing system; 2) the Administration still has never outlined how it would ensure that eliminating the enhanced matching rate for CHIP will not result in children missing out on coverage; and 3) no one seems to have any details on how the concept would actually work, making it very hard to fully assess the proposal.  All of these issues could perhaps be addressed, but, in its current form, the blended matching rate proposal is little more than a gussied up cut in federal support for Medicaid and CHIP that is very unlikely to go anywhere for now.

• Cut in provider taxes:  The other “big ticket” item making a reappearance is a proposal to limit states’ use of provider taxes to finance their share of Medicaid spending.  At $21.8 billion over ten years, this is the single largest source of Medicaid savings in the proposed budget.  As occurred last year, look for states to respond to this proposal with the same enthusiasm that Boston fans would welcome Eli Manning to their favorite watering hole. 
• Anti-fraud and abuse provisions: In the Medicaid/Medicare universe this year, one topic is about as popular as Adele was at the Grammys – fraud and abuse.   There’s a plethora of anti-fraud initiatives in Medicare, Medicaid and CHIP again front and center in the President’s budget.  These include measures to 1) crack down on pharmaceutical companies that are skirting their obligations to pay Medicaid drug rebates; 2) require states to monitor and respond to potentially abusive prescribing patterns; and 3) make it more difficult for fraudulent providers to continue to participate in Medicare and Medicaid.  Not lots of money here – about $3.6 billion in Medicaid and Medicare savings over 10 years – but, unlike almost all of the other Medicaid and CHIP items in the budget, Congress might just take these ideas for a spin down the red carpet this year.
• Other cuts: The budget also includes further cuts to disproportionate share hospital payments ($8.3 billion in savings over 10 years) and a proposal to save $3 billion by limiting federal reimbursement for durable medical equipment (e.g,. wheel chairs, hospital beds, nebulizers).
• The good stuff:  Last, but not least, there are some helpful improvements to Medicaid and CHIP for families and children included in the budget.  Most notably:

• Extension of Transitional Medical Assistance through December 31, 2013: TMA provides 6 to 12 months of transitional Medicaid coverage to low-income families leaving welfare for work.  Slated to expire February 29th of this year, the Administration proposed to continue it until the ACA coverage expansions are operational on January 1, 2014.  Congress routinely extends TMA (but also routinely likes to wait until the last minute to do so) so we expect to see at least a temporary extension, most likely as part of larger negotiations over an extension of the payroll tax cuts, SGR, and unemployment insurance.
• Preventing inflation-based reductions in the federal poverty guidelines:  To prevent people from losing Medicaid if inflation is negative, the budget proposes a “hold harmless” provision that would allow the federal poverty guidelines to be adjusted only if there is an increase in inflation (as measured by the Consumer Price Index for all Urban Consumers).  There is no cost to this one, but it is also unclear that Congress has interest in making small, helpful improvements to Medicaid. 
• Eliminating duplicative error rate measurement programs: In a move that IS likely to be as popular with states as a Jeremy Lin three-pointer is with Knicks fans, the Administration proposes consolidating the two major audit programs it uses to evaluate Medicaid programs – the Medicaid Eligibility Quality Control and Medicaid Payment Error Measurement programs.  There is no budget impact, but a good idea nonetheless.
• State flexibility to provide benchmark benefits to adults over 133 percent of the federal poverty line:   In an effort to “clean up” a quirk in the ACA, the Administration has proposed allowing states that elect to provide adults above 133 percent of the federal poverty level with benchmark benefits.  As currently written, the Medicaid statute requires states to provide benchmark benefits to many adults below 133 percent of the federal poverty level, but requires them to provide “full” Medicaid benefits to those above 133 percent of the federal poverty line.  Since we don’t expect states to elect to cover any adults above 133 percent of the federal poverty line once subsidized Exchange coverage becomes available, I’d put this in the camp of useful, but of little or no relevance to most states.

AFFORDABLE CARE ACT

Most of the budget materials on the ACA are designed to explain the progress that already has been made in implementation, and only a handful of legislative changes related to the law itself are proposed. 

• Request for additional ACA implementation funding: The Administration is requesting $1 billion more in administrative funding for HHS, largely to implement the Affordable Care Act.  If Congress acceded to the request — which it surely will not —  administrative funding for HHS would rise from $3.8 billion to $4.8 billion.  The ACA itself included $1 billion in administrative funding for federal agencies to implement the law, but an HHS spokesperson said Monday that about half of this money already is obligated and the rest will be spent by the end of the year. 

As for how the administrative funds would be used, the Administration says $574 million is needed to help HHS operate federally-facilitated Exchanges (FFEs) and oversee state-based Exchanges in 2013.  Moreover, the agency cites the need for ACA-related consumer and beneficiary education and outreach (some $290 million), ACA-related IT systems, continued work on health care.gov, and oversight of ACA private insurance reforms. 

As hard as it is to imagine the current Congress providing more funding to implement the ACA, it is even harder to imagine that the Obama Administration will throw up its hands if its funding request is denied.  To the contrary, as Lester Feder reported in Politico earlier this week, even if Congress does not grant the president’s request for more health reform funding, HHS is determined to find a solution.  “We are going to get it done, yes,” he quotes Secretary Sebelius as saying.  But, expect it to be harder than ever to get emails and phone calls returned from the already-overworked staffers at HHS in the months ahead.

• Provide states with sweeping authority to waive ACA requirements beginning in 2014:  The Administration proposes moving up the ability of states to seek sweeping waivers of the Affordable Care Act from 2017 to 2014.  There is no fiscal impact, but it is still a potentially controversial idea.  We are missing guidance on how the waivers would work, including on the extent to which consumer advocates will be involved in their development. It is easy to see them working well in states, such as Vermont, that are deeply committed to goals of the ACA.  At the same time, antagonistic states might use the waivers to avoid health reform, especially if they are available “right off the bat,” before a state even has a track record with the ACA. 

LOOKING AHEAD

Just like last year, we can expect most of these proposals to go nowhere in the short-run, but to return in future years.  A bit like “Downton Abbey” — minus the gorgeous clothing  — where we again and again get to wonder whether Cousin Matthew and Lady Mary will EVER get together.  (For obvious and very sad reasons, I’m on a temporary hiatus from Tom Brady analogies.)  Chances are that in future years, we’ll still be wondering about Cousin Matthew and Lady Mary, and, if President Obama wins re-election, again contemplating the fate of blended matching rates and other Medicaid cuts.  Of course, if he does not, we’ll likely be facing far more dire proposals, such as repeal of the Affordable Care Act and/or transforming Medicaid into a block grant.