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President Releases FFY 2016 Budget Proposal

Summary of hospital-related provisions

President Obama has released his federal fiscal year 2016 budget for the federal government. The $3.9 trillion budget is a political document because the Republican-controlled Congress will not accept any of the provisions. Nonetheless, it offers a list of potential savings that Congress may turn to as it looks for funds to offset additional spending for policy priorities, such as fixing or repealing the sustainable growth rate formula for Medicare physician payments.

Of significant concern to hospitals are cuts in Medicare payments to providers totaling more than $431 billion over the next 10 years. The plan outlines $7.7 billion in increased Medicaid spending. Many of the proposed Medicare cuts have also been proposed in previous administration budgets and/or recommended by MedPAC. Additionally, the proposal finds $84 billion in savings from changes to beneficiary payments; replaces sequestration with other savings; and assumes that the physician payment formula will be reformed, but it does not suggest a pay-for. Several hospital-related programs are also slated for additional spending. A brief summary, including the 10-year nationwide savings (red) or spending (black) figure, follows. As more details become available, CHA will share them with members.

  • Site-Neutral Payments – reduce provider payments: $29.5 billion
  • Bad Debt – reduce Medicare coverage of bad debts: $31 billion
  • Graduate Medical Education (GME) – reduce Medicare spending on GME ($16.2 billion); create a value-based GME program ($ 4 billion)
  • New Health Care Provider Training – 13,000 new residents in a competitive GME program emphasizing high-quality training: $5.25 billion
  • Critical Access Hospitals – reduce payments from 101 percent of reasonable costs to 100 percent: $1.7 billion
  • Critical Access Hospitals – limit the CAH designation to those facilities more than 10 miles apart: $770 million
  • Post-Acute Care – reduce payment updates: $102 billion
  • Inpatient Rehabilitation Facilities – re-establish the 75 percent compliance threshold for certain patient conditions: $2.2 billion
  • Bundled Payments – implement bundled payments for post-acute care beginning in 2020: $9.2 billion
  • Medicaid Disproportionate Share – extend current payment reductions into 2025: $3.2 billion
  • CHIP – extend funding for CHIP through 2019: $11.9 billion
  • Children’s Graduate Medical Education – cut spending by $165 million  
  • Hospital Preparedness Program – unlike previous years, no cuts proposed
  • Mental Health Programs – spend an additional $58 million for treatment; eliminate the 190-day lifetime limit on inpatient psychiatric services: $5 billion
  • Value-Based Purchasing – implement payment reforms for home health agencies, ambulatory surgical centers and hospital outpatient departments: budget neutral
  • Medicaid Primary Care – extend enhanced payments for one year: $6.2 billion
  • PACE – create pilot to expand age eligibility: budget neutral
  • Dually Eligible – establish integrated appeals process for Medicare-Medicaid enrollees: budget neutral