2011 White House Budget

By John Jordan, Compliance Associate
johnjordan@cis-partners.com

February 1, 2010, President Obama released his proposed budget for the fiscal year of 2011. The fiscal year starts in October, 2010. The total for the 2011 budget is $3.8 trillion. With this said, the current year’s deficit will be a record breaking $1.6 trillion, and 2011 projected deficit would be $1.3 trillion. As many of us are wondering, how does this affect the Pharmaceutical area? The Department of Health and Human Services received $81.3 billion in support from the President’s budget . This is slightly down from the approximately $82 billion estimated for 2010. According to the Budget documentation some of the key highlights include:

• Supports health insurance reform by expanding patient-centered health research to give patients and physicians the best available information on what treatments will work the best for them. Also in supporting investments in health information technology, expanding prevention and wellness activities, and launching payment reform demonstration programs in Medicare.
• Adds $290 million for healthcare centers to expand health care access to the medically underserved.
• Expands support for biomedical research, by providing an increase of $1 billion for the National Institutes of Health.
• Invests approximately $1.4 billion to strengthen food safety efforts.
• Supports over 8,500 healthcare professionals in medically underserved areas through the National Health Service Corps.
• Continues a commitment to invest in the Indian Health Systems.
• Invests more than $3 billion for HIV/AIDS prevention and treatment activities to expand access to affordable healthcare and prevention services.
• Includes $25.5 billion for a 6-month extension of the American Recovery and Reinvestment Act (ARRA) temporary increase in Federal Medicaid match.
• Increases funding towards bio-defense medical countermeasure development.
• Places renewed emphasis on preventing, detecting, and recouping fraudulent, wasteful, and abusive payments in Medicare, Medicaid, and Children’s Health Insurance Program (CHIP).
• Increase of $1.6 billion for child care to serve 235,000 more children than could be served without additional funds in 2011 for the programs Head Start and Early Head Start.
• Increases help for families caring for aging relatives at home.

The $25.5 billion allocated for the 6-month extension of the ARRA is to help States maintain their Medicaid programs during a period of high enrollment and not enough funding within the State revenue systems. This provides the States with fiscal relief for an extended 6-month period. President Obama’s budget also has an increase of $250 million aimed toward the prevention of fraud. This is supposed to ensure that the government, including the Department of Justice, the Office of Inspector’s General, etc., will strongly enforce the penalties to a manufacturer if there is a case of fraud towards the Medicaid, Medicare, and CHIP programs.

In addition to those accounts within the Department of Health and Human Services, there were a few changes that took place between the 2010 budget and 2011 budget proposal. The Administration decided to terminate the funding for the projects in the Health Care Facilities and Construction, the Denali Commission, which supports the construction of health facilities in Alaska, and the Delta Health Initiative, which consists of training healthcare professionals, and the purchase of equipment in Mississippi. These programs were designated as being private health care facilities and should not be included in Federal spending.

The Administration feels that it will be saving money in the long run by investing in certain sectors of the Department of Health and Human Services. For example, it feels that for every dollar spent to prevent and fight healthcare fraud and improper payments, approximately $1.55 will be saved. Another view is that by putting forth legislation to provide additional program integrity authority to the Centers for Medicare and Medicaid Services (CMS), CMS can take specific actions against providers that do not follow appropriate Medicare payment requirements. Another method of fraud prevention is to require States to track and monitor providers’ drug billing, tracking, and utilization patterns that could help deduce whether or not payments are being paid inappropriately.

With this budget in place, the President’s advisors are predicting that the deficit will decrease in the future and that investing now will pay off in the long. According to an article in the New York Times,

“Over 10 years, according to the administration, the budget would save an
estimated $1.2 trillion, mainly by ending the Bush tax cuts for the richest
Americans and freezing some domestic spending for three years. But that total is
roughly one-fifth of the size of the debt that will pile up from now to 2020,
the budget shows.”

Peter Orszag, President Obama’s budget director, also states that Obama will keep his promise towards reducing the deficit in half by the end of his term.

There is also another side of the argument in regards to the deficit. According to some research, it is shown that the national deficit would reach $18.6 trillion in the year 2020, if everything is accepted in President Obama’s proposal. This statement was made by James Capretta, who served as an associate director at the White House Office of Management from 2001-2004. A deficit that large would likely start an economic crisis. “At some point, the flood of Treasury debt instruments worldwide would lead lenders to demand higher rates of return for their loans, or perhaps to runaway inflation — or more probably both. The result could be quite devastating to private-sector business investment, productivity and job growth, making it all the more difficult to get out from under the debt spiral that would ensue,” states Capretta.

Sources:
1. http://www.whitehouse.gov/omb/budget/Overview/
2. http://www.nytimes.com/2010/02/02/us/politics/02budget.html
3. http://www.foxnews.com/politics/2010/01/31/obama-offers-budget-deficits-far-number-crunchers/http://www.kaiserhealthnews.org/Columns/2010/February/020410Capretta.aspx