[Budget Supplement]
[Creating Opportunity and Encouraging Responsibility]
[6. Strengthening Health Care]
[From the U.S. Government Printing Office, www.gpo.gov]


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  We still have a lot of work to do. But the answer to the problems of the great American middle class, the     
answer to the problem of curing the American deficit, the answer to the problem of dealing with the challenge of
educating a new generation of Americans for a new, highly competitive economy--surely the answer to those       
problems is not to break down the one thing we have done right completely, which is to keep faith with our      
elderly people.                                                                                                 
                                                                                                                
                                      President Clinton                                                         
                                      July 1995                                                                 
                                                                                                                
                                                                                                                

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  In a recent report in the New England Journal of Medicine, two 
demographers wrote that Americans who reach the age of 80 have a longer 
life expectancy than their counterparts in Japan, England, France, and 
Sweden. One reason, they wrote, is that older Americans receive better 
health care than the elderly in other countries.\1\
  \1\Manton, Kenneth G., and Vaupel, James W., ``Survival After the Age 
of 80 in the United States, Sweden, France, England, and Japan,'' New 
England Journal of Medicine, November 2, 1995, pp. 1232-1235.
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  With this in mind, our challenge is to build on the existing health 
care system--to protect its strengths and address its weaknesses--as the 
President has tried to do for the last three years. It is not to do as 
others would--that is, to tear it down.
  The President has consistently worked to balance two competing demands 
in health care: (1) improving access to coverage, and (2) making the 
system more efficient. Thus, he has sought to create an environment in 
the public and private health systems where plans compete based on 
quality and cost-effectiveness, not on which can choose the healthiest 
and cheapest populations to insure. The budget includes health care 
provisions that reflect this commitment.
  Many innovations in health care have helped to contain costs in the 
private sector. The best of them make our delivery system more 
efficient, and improve quality by increasing consumer choice, stressing 
accountability, and focusing on medical outcomes. The President proposes 
to introduce these kinds of improvements into Medicare. For its 37 
million beneficiaries, they would create more plans to choose from, 
higher quality care, and a more cost-effective program.
  For Medicaid, the President's plan proposes to give States 
unprecedented flexibility to better manage their programs. They no 
longer would have to receive Federal permission to use managed care for 
their Medicaid populations, to expand into more desirable home- and 
community-based service programs for the chronically ill, or to expand 
coverage.
  The plan would let States better negotiate contracts with health 
providers. And the President's per-person limit on Medicaid spending 
would ensure that federal dollars follow the recipients--an approach 
that would limit the growth in Medicaid spending while protecting States 
that face high population growth or economic downturns. These and other 
provisions would maintain and strengthen Medicaid's guarantee of 
meaningful coverage for 36 million vulnerable Americans.
  In addition, the budget proposes $26.9 billion, a $1.2 billion 
increase over 1996, for a wide range of public health services as well 
as research and regulatory activities that promote public health.
  The services range from community health centers in inner 
          cities, to clinics on remote Indian reservations, to research 
          activities at prestigious universities and medical schools. 
          Public health clinics provide immunizations for uninsured 
          children, dental care for the underinsured, and prenatal
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 care 
          for millions of low- and moderate-income women. Other public 
          health services that help those in need include the Ryan White 
          program, which gives States and cities the resources to 
          deliver vital services to people with AIDS.
  The research and regulatory activities include biomedical and 
          behavioral research at the National Institutes of Health 
          (NIH), worker safety and health research at the National 
          Institute for Occupational Safety and Health, and food and 
          pharmaceutical safety regulation and enforcement at the Food 
          and Drug Administration.

                         STRENGTHENING MEDICARE

  The budget strengthens and improves Medicare, extending the solvency 
of the Part A Hospital Insurance trust fund through the next decade. It 
gives seniors and people with disabilities more choices among private 
health plans, makes Medicare more efficient and responsive to 
beneficiary needs, attacks fraud and abuse through programs praised by 
law enforcement officials, slows the growth rate of provider payments, 
and holds the Part B Supplementary Medical Insurance premium at 25 
percent of program costs.
  The plan saves $124 billion over seven years, as estimated by the 
Health Care Financing Administration's Office of the Actuary. The 
Administration is proposing policies that save $124 billion in Medicare 
using either the Administration's or CBO's ``baseline'' (i.e., 
projection of Medicare spending). The Administration will work with 
Congress to ensure that any plan that the President proposes will save 
$124 billion as estimated by CBO.\2\
  \2\The Administration expects that, for technical reasons--e.g., 
different assumptions about how fast Medicare spending will grow, and 
how providers and beneficiaries will behave--the Congressional Budget 
Office (CBO) will estimate that the Administration's plan saves slightly 
less. In that event, the Administration has identified a way to close 
the gap--specifically, by changing the legal formula for paying hospital 
outpatient departments to better reflect actual costs.
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Provider Payment Reforms and Program Savings

  Hospitals.--The budget reduces the annual inflation increase, 
          or ``update,'' for hospitals; reduces payments for hospital 
          capital; reforms payments for graduate medical education; and 
          begins to reform the payment method for outpatient departments 
          while protecting beneficiaries from increasing charges for 
          those services.
  Managed Care.--The budget reforms payments by using reasonable 
          rate-of-growth limits on updates for managed care payments and 
          reducing the current geographic variation in payments.
  Physicians.--The budget reforms physician payments by paying a 
          single update for all physicians\3\ and replaces current 
          ``volume performance standards'' with a sustainable growth 
          rate.
  \3\The hospital update will be based on a single ``conversion 
factor,'' or base payment amount, replacing the current three conversion 
factors, effective January 1, 1997.
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  Home Health Care/Skilled Nursing Facilities.--The budget 
          implements interim payment reforms, leading to separate 
          prospective payment systems for home health care and skilled 
          nursing facilities.
  Fraud and Abuse.--The budget introduces aggressive and 
          comprehensive policies to stamp out Medicare waste, fraud, and 
          abuse, and extends and enhances Medicare's secondary payor 
          policy to ensure that Medicare pays only when it should.
  Other Providers.--The budget freezes or reduces payments for 
          durable medical equipment and ambulatory surgical centers.
  Beneficiaries.--The budget continues, but does not increase, 
          the requirement that beneficiaries pay 25 percent of Part B 
          costs through the monthly Part B premium; it imposes no new 
          cost increases on beneficiaries.

Provisions to Improve Rural Health Care

  The budget enhances access to, and the quality of, health care in 
rural areas. It extends the Rural Referral Center program; allows direct 
Medicare reimbursement for nurse practitioners, clinical nurse 
specialists, and physician assistants; improves the Sole Community 
Hospital program; expands the Rural Primary Care Hospital program; and
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provides grants to promote telemedicine and rural health outreach.

Provisions to Expand Choices and Add Preventive Benefits

  The budget expands and improves Medicare managed care by:
  ensuring beneficiary protections while increasing the types of 
          plans--including Preferred Provider Organizations and Provider 
          Sponsored Networks--available to seniors and people with 
          disabilities; and
  instituting a coordinated annual open enrollment process--
          similar to that used by the Federal Employees Health Benefits 
          Plan--during which beneficiaries use comparative information 
          to choose among managed care and supplemental insurance 
          options.
  In addition, the budget expands coverage of preventive benefits to 
include annual mammograms and the elimination of mammography 
coinsurance, colorectal cancer screening, flu shots, and diabetes 
screening and education. Finally, the budget introduces a respite care 
benefit, providing relief to families caring for relatives with 
Alzheimer's disease.

                         STRENGTHENING MEDICAID

  The budget reforms Medicaid to give States much more flexibility to 
manage their programs, while preserving the guarantee of meaningful 
health coverage for the most vulnerable Americans. Millions of children, 
people with disabilities, and the elderly would retain the guarantee of 
basic health and long-term care services.
  The budget saves $59 billion over seven years by imposing a per-person 
limit on spending, and cutting Disproportionate Share Hospital payments 
and retargeting them to hospitals that serve large numbers of Medicaid 
and uninsured patients. As with Medicare, the Administration expects CBO 
to make somewhat different estimates about how much the budget would 
save in Medicaid. In this case, too, the Administration will work with 
Congress to ensure that any plan that the President proposes saves $59 
billion under CBO estimates.
  The plan provides special payments to States for their transition into 
the new system and for meeting their most pressing needs. It gives 
States unprecedented flexibility to administer their programs more 
efficiently. Finally, it retains current nursing home quality standards 
and continues to protect the spouses of nursing home residents from 
impoverishment.

Program Savings

  Per-person cap.--A per-person cap on Medicaid growth would 
          limit spending to a reasonable level, while retaining current 
          eligibility and benefit guidelines. This approach guarantees 
          that the elderly, people with disabilities, pregnant women, 
          and children who depend on Medicaid would remain eligible for 
          health benefits, while it slows increases in spending to 
          levels that States and the Federal Government can support. In 
          contrast to a block grant, the Administration's plan protects 
          States facing population growth or economic downturns.
  Disproportionate Share Hospital Payments (DSH).--The budget 
          gradually reduces DSH payments and retargets them to hospitals 
          that serve a large proportion of Medicaid and uninsured 
          patients, including children's and public hospitals. It 
          provides special payments for Federally Qualified Health 
          Centers, Rural Health Clinics, States with large numbers of 
          undocumented immigrants, and States moving into the new 
          system.

Provisions to Increase State Flexibility

  The budget includes a number of policies to give States more 
flexibility in managing their Medicaid programs, such as:
  Boren amendment.--The plan repeals the ``Boren amendment'' for 
          hospitals and nursing homes, allowing States more flexibility 
          to negotiate provider payment rates.
  Managed care.--The plan allows States to adopt managed care 
          without Federal waivers.
  Home- and community-based care.--The plan allows States to 
          move populations who need long-term care from nursing
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 homes to 
          home- and community-based settings without Federal waivers.
  Coverage expansions without waivers.--The plan enables States, 
          without waivers, to expand coverage to any person whose income 
          is under 150 percent of the poverty line. States would pursue 
          these expansions within their per-person limits, thereby 
          limiting Federal costs.

Protections for the Most Vulnerable

  The budget retains the policy of helping low-income seniors and people 
with disabilities by preserving the shared Federal-State responsibility 
for their Medicare premiums, copayments, and deductibles. It also 
retains payment protections for Medicaid-eligible Native Americans 
treated in Indian Health Service and other facilities. These protections 
are not subject to the per-person cap.

        MAINTAINING AND EXPANDING COVERAGE FOR WORKING AMERICANS

Reforms to Make Health Coverage More Accessible and Affordable

  In his State of the Union address, the President challenged Congress 
to enact insurance reforms to enable more Americans to maintain health 
insurance coverage when they change jobs, and stop insurance companies 
from denying coverage for pre-existing conditions. The budget proposes 
that plans make coverage available to all groups of businesses, 
regardless of the health status of any group members. Insurers would 
have to provide an open enrollment period of at least 30 days for all 
new employees (whether or not they were previously insured), and 
insurers could not individually underwrite new enrollees--i.e., their 
premiums would have to match other enrollees' with similar demographic 
characteristics.
  To increase affordability, the President's insurance reforms phase out 
the use of claims experience, duration of coverage, and health status in 
determining rates for small businesses. To put the self-employed on a 
more equal footing with other businesses, the reforms gradually raise 
the self-employed tax deduction for health insurance premiums from 30 to 
50 percent. And to help give small businesses the purchasing clout that 
larger businesses have, the budget proposes $25 million a year in grants 
that States can use for technical assistance and for setting up 
voluntary purchasing cooperatives.

Health Insurance for the Temporarily Unemployed

  The budget gives premium subsidies to individuals who lose their 
health insurance when they lose their jobs, to pay for private insurance 
coverage for up to six months. States would receive funding to design 
and administer the program, which would provide coverage for about 3.8 
million Americans a year. During the four-year period for which this 
program is authorized, a Commission would study and provide 
recommendations to the Administration and Congress as to making it 
permanent.

                         PROMOTING PUBLIC HEALTH

  The budget continues our Nation's critical investment in basic 
biomedical research, an investment that plants the seeds for lifesaving 
advances in medicine. The budget proposes $12.4 billion for NIH, a $467 
million increase over 1996 and a 20 percent increase since 1993. 
Further, the budget advances our efforts to eradicate, once and for all, 
the dreaded disease of polio. And it supports childhood immunizations, 
which have proven their cost-effectiveness time and again.
  The budget continues the President's strong commitment to HIV/AIDS 
prevention and treatment. It increases funds to prevent HIV transmission 
by $34 million over 1996 levels. It increases Ryan White funding by $32 
million over 1996 to ensure that our most hard-hit cities, States, and 
local clinics can assist those with AIDS. It increases funding for 
potentially life-prolonging therapies, including some of the newly-
discovered drugs that show so much promise in treating AIDS. It 
increases support for drug treatment--one of the most effective forms of 
HIV prevention. And it increases AIDS research funding at NIH in the 
continuing search for effective treatments, vaccines, and a cure.
  The budget also gives substance abuse treatment and prevention a 17 
percent increase, helping expand efforts against drugs.
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 And it increases 
support for the Indian Health Service (IHS) by eight percent--keeping 
our Nation's commitment to Native Americans and continuing efforts to 
promote Tribal administration of IHS programs.

   Biomedical and Behavioral Research: The budget continues the 
Administration's long-standing commitment to biomedical and behavioral 
research, which advances the health and well-being of all Americans. The 
$12.4 billion proposal for the NIH invests in research directed to areas 
of high need and promise, as well as in basic biomedical research that 
would lay the foundation for future innovations that improve health and 
prevent disease. The budget includes increases for HIV/AIDS-related 
research, breast cancer research, high performance computing, prevention 
research, gene therapy, and developmental and reproductive biology. The 
Office of AIDS Research will continue to coordinate all of NIH's AIDS 
research. The budget also includes funding for a new NIH Clinical 
Research Center, which would give NIH a state-of-the-art research 
facility in which researchers would bring the latest discoveries 
directly to patients' bedsides. NIH's highest priority continues to be 
financing investigator-initiated research project grants.
   Ryan White HIV/AIDS Treatment Grants: The budget proposes $807 
million for activities authorized under the Ryan White CARE Act, an 
increase of $32 million over 1996. This level would fund grants to 
cities disproportionately affected by the HIV epidemic; to States to 
provide medical and support services; to community-based organizations 
to provide HIV early intervention services; and to support pediatric 
AIDS demonstration activities. In addition, the Administration has 
sought more funds for State AIDS drug assistance programs funded under 
Title II of the Ryan White program--to finance newly-discovered life-
prolonging AIDS therapies, some of which are beginning to receive Food 
and Drug Administration approval. Under this Administration, funding for 
Ryan White grants has risen by 89 percent. The budget for 1997 would 
increase Ryan White funding by 132 percent since 1993.
   HIV Prevention: The budget proposes $618 million for Centers for 
Disease Control and Prevention (CDC) HIV prevention activities, a $34 
million increase over 1996. At the historic White House Conference on 
HIV and AIDS, the President made his commitment to HIV prevention clear: 
``We have to reduce the number of new infections each and every year 
until there are no more new infections.'' A portion of these funds would 
address the linkages between substance abuse and HIV infection.
  Indian Health Service: The budget proposes $2.4 billion for the IHS, a 
$186 million increase. IHS clinical services--often the only source of 
medical care on isolated reservation lands--grow by $138 million, 
maintaining our commitment to Native Americans. The budget allows the 
Tribes to continue taking greater responsibility for managing their own 
hospitals and clinics; it increases the ``contract support costs'' that 
help underwrite Tribal activities by 31 percent, to $201 million. In 
addition, the budget proposes a major new initiative to bring water and 
sewer lines to those Native Americans still without adequate access to 
these basic necessities. This initiative would ensure that about 4,000 
more Native American homes receive water and sewer lines--a step which 
has been critical to improving public health.
   Substance Abuse Treatment and Prevention: The budget increases 
support for State substance abuse treatment and prevention activities by 
$67 million, to $1.3 billion. The budget reiterates support for 
Performance Partnerships, which would give States more flexibility to 
better design and coordinate their substance abuse prevention and 
treatment programs, and better target resources to local priority areas. 
In addition, it increases funds for substance abuse demonstration and 
training activities by $140 million, to $352 million. The budget 
establishes a $20 million Substance Abuse Managed Care Initiative that, 
with the rapid growth of managed care, would help to establish service 
guidelines and design quality assurance, monitoring, and evaluation 
systems. This strong support for substance abuse activities would enable 
hundreds of thousands of pregnant women, high risk youth, and other 
under-served Americans to receive drug treatment and prevention 
services.
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   Special Supplemental Nutrition Program for Women, Infants, and 
Children (WIC): WIC reaches over seven million women, infants, and 
children a year, providing nutrition assistance, nutrition education and 
counseling, and health and immunization referrals. As a result of 
funding increases under President Clinton, WIC participation has grown 
by nearly 25 percent in the past three years. The budget proposes $3.9 
billion, to serve 7.5 million individuals by the end of 1997, fulfilling 
the President's goal of fully funding WIC in four years.
   Immunizations: The budget proposes $957 million in spending on 
immunizations, including the Vaccines for Children program. For many 
diseases, the Administration is ahead of schedule to meet the goal of 
immunizing 90 percent of two-year-old children by 1996. The most recent 
figures show that, from April 1994 to December 1995, 90 percent or more 
of all two-year-old children were immunized against diphtheria, tetanus, 
pertussis, and hemophilus influenza type B. Further, rates for 
immunization against measles, mumps, rubella and polio are approaching 
the 1996 goals. Nevertheless, the Nation must maintain its efforts in 
order to lock in these gains and meet the goals for the remaining 
immunizations.
  The budget also includes a major $47 million initiative in the 
Department of Health and Human Services (HHS) to eradicate polio--
preventable through immunizations--throughout the world. (This HHS 
funding comes in addition to polio-eradication efforts that the Agency 
for International Development supports.) Polio is already gone from the 
Western Hemisphere. This shows that, like smallpox, polio can be wiped 
from the face of the earth, sparing all children from this crippling 
disease and saving the United States the hundreds of millions of dollars 
we now spend to immunize against it.

   Infectious Disease: The budget proposes $88 million for CDC's 
cooperative efforts with States to address infectious disease, an 
increase of $25 million. It would support training and applied research, 
and States' disease surveillance capability. All Americans face threats 
from the onset of infectious disease problems, such as drug resistant 
bacteria, and emerging viruses, such as the hantavirus. CDC works with 
State health departments to monitor and prevent such problems and to 
contain outbreaks.