[Budget of the U.S. Government]
[V. Creating Opportunity, Demanding Responsibility, and Strengthening Community]
[1. Strengthening Health Care]
[From the U.S. Government Publishing Office, www.gpo.gov]
V. CREATING OPPORTUNITY, DEMANDING RESPONSIBILITY, AND
STRENGTHENING COMMUNITY
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1. STRENGTHENING HEALTH CARE
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We can, and we must, work together to reform Medicare and Medicaid so they continue to meet the promise to our
parents and our children and continue to expand health care step by step to children in working families who
don't have it. We can do that and balance the budget, and take advantage of the fact that new models are clearly
making it possible to lower the rate of medical inflation in a way that advances the quality of health care as
well as the quality of our long-term objectives in balancing the budget and investing in the future of America.
I know it can be done, and I am determined to get it done.
President Clinton
December 11, 1996
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Americans have good reason to be optimistic about the Nation's health
care as we approach the new millennium.
Medicare ensures that older Americans receive high quality health care
and can look forward to a longer life expectancy. Medicaid provides
vital health services to low-income pregnant women and children, people
with disabilities, and elderly Americans. Together, Medicare and
Medicaid serve over 71 million Americans. Meanwhile, the Federal
Government is investing more in biomedical research and technology,
furthering our knowledge about the prevention and treatment of diseases
and providing new insights into the genetic basis of diseases such as
breast cancer as well as threats from food-borne illnesses newly
emerging infectious diseases.
And just in the past year, we have witnessed the rapid development of
new prescription drugs to help people with AIDS and other debilitating
diseases. These new developments hold the potential for a vastly
increased life expectancy for these Americans.
Our private health system, already the world's most dynamic, is
undergoing a dramatic transformation--much of it positive. The best
private sector innovations have helped make our delivery system more
efficient, and have improved quality by increasing consumer choice,
stressing accountability, and focusing on medical outcomes.
In his first term, the President and Congress took important steps to
improve our Nation's health care system. One of the most significant was
last year's passage of the Health Insurance Portability and
Accountability Act of 1996 (HIPAA), also known as the Kassebaum-Kennedy
bill. Now, as many as 25 million Americans have health benefit
portability they did not have before; no longer will people who have
been sick have to fear that they will lose their access to health
insurance if they lose their job or change jobs. Nor can they be denied
coverage because they have a preexisting medical condition. Moreover,
the law requires insurance companies to sell coverage to small employer
groups and to individuals who lose group coverage without regard to
their health status. It also made it easier and cheaper for self-
employed people to get health insurance, simplified health care
paperwork, strengthened Medicare's fraud and abuse efforts, and helped
make long-term care insurance more affordable.
Other significant health care initiatives enacted in the last four
years include laws requiring health plans to allow new mothers and their
babies to remain in the hospital at least 48 hours following most
deliveries, and prohibiting health plans from establishing separate
lifetime and annual limits for mental health coverage.
With this budget, the President takes the next critical steps toward a
better health care future:
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Preserving Medicare and Medicaid, while reforming and
strengthening both programs in important ways.
Helping the growing numbers of American children and families
who lack health insurance coverage.
Strengthening the health care infrastructure by investing
more in biomedical research, in programs to combat infectious
diseases, in the Ryan White AIDS program that provides life-
extending drug therapies to many people with AIDS, and in
programs such as community health centers and Indian Health
Service facilities that serve critically underserved
populations.
Preserving Medicare
The budget preserves and improves Medicare, extending the life of the
Part A Hospital Insurance Trust Fund into 2007. Like the President's
previous two budgets, it gives beneficiaries more choices among private
health plans, makes Medicare more efficient and responsive to
beneficiary needs, slows the growth rate of provider payments, and
maintains the Part B Supplementary Medical Insurance premium at 25
percent of program costs. The plan saves $100 billion over five years
(and $138 billion over six years), according to the Health Care
Financing Administration's Office of the Actuary.
The President also wants to work with Congress on a bipartisan basis
to address the longer-term problem of financing Medicare to support the
health care needs of the ``baby boom'' generation.
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 methodology for outpatient
departments while protecting beneficiaries from increasing
charges for those services.
Managed Care: Along with the Administration's previous
proposals to reduce the current geographic variation in
payments, the budget proposes a new managed care payment
methodology in light of substantial evidence that Medicare
pays too much for managed care plans and, in fact, loses money
for every beneficiary who opts for managed care. The budget
would reduce Medicare reimbursement to managed care plans from
its current rate of 95 percent of fee-for-service rates to 90
percent. To enable the industry to prepare for this change,
the Administration would not implement it until the year 2000.
The Administration views this reform as a first step and will
continue to work with the industry to create a better
reimbursement mechanism for Medicare managed care plans.
Physicians: The budget reforms physician payments by paying a
single update for all physician services--based on a single
``conversion factor,'' or base payment amount, and replacing
the current three conversion factors, effective January 1,
1998. The budget replaces current ``volume performance
standards'' with a sustainable growth rate.
Home Health Agencies/Skilled Nursing Facilities: The budget
implements payment reforms, leading to separate prospective
payment systems for home health care and skilled nursing
facilities. Prospective payments would begin to bring the
current double-digit rise in spending on these services under
control. The budget also proposes to reform the home health
benefit by paying for services following a hospital stay from
the Part A Trust Fund and paying for other services from
Medicare's Part B Trust Fund. Beneficiaries would not be
affected by the change. In addition, the change will not count
towards the budget's proposed $100 billion in Medicare savings
through 2002, but will help to extend the solvency of the Part
A Trust Fund.
Other Providers: The budget makes payments for durable medical
equipment and laboratory services more consistent with private
market rates and reduces payment updates to ambulatory
surgical centers. The budget also proposes to address
Medicare's overpayment for prescription drugs that are
provided in a physician's office
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by making payments more competitive with what private purchasers pay.
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. The budget imposes
no new cost increases on beneficiaries. The budget also would
maintain current law to prevent ``balance billing,'' ensuring
that doctors in the new managed care plan options may not
charge above Medicare's approved amount and leave the elderly
vulnerable to higher costs.
Private Plan Choices: The budget increases the numbers of
plans--including Preferred Provider Organizations and Provider
Sponsored Networks--available to seniors and people with
disabilities. These new options will meet strong quality
standards and include consumer protections. The plans would be
required to compete on cost and quality, not on the health
status of enrollees.
Beneficiary Improvements
The budget proposes reforms to improve and increase services to
beneficiaries, to protect them from the burden of additional costs, and
to offer them a wider choice of private plans.
Preventive Health Care: The budget covers new preventive
health benefits including: colorectal screening; diabetes
management; preventive injections like pneumonia, influenza,
and hepatitis B; and annual mammograms without coppayments.
Alzheimer's Respite Benefit: The budget establishes a new
respite benefit for the families of Medicare beneficiaries
with Alzheimer's disease. Medicare beneficiaries would be
eligible to receive non-medical care, giving family members a
much-needed break from the constant demands of caring for
them.
Outpatient Department Payments: Payments to hospitals for
outpatient services are one of Medicare's fastest growing
components. Due to flaws in the current reimbursement
methodology, hospital outpatient departments get a
reimbursement higher than their actual costs. In effect,
beneficiaries pay about a 50-percent copayment for hospital
outpatient services, as opposed to the 20-percent copayment
made for other Part B services. Medicare's payments are not
always reduced to account fully for these high copayments. The
budget corrects these flaws by establishing a prospective
payment system for outpatient services and ensuring that, by
2007, beneficiaries pay the same 20-percent copayment as they
do for other Part B services.
Medigap Protections: The budget adds protections, such as new
open enrollment requirements and prohibitions against the use
of pre-existing condition exclusions, to help Medicare
beneficiaries who wish to opt for managed care but fear they
will be ``locked in'' and unable to access their old Medigap
protections if they switch back to a fee-for-service plan.
The Working Disabled: The budget proposes a Medicare
demonstration project to encourage Social Security Disability
Insurance (SSDI) beneficiaries to return to work. Under the
four-year, Nation-wide demonstration project, SSDI
beneficiaries who return to work beginning in 1998 would
receive Part A coverage through 2001 without paying the
premiums.
Additional High-Priority Initiatives
The budget contains other reforms to improve the Medicare program as
well as adjustments to Medicare payments to ensure that rural
beneficiaries have access to health care services.
Rural Health Care: The budget would expand access to, and
improve the quality of, health care in rural areas. It would
extend the Rural Referral Center program; allow direct
Medicare reimbursement for nurse practitioners, clinical nurse
specialists, and physician assistants; improve the Sole
Community Hospital program; expand the Rural Primary Care
Hospital program; and provide grants to promote telemedicine
and rural health outreach. The proposed changes in managed
care payment methodology also would promote access to managed
care plans in rural areas.
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Fraud and Abuse: The budget proposes strong fraud and abuse
provisions, including measures to eliminate fraud in home
health care--such as by ensuring that home health agencies are
reimbursed based on the location of the service, not the
billing office, and by enabling the Secretary of Health and
Human Services to deny payments for excessive home health use.
The budget also would repeal several provisions in last year's
HIPAA law that weakened anti-fraud enforcement. Together,
these initiatives would save about $9 billion.
Strengthening Medicaid
The budget would reform Medicaid to give States much more flexibility
to manage their programs, while preserving the guarantee of high-quality
health care and long-term services for the most vulnerable Americans--
millions of children, pregnant women, people with disabilities, and
older Americans. The budget would ensure that as we control the costs of
Medicaid, we do not compromise what is right with the program.
The growth in Medicaid spending has slowed significantly over the
past two years. The budget, however, ensures that our success in
bringing Medicaid spending under control will not be lost in future
years, when the actuaries project that Medicaid spending will again
begin to rise. The budget would save $22 billion from a combination of
policies to impose a per capita limit on spending and reduce
Disproportionate Share Hospital (DSH) payments and retarget them to
hospitals that serve large numbers of Medicaid and low-income patients.
The budget also makes a number of improvements to the Medicaid program,
including changes to last year's welfare reform law, costing $13 billion
over the same period.
Program Savings
Per Capita Cap: Even though the growth in Medicaid spending
has fallen in recent years, aggregate Medicaid spending still
will grow at an average annual rate of 7.2 percent from 1997
to 2002. To ensure that Medicaid's explosive growth of the
1980s and early 1990s does not resume, the budget would set a
per capita cap on Medicaid spending, based on spending per
beneficiary in a base year, increased by an annual growth
limit. The cap protects States facing population growth or
economic downturns because it ensures that dollars follow
people, allowing Medicaid spending to respond to changes in
caseload and the economy.
Disproportionate Share Hospital Payments: Medicaid DSH
spending doubled each year from 1988 to 1993. Although this
rapid growth has slowed, due to 1993 legislation that modified
the program, the DSH program is still large, and the payments
could be targeted better. The budget proposes reforms to reach
this goal without undermining the important role these funds
play for providers who serve a disproportionate number of low-
income and Medicaid beneficiaries.
Provisions to Increase State Flexibility
The budget continues the President's strong commitment to giving
States the flexibility to design their own Medicaid program. The budget
would ensure accountability for high-quality health care while enabling
States to develop programs that meet the special needs of their
populations.
Coverage for Children: The budget would let States provide
continuous coverage for one year after eligibility is
determined, guaranteeing more stable coverage for children and
more continuity of health care services. In addition, it will
reduce the administrative burden on Medicaid officials, health
care providers, and families required to refile paperwork to
determine their children's eligibility.
Coverage Without Waivers: The budget would let States, without
a waiver, expand coverage to any person whose income is under
150 percent of the poverty line, within their per-capita
spending limits.
Managed Care: The budget would allow States to enroll people
in managed care without Federal waivers.
Home- and Community-based Care: The budget would allow States
to serve people needing long-term care in home- and com-
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munity-based settings without Federal waivers.
Boren Amendment: The budget would repeal the ``Boren
amendment'' for hospitals and nursing homes, giving States
more flexibility to negotiate provider payment rates.
The Working Disabled: The budget would let States establish an
income-related premium buy-in program under Medicaid for
people with disabilities who work. It would let eligible
Supplemental Security Income beneficiaries who earn more than
certain amounts purchase Medicaid coverage by paying a premium
that States would set on an income-related sliding scale.
Maintaining and Expanding Coverage for Working Families
The President's budget plan would help an estimated 3.2 million
families, including 700,000 children, keep their health care coverage
for to six months up until their breadwinners find new jobs. The budget
also would help provide health coverage for millions of children who do
not now have it. Finally, the budget proposes to help States to create
voluntary health insurance purchasing cooperatives.
Health Insurance for the Families of Workers Who are In-Between Jobs
While unemployment remains low and job creation remains high, the
fast-moving economy creates rapid job turnover and job elimination. An
estimated one in four workers will make an unemployment claim at least
once in four years.
With health care coverage in this country usually linked to
employment, many workers lose their health care coverage during these
brief periods of unemployment. Nearly half of workers with one or more
job interruptions experienced at least a month without health insurance
between 1992 and 1995. Nearly half of children who lose their health
insurance do so because of a change in their parent's employment status.
A family experiencing a catastrophic illness during this transition
loses the benefit of years' worth of premiums. Worse, for families with
an ill child or a worker with a chronic condition, the loss of health
insurance while their breadwinner is between jobs can make it
financially impossible for them to regain coverage.
The budget proposes a national demonstration program to help States
finance up to six months of coverage for the unemployed and their
families. The program would be available to recipients, based on need,
who had employer-based coverage in their prior jobs. Eligible
individuals and their families would have access to a policy generally
equivalent to the Blue Cross/Blue Shield Standard Option plan available
through the Federal Employees Health Benefits program. The plan gives
States flexibility to administer their own programs (e.g., through
Medicaid, COBRA, or an independent program). It would cost $1.7 billion
in 1998, $9.8 billion from 1998 to 2002.
Health Coverage for Children
The budget proposes several measures to expand health care coverage to
more children. Combined with the proposal to help the families of
unemployed workers (discussed above), and the ongoing phase-in of
Medicaid coverage for a million older children, these additional
proposals could add coverage for as many as five million children. The
President is pleased with the widespread congressional interest in
expanding health care coverage for children, and he looks forward to
working with both Democrats and Republicans to develop and implement
proposals to reach that goal.
State Grants to Develop Innovative Programs: The budget
provides $750 million a year in grants to States ($3.8 billion
from 1998 to 2002) to build on recent State successes in
working with insurers, providers, employers, schools, and
others to develop innovative ways to provide coverage to
children. This proposal would cover an estimated one million
children.
Continuous Medicaid Coverage to Children: The budget provides
funds to let States extend one year of continuous Medicaid
coverage to children, potentially helping one million children
who would otherwise have lost coverage to keep it. The
proposal would reduce administrative bur-
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dens on States, families, and health care plans
who now must determine eligibility
at least every six months.
Medicaid Outreach: About three million children are now
eligible for Medicaid, but not enrolled. The Administration
will ask the Nation's Governors to work with us to find ways
to reach and sign up such children.
School Health Centers and Consolidated Health Centers (CHCs):
The budget provides more funds for CHCs to expand and enhance
services to working families and their children through
school-based health clinics.
Voluntary Purchasing Cooperatives
Employees in small businesses and their families are far likelier to
be uninsured than other Americans. Small businesses have more difficulty
providing health care coverage for their workers because they have
higher per capita costs due to increased risk and extraordinarily high
administrative costs.
The budget would make it easier for small businesses to provide health
care coverage for their employees, by helping them to band together to
reduce their risks, lower their administrative costs, and improve their
purchasing power with insurance companies. The budget proposes to
empower small businesses to access and purchase more affordable health
insurance through voluntary health purchasing cooperatives--providing
$25 million a year in grants that States can use for technical
assistance, and setting up voluntary purchasing cooperatives and
allowing them to access Federal Employees Health Benefit Plans.
Promoting Public Health
The budget invests in preventive steps that show the greatest promise
of ameliorating pain and suffering while controlling future costs. In
particular, the budget focuses on preventing teen smoking; substance
abuse; teen pregnancy; the spread of AIDS and HIV infections; food-borne
diseases; the spread of infectious diseases; and infant mortality. The
budget also invests in health care services for low-income and other
vulnerable populations, such as American Indians and Alaska Natives.
Expanding Biomedical and Behavioral Research
The budget continues the Administration's longstanding commitment to
biomedical and behavioral research, which advances the health and well-
being of all Americans. For the National Institutes of Health (NIH), it
proposes $13.1 billion for biomedical research that would lay the
foundation for future innovations that improve health and prevent
disease. The budget includes funding for high-priority research areas
such as HIV/AIDS (including efforts to develop an AIDS vaccine), breast
cancer, spinal cord injury, high performance computing, prevention and
genetic medicine.
The Office of AIDS Research will continue to coordinate all of NIH's
AIDS research. The budget also includes the second year of 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 top priority continues
to be financing investigator-initiated research project grants.
Providing Direct Services and Preventive Care to Special Populations
While basic biomedical research lays the foundation for medical
advances, direct health services and prevention activities reduce the
cost of medical care, and directly benefit Americans by preventing
disease outbreaks and promoting the population's health. The budget
proposes funding increases for the following health service and
prevention activities:
Preventing and Treating AIDS through Ryan White HIV/AIDS
Treatment Grants/HIV Prevention: The budget proposes just over
$1 billion for activities authorized by the Ryan White CARE
Act, $40 million more than in 1997, to help our most hard-hit
cities, States, and local clinics provide medical and support
services to individuals with HIV/AIDS. Under this
Administration, funding for Ryan White grants has risen by 158
percent. The proposed level
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would fund grants to cities and
States to help finance medical and support services for
individuals infected with the HIV virus; to community-based
clinics to provide HIV early intervention services; to
pediatric AIDS and HIV dental activities; and to HIV education
and training programs for health care providers. The budget
also includes $167 million dedicated to State AIDS drug
assistance programs funded under Title II of the Ryan White
Care act, to improve access to protease inhibitors and other
life-extending AIDS medications. The budget also proposes $637
million for the Centers for Disease Control's (CDC) HIV
prevention activities, $20 million more than in 1997. The
increased funding will help prevent HIV among drug users, who
face the greatest risk of HIV infection.
Reducing Tobacco Use Among Young People: Tobacco is linked to
over 400,000 deaths a year from cancer, respiratory illness,
heart disease, and other health problems. Each year, another
million young people become regular smokers, and over 300,000
of them will die earlier as a result. Consequently, in August
1996, the Administration approved an FDA regulation that aims
to cut tobacco use among young people by half over seven
years; the budget includes $34 million to implement the
regulation. The budget also provides $36 million for the CDC
and $50 million for NIH for State grants and technical support
for tobacco control and cancer prevention activities.
Enhancing Food Safety: Too many Americans get sick from
preventable food-borne diseases. The Nation faces new
challenges in this area as we enter the 21st Century. New
pathogens are emerging and familiar pathogens have grown
resistant to treatment. We consume record levels of imported
foods, some of which moves across the globe overnight. The
budget proposes $42 million for a new interagency food safety
initiative to establish a national early warning system for
food-borne illnesses Nation-wide, and to improve Federal-State
coordination when food-borne disease outbreaks occur. The
budget also proposes to continue implementing a new food
safety system in the meat, poultry, and seafood industries.
Promoting Full Participation in 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. WIC provides prenatal care to those who would not
otherwise get it, while reducing the incidence of premature
birth and infant death. As a result, Medicaid saves
significant sums that it would otherwise spend in the first 60
days after childbirth. Because of funding increases in the
last four years, WIC participation has grown by over 25
percent. The budget proposes $4.1 billion to serve 7.5 million
people by the end of 1998, fulfilling the President's goal of
full participation in WIC.
Promoting Childhood Immunizations: The budget proposes $794
million for the Childhood Immunization Initiative, including
the Vaccines for Children program and CDC's discretionary
immunization program. The Nation is ahead of schedule to meet
the Administration's goal of raising immunization rates to 90
percent for two-year old children for each basic childhood
vaccine. The incidence of vaccine-preventable diseases among
children, such as diphtheria, tetanus, measles, and polio, are
at all-time lows. The budget also includes $47 million to
eradicate polio--preventable through immunizations--throughout
the world.
Improving Substance Abuse Treatment and Prevention: The
budget proposes to increase support for the Substance Abuse
and Mental Health Services Administration's substance abuse
treatment and prevention activities by $33 million, to $1.7
billion, enabling hundreds of thousands of pregnant women,
high-risk youth, and other under-served Americans to get drug
treatment and prevention services. The budget proposes a
coordinated approach to combating substance abuse among youth
with a comprehensive prevention initiative, focusing on State-
level data documenting trends in drug use. The Administration
again calls on Congress to enact
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Performance Partnerships,
which would give States more flexibility to better target
Federal resources to priorities.
Enhancing Abstinence Education and Family Planning: For each
of the next five years, the budget includes $50 million in
mandatory funding for States to conduct abstinence education
projects to help reduce out-of-wedlock pregnancies. The budget
also includes a $5 million increase, to $203 million, to
support voluntary family planning services.
Preventing and Containing Infectious Diseases: The budget
includes $103 million, $15 million more than in 1997, for
CDC's cooperative efforts with States to address infectious
disease. It would support training and applied research, and
the States' disease surveillance capability. All Americans
face threats from infectious disease problems, such as drug
resistant bacteria, and from emerging viruses, such as the
hantavirus. CDC works with State health departments to monitor
and prevent such problems and to contain outbreaks.
Promoting Better Health Care for Native Americans through
Indian Health Service (IHS): The budget proposes $2.4 billion
for the IHS, $70 million over 1997. IHS clinical services are
often the only source of medical care on remote reservation
lands, and this increase maintains our commitment to American
Indians and Alaska Natives.
Caring for Veteran's Health Needs through Veterans Medical
Care: Continuing its longstanding commitment to veterans
programs, the Administration proposes $17.5 billion for the
Department of Veterans Affairs' (VA) health system, $0.5
billion more than in 1997. The budget would enable the VA
health system to retain, and spend for itself, all first- and
third-party medical collections. In the past, these
collections have gone to the Treasury; in 1998, they would
support health services for veterans. The budget would enable
the VA to implement eligibility reform legislation that the
President signed in October 1996, and pursue ambitious plans
to restructure the health system to better deliver care.