President Obama has released the administration’s FY 2015 budget request, and it includes investments and proposals for HHS that are estimated to save $355.6 billion over 10 years.  The FY 2015 budget estimate for CMS is $897.3 billion in mandatory and discretionary outlays, which is a net increase of $54.3 billion from FY 2014, and includes proposed reforms to the Medicare and Medicaid programs that are estimated to save $414.5 billion over the next 10 years.  

HHS, in a summary of the budget, detailed the following proposed reforms, among others, to begin in 2015:

• Reducing bad debt payments to 25 percent over 3 years for all providers who receive bad debt payments;
• Reducing payments to hospitals for the indirect costs of medical education by 10 percent;
• Reducing the rate paid to CAHs to 100 percent of reasonable costs;
• Preventing hospitals that are within 10 miles of another hospital from maintaining a CAH designation and receiving the enhanced rate and instead paying such hospitals under the appropriate PPS;
• Reducing market basket updates for IRFs, LTACHS, and HHAs by 1.1 percentage points in each year through 2024 (but payment updates would not fall below zero) and for SNFs beginning with a -2.5 percent update in FY 2015 tapering down to a -0.97 percent update in FY 2022;
• Implementing bundled payments for post-acute care providers;
• Adjusting the standard for classifying a facility as an IRF from the current requirement of 60 percent of patient cases meeting specific criteria to 75 percent; and
• Lowering payment rates under the Clinical Laboratory Fee Schedule by -1.75 percent every year from 2016 through 2023.

Similarly, a number of reforms were proposed in the budget with respect to the Medicaid program, including (i) expanding the enhanced rate of payment paid to Medicaid primary care providers through December 31, 2015, while also expanding the eligibility for higher payment to mid-level providers; (ii) providing authority for the Secretary to implement a more closely aligned appeals process for Medicare and Medicaid enrollees, as the processes currently have different requirements with respect to timeframes, amounts in controversy, and levels of appeals; and (iii) implementing policies to lower drug costs.

The budget also reiterates that fraud prevention and control remain top priorities of the administration and includes a total of $428 million to be invested in a new Health Care Fraud and Abuse Control Program and Medicaid program integrity funds.  Additionally, the budget includes $17 million for the 340B program, an increase of $7 million, to establish a cost recovery fee to improve program integrity and oversight.  In total, the HHS portion of the Budget provides for $1 trillion in outlays and proposes $77.1 billion in discretionary budget authority, a reduction of $1.3 billion from FY 2014. 

The budget is unlikely to be enacted by Congress in its current form but will serve as a basis for discussions and negotiations between the parties. 

Reporter, Christina A. Gonzalez, Houston, +1 713 276  7340, cagonzalez@kslaw.com.