President’s 2014 Budget Proposal for the Department of Health and Human Services (HHS)

by Mintz Levin - Health Law & Policy Matters

The Obama Administration released its proposed Fiscal Year 2014 budget on April 10th. The 244-page document outlines the President’s spending priorities for the coming fiscal year. The FY 2014 Budget for the Department of Health and Human Services (HHS) totals $80.1 billion in discretionary funding for FY 2014, $3.9 billion above the 2012 enacted level.

Included in the President’s Budget are significant payment reductions and other forms of savings to the Medicare program. Proposed payment changes for Medicare providers would save an estimated $306 billion from 2014-2023. Structural changes to Medicare, including an increase in premiums for wealthier beneficiaries, would provide $67 billion in savings over the same 10-year period. Also of note, the budget proposal includes over $800 million for the Centers for Medicare & Medicaid Services (CMS) to support insurance exchange operations in 2014 under the Affordable Care Act (ACA). The budget also includes $19 billion in Medicaid savings and over $14 billion in pharmaceutical savings by 2023. Overall, proposals achieve an estimated $400 billion in total health savings from 2014 through 2023.

This legislative update is intended to provide an overview of key elements of the proposed FY 2014 HHS budget.

Affordable Care Act Implementation

The FY 2014 Budget requests $634 million to employ an additional 280 full-time CMS employees to “oversee expanded responsibilities resulting from the Affordable Care Act (ACA) and other legislation passed in recent years.” The additional employees would also support a new wave of Medicare beneficiaries and administer Medicaid and the Children’s Health Insurance Program (CHIP). In addition the Budget requests $350 million in additional funding for approximately 1,000 new employees at the IRS to oversee implementation of the ACA.

The FY 2014 Budget also includes:

  • $803.5 million for CMS activities in 2014 to support ACA insurance exchange operations, scheduled to begin enrollment in October of 2013
  • $3.8 billion to support 22 million patients receiving community health center services. The ACA already provides the Health Center program with a total of $9.5 billion through 2015
  • A delay in reductions of the Medicaid Disproportionate Share Hospital (DSH) payments scheduled for 2014, which would instead begin in 2015.

Medicare and Medicaid

The FY 2014 Budget estimate for CMS is $854.3 billion in mandatory and discretionary outlays, an increase of $60.2 billion above the FY 2013 request. Specifically, the Budget includes $22.1 billion in savings over 10 years in the Medicaid program and savings of $371 billion over 10 years through changes to Medicare.

The biggest savings from Medicare, $50 billion, would come from additional means-testing Part B and Part D premiums for wealthier recipients beginning in 2017. The Budget would also modify Part B premiums for new enrollees, making beneficiaries pay 35 percent of program costs, up from 25 percent. It would introduce an approximate 15 percent surcharge for new beneficiaries in Medigap plans for beneficiaries beginning in 2017 to achieve $3.3 billion in savings by 2023. Notably, the proposal would not increase the eligibility age for Medicare.

The proposed Budget would also save $8.8 billion over 10 years, by implementing targeted adjustments in Medicaid prescription drug financing through clarifying the definition of brand drugs, excluding authorized generic drugs from average manufacturer price calculations for determining manufacturer rebate obligations for brand drugs, and making a technical correction to the ACA alternative rebate for new drug calculations.

Additional changes to Medicaid and Medicare include:

  • Stabilizing physician payment rates and eventually replacing the sustainable growth rate (SGR) through reforms implementing scalable accountable payment models
  • Instituting mandatory drug rebates in Medicare Part D for low-income seniors, which would save an estimated $140 billion
  • Closing the donut hole in the Part D benefit by 2015 for brand drugs by increasing discounts provided by the pharmaceutical industry
  • Requiring new beneficiaries, beginning in 2017, to pay copays on certain home health services and skilled nursing facilities (SNFs)
  • Aligning Medicare payments for drugs with Medicaid rebate policies for low-income beneficiaries
  • Using the Independent Payment Advisory Board (IPAB), created under the ACA, to reduce long-term drivers of Medicare cost growth
  • Reducing payment errors, preventing fraud, and enhancing criminal enforcement in Medicare, Medicaid, and CHIP.

National Institutes of Health

The FY 2014 Budget requests $31.3 billion for the National Institutes of Health (NIH), an increase of $471 million, 1.5 percent, over the FY 2012 funding level. The increase reflects the Administration’s desire to prioritize investments in biomedical and behavioral science to advance medicine and spur economic growth. In FY 2014, 83 percent of funding appropriated to NIH will flow to the extramural community, supporting over 300,000 research positions at more than 2,500 organizations, while 11 percent of the budget will support intramural programs and basic research and training activities.

Research priorities for NIH in FY 2014 include:

  • $100 million to pursue the Brain Research through Advancing Innovative Neurotechnologies (BRAIN) Initiative, aimed at helping researchers explore new ways to treat, cure, and prevent brain disorders
  • $50 million to continue the work of the newly established National Center for Advancing Translational Sciences (NCATS), which seeks to re-engineer scientific discoveries into new diagnostics and therapeutics
  • $16.9 billion, or 54 percent of its total budget, to finance 36,510 competitive, peer-reviewed research project grants
  • The NIH budget also prioritizes funding for recruiting and retaining diverse scientific talent and creativity, HIV/AIDS research, and Science, Technology, Engineering, and Mathematics (STEM) education.

Food and Drug Administration

The FY 2014 Budget provides $4.7 billion in total program resources for the Food and Drug Administration (FDA), which is $821 million above the 2012 enacted level. It includes $10 million in new resources to improve the safety of food and medical product imports to the United States through a greater FDA presence in foreign countries. The proposal uses $16 million to implement the Food Safety Modernization Act while cutting $15 million in budget authority for human drug, biologics and medical device programs. The Budget also estimates that banning pay-for-delay settlements would save Medicare $8.6 billion over 10 years and reducing exclusivity for brand-name biologics to seven years from 12 years would save $3.1 billion in Medicare over 10 years.

Other Budget Highlights

In addition to the items highlighted above, the FY 2014 Budget proposal includes:

  • $11.3 billion for the Centers for Disease Control and Prevention (CDC) and the Agency for Toxic Substances and Disease Registry (ATSDR)
  • $5.7 billion for the Indian Health Service (IHS)
  • $3.6 billion for the Substance Abuse and Mental Health Service Administration (SAMSHA)
  • $9 billion for the Health Resources and Services Administration (HRSA), an increase of $841 million above FY 2012 levels
  • $434 million for the Agency for Healthcare Research and Quality (AHRQ)
  • $51.9 billion for the Administration for Children and Families (ACF)
  • $2.1 billion for the Administration for Community Living (ACL)
  • $25 million to the Office of the National Coordinator for Health IT (ONC) to support advances in electronic health records (EHRs).

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Mintz Levin - Health Law & Policy Matters | Attorney Advertising

Written by:

Mintz Levin - Health Law & Policy Matters

Mintz Levin - Health Law & Policy Matters on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.