President Obama's Fiscal 2010 Budget
Transforming and Modernizing Americafs Health Care System
One of the biggest drains on American pocketbooks is the high cost of health
care. Many families are one illness or accident away from financial ruin. Health
insurance costs reduce workersf take-home pay to a degree that is both
underappreciated and unnecessarily large. At the same time, health care costs
are consuming a growing share of federal and state government budgets. The
United States spends over $2.2 trillion on health care each year—almost $8,000
per person. That number represents approximately 16 percent of the total economy
and is growing rapidly. If we do not act soon, by 2017, almost 20 percent of the
economy—more than $4 trillion—will be spent on health care.
At the same time that we strive to contain costs, we cannot stand by as tens
of millions of Americans lack health care coverage. An unhealthy workforce leads
to an unhealthy economy, and moving to provide all Americans with health
insurance is not only a moral imperative, but it is also essential to a more
effective and efficient health care system.
For too long, we have recognized the problems with health care, but have not
taken responsibility for them. We can no longer afford to wait. That is why the
President has already begun the process of reforming health care by:
- Instituting Temporary Provisions to Make Health Care Coverage More
Affordable for Americans Who Have Lost Their Jobs. As part of the
Recovery Act of 2009, the Administration will provide Americans who lose their
jobs or have recently lost their jobs a tax credit to keep their health
insurance through COBRA. These steps are estimated by the Joint Committee on
Taxation to help provide coverage for approximately seven million Americans.
- Increasing Health Care Coverage for Children. In one of his first
official acts, the President signed into law the reauthorization of the
Childrenfs Health Insurance Program (CHIP)— bipartisan legislation vetoed
twice by the previous President. It provides the support, options, and
incentives for States to provide coverage for an additional four million
children on average in CHIP and Medicaid who are now uninsured by FY 2013. The
President is committed to implementing this law quickly and aggressively to
help families whose children are at risk of losing coverage in this weak
economy.
- Computerizing Americafs Health Records in Five Years. The
current, paper-based medical records system that relies on patientsf memory
and reporting of their medical history is prone to error, time-consuming,
costly, and wasteful. With rigorous privacy standards in place to protect
sensitive medical record, we will embark on an effort to computerize all
Americansf health records in five years. This effort will help prevent medical
errors, and improve health care quality, and is a necessary step in starting
to modernize the American health care system and reduce health care costs.
- Developing and Disseminating Information on Effective Medical
Interventions. Medicine is changing so rapidly it is almost impossible
for any individual physician to keep abreast of all the latest research
studies. Without the most recent information on effective treatments, it is
increasingly more difficult for a doctor to give a patient the type of
individualized treatment he or she deserves. To help physicians get the
information they need to provide the highest quality care for patients, the
Recovery Act of 2009 devotes $1.1 billion to comparative effectiveness
research—the reviews of evidence on competing medical interventions and new
head-to-head trials. The information from this research will improve the
performance of the U.S. health care system.
- Investing in Prevention and Wellness. Over a third of all illness
is the result of poor diet, lack of exercise, and smoking. Indeed, obesity
alone leads to many expensive, chronic conditions including high blood
pressure, heart disease, diabetes, and even cancer. Furthermore, there are
important vaccines that can prevent diseases, and screening tests that can
detect cancer and other diseases at an early stage when they are more curable.
Yet many Americans are not getting these effective treatments. The President
has devoted in the Recovery Act an unprecedented $1 billion for prevention and
wellness interventions. This will dramatically expand community-based
interventions proven to reduce chronic diseases.
Transforming and Modernizing Americafs Health Care System
To build on these steps, the Budget sets aside a reserve fund of
more than $630 billion over 10 years that will be dedicated towards financing
reforms to our health care system. The President recognizes that while a very
large amount of money and a major commitment, $630 billion is not sufficient to
fully fund comprehensive reform. But this is a first crucial step in that
effort, and he is committed to working with the Congress to find additional
resources to devote to health care reform. The Administration will explore all
serious ideas that, in a fiscally responsible manner, achieve the common goals
of constraining costs, expanding access, and improving quality.
To achieve these goals and finance reform, the President looks forward to
working with the Congress over the coming year, and as he does, the President
will adhere to the following set of eight principles:
- Guarantee Choice. The plan should provide Americans a choice of
health plans and physicians. People will be allowed to keep their own doctor
and their employer-based health plan.
- Make Health Coverage Affordable. The plan must reduce waste and
fraud, high administrative costs, unnecessary tests and services, and other
inefficiencies that drive up costs with no added health benefits.
- Protect Familiesf Financial Health. The plan must reduce the
growing premiums and other costs American citizens and businesses pay for
health care. People must be protected from bankruptcy due to catastrophic
illness.
- Invest in Prevention and Wellness. The plan must invest in public
health measures proven to reduce cost drivers in our system—such as obesity,
sedentary lifestyles, and smoking—as well as guarantee access to proven
preventive treatments.
- Provide Portability of Coverage. People should not be locked into
their job just to secure health coverage, and no American should be denied
coverage because of preexisting conditions.
- Aim for Universality. The plan must put the United States on a
clear path to cover all Americans.
- Improve Patient Safety and Quality Care. The plan must ensure the
implementation of proven patient safety measures and provide incentives for
changes in the delivery system to reduce unnecessary variability in patient
care. It must support the widespread use of health information technology with
rigorous privacy protections and the development of data on the effectiveness
of medical interventions to improve the quality of care delivered.
- Maintain Long-Term Fiscal Sustainability. The plan must pay for
itself by reducing the level of cost growth, improving productivity, and
dedicating additional sources of revenue.
Financing Health Care Reform. The reserve fund is financed
by a combination of rebalancing the tax code so that the wealthiest pay more as
well as specific health care savings in three areas: promoting efficiency and
accountability, aligning incentives towards quality and better care, and
encouraging shared responsibility. Taken together, the health care savings would
total $316 billion over 10 years while improving the quality and efficiency of
health care, without negatively affecting the care Americans receive. These
savings include:
- Reducing Medicare Overpayments to Private Insurers Through Competitive
Payments.
Under current law, Medicare overpays Medicare Advantage plans by 14 percent
more on average than what Medicare spends for beneficiaries enrolled in the
traditional fee-for-service program. The Administration believes itfs time to
stop this waste and will replace the current mechanism to establish payments
with a competitive system in which payments would be based upon an average of
plansf bids submitted to Medicare. This would allow the market, not Medicare, to
set the reimbursement limits, and save taxpayers more than $175 billion over 10
years, as well as reduce Part B premiums. These overpayments threaten Medicarefs
finances and increase the premiums paid by participants in traditional
Medicare.
- Reducing Drug Prices. Prescription drug costs are high and
rising, causing too many Americans to skip doses, split pills, or not take
needed medication altogether. The Administration will prevent drug companies
from blocking generic drugs from consumers by prohibiting anticompetitive
agreements and collusion between brand name and generic drug manufacturers
intended to keep generic drugs off the market.
The Administration will accelerate access to make affordable generic biologic
drugs available through the establishment of a workable regulatory, scientific,
and legal pathway for generic versions of biologic drugs. In order to retain
incentives for research and development for the innovation of breakthrough
products, a period of exclusivity would be guaranteed for the original innovator
product, which is generally consistent with the principles in the Hatch-Waxman
law for traditional products.
Additionally, brand biologic manufacturers would be prohibited from
reformulating existing products into new products to restart the exclusivity
process, a process known as ever-greening.
Finally, the Budget will bring down the drug costs of Medicaid by increasing
the Medicaid drug rebate for brand-name drugs from 15.1 percent to 22.1 percent
of the Average Manufacturer Price, apply the additional rebate to new drug
formulations, and allow States to collect rebates on drugs provided through
Medicaid managed care organizations. All the savings would be devoted to the
health care reserve fund.
- Improving Medicare and Medicaid Payment Accuracy. The Government
Accountability
Office (GAO) has labeled Medicare as "high risk" due to billions of dollars
lost to overpayments and fraud each year. To save Medicare and Medicaid,
increase quality, and make sure Medicare and Medicaid patients get the care they
deserve, we need to rein in these abuses and use this money for reform. The
Centers for Medicare and Medicaid Services (CMS) will address vulnerabilities
presented by Medicare and Medicaid, including Medicare Advantage and the
prescription drug benefit (Part D). CMS will be able to respond more rapidly to
emerging program integrity vulnerabilities across these programs through an
increased capacity to identify excessive payments and new processes for
identifying and correcting problems.
- Improving Care after Hospitalizations and Reduce Hospital Readmission
Rates. Nearly
18 percent of hospitalization of Medicare beneficiaries resulted in the
readmission of patients who had been discharged in the hospital within the last
30 days. Sometimes the readmission could not have been prevented, but many of
these readmissions are avoidable. To improve this situation, hospitals will
receive bundled payments that cover not just the hospitalization, but care for
certain post-acute providers the 30 days of care after the hospitalization, and
hospitals with high rates of readmission will be paid less if patients are
re-admitted to the hospital within the same 30-day period. This combination of
incentives and penalties should lead to better care after a hospital stay and
result in fewer readmissions—saving roughly $26 billion of wasted money over 10
years. The money saved will also be contributed to the reserve fund for health
care reform.
- Expanding the Hospital Quality Improvement Program. The health
care system tends to pay for quantity of services not quality. Experts have
recommended that hospitals and doctors be paid based on delivering high
quality care, or what is called "pay for performance." The Presidentfs Budget
will link a portion of Medicare payments for acute in-patient hospital
services to hospitalsf performance on specific quality measures. This program
will improve the quality of care delivered to Medicare beneficiaries, and the
higher quality will save over $12 billion over 10 years. Again, the money
saved will be contributed to the Reserve Fund for health care reform.
- Reforming the Physician Payment System to Improve Quality and
Efficiency. The Administration believes that the current physician
payment system, while it has served to limit spending to a degree, needs to be
reformed so that physicians are paid for providing high-quality care rather
than simply for more procedures and exams. Thus, while the baseline reflects
our best estimate of what the Congress has done in recent years, we are not
suggesting that should be the future policy.
As part of health care reform, the Administration would support
comprehensive, but fiscally responsible, reforms to the payment formula. The
Administration believes Medicare and the country need to move toward a system in
which doctors are paid for high-quality care rather than simply more care.
- Reducing Itemized Deduction Rate for Families With Incomes Over
$250,000. Lowering health care costs and expanding health insurance
coverage will require additional revenue. In the health reform policy
discussions that have taken place over the past few years, a wide range of
revenue options have been discussed—and these options are all worthy of
serious discussion as the Administration works with the Congress to enact
health care reform. The Administrationfs Budget includes a proposal to limit
the tax rate at which high-income taxpayers can take itemized deductions to 28
percent— and the initial reserve fund would be funded in part through this
provision. This provision would raise $318 billion over 10 years.