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Mar 05, 2014

President Releases 2015 Fiscal Year Budget

On March 4, President Obama released his budget for the 2015 Fiscal Year (FY). While Congress is unlikely to engage in a serious budget process this year, the president’s budget expresses the administration’s priorities and stands as a marker of potential healthcare offsets or "savers" for other legislative initiatives, including a repeal of the Sustainable Growth Rate (SGR).

Of note, the budget points to the Affordable Care Act as “one notable structural factor,” contributing to an overall decline in the rate of overall healthcare cost growth.  

Generally, the potential impact on the health industry, and for specific sectors, is relatively consistent with previous budgets.

  • Life Sciences: As in years past, the budget includes several provisions, which if enacted, would increase pressure on manufacturers, including increasing rebate liability. Examples of proposals included in this year’s budget that emerged in the president’s FY14 budget and in previous budget debates, include: extending Medicaid drug rebates to Part D low-income beneficiaries; prohibiting pay-for-delay agreements between brand and generic drug companies; reducing brand name biologic exclusivity; accelerating manufacturer discounts to close the Part D coverage gap; and modifying reimbursement of Part B drugs, among others.
  • Health Plans: The president’s budget includes several familiar proposals impacting health plans and Medicare beneficiaries, also from his FY14 budget, including: increasing the minimum Medicare Advantage (MA) coding intensity adjustment; aligning EGWP payments with average MA plan bids; and increasing income-related premiums under Medicare Parts B and D.
  • Providers: This year’s budget also calls for a variety of provider payment cuts, with several proposals focusing on post-acute providers specifically. In addition, the budget calls for a reduction in both Medicare bad debt payments, and graduate medical education payments.

Finally, the budget continues to emphasize efforts to reduce “waste, fraud, and abuse” in Medicare and Medicaid, as well as in the new Health Insurance Marketplaces.  The budget also proposes several new initiatives that require further evaluation, including: a new Medicaid demonstration focused on reducing reliance on psychotropic medications for foster children; a new competitive graduate medical education program; and bonus payments for high-performing Part D plans.

The two-year budget deal struck at the end of 2013 set discretionary funding levels for not only FY14, but also FY15. House Republicans are expected to release a budget in the coming weeks, while Senate Budget Chair Patty Murray has indicated that Senate Democrats will not engage in a budget process this year.

View the president’s budget.

View the HHS budget in brief.

For more information on the president's budget, email Elizabeth Carpenter at ECarpenter@avalere.com.

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