President Trump has released his FY 2018 budget proposal, which the Administration dubs “A New Foundation for American Greatness.”  The proposed budget – which received a generally chilly reception on Capitol Hill – offers a mixed bag for the health care industry.  On the one hand, a document summarizing the Department of Health and Human Services (HHS) provisions declares that, unlike other recent Administration budget proposals, the Trump budget “does not include any direct Medicare cuts.”  President Trump also calls for repeal of the Independent Payment Advisory Board (IPAB), which was established by the Affordable Care Act (ACA) to propose Medicare spending reductions if projected spending growth exceeds a specified economic target.  Furthermore, the President proposes to invest $1.3 billion over 10 years to address the Medicare appeals backlog and reform the appeals process.

On the other hand, the Administration proposes $250 billion in budget savings over 10 years as a result of repealing and replacing the ACA, although the budget commits to funding “necessary activities to continue to operate the Exchanges in 2018.”  The budget also would reduce net federal Medicaid spending by $627 billion over 10 years – on top of Medicaid savings included in the Administration’s ACA repeal plan.  The bulk of the Medicaid savings ($610 billion) would come from structural reforms that would allow states to choose between a per capita cap or a block grant beginning in FY 2020.  States would be given additional regulatory flexibility to “advance solutions that best serve their unique populations,” which might include provisions encouraging work and/or promoting personal responsibility.  Funding for the Children’s Health Insurance Program (CHIP) also would cut by $13.9 billion over 10 years.  Additionally, the Trump Administration proposes a new user fee that would fund provider survey and certification revisits resulting from deficiencies found during initial certification, recertification, or substantiated complaints surveys.  According to the HHS summary, this fee would give CMS “an increased ability to revisit poor performers, while creating an incentive for facilities to correct deficiencies and ensure quality of care.”  While the Administration expects a five month lag in collecting FY 2018 fees, it still projects $26 million in new user fee revenue in FY 2018.

With regarding to the Food and Drug Administration (FDA), the budget calls for $5.1 billion in total FY 2018 FDA funding.  This reflects an $854 million reduction in budget authority and a $1.3 billion increase in user fees so that such fees fund 100% of costs for premarket review and approval activities in the medical device, animal drug, animal generic, prescription and generic drug, and biosimilar programs.  The Budget also endorses reforms to “balance the demand for scientific rigor and access to reliable, life-saving cures” and provide “regulatory relief to the industry and speed the development of safe and effective medical products.”

Other notable provisions of the budget include:

  • An additional $70 million in 2018 to fund the Health Care Fraud and Abuse Control Program.
  • Updates to 340B drug pricing program rules intended to “increase transparency and improve program integrity.”
  • Unspecified medical liability reforms, which the Administration projects would save $31.8 billion over 10 years.
  • A $5.7 billion reduction in National Institutes of Health funding compared to FY 2017 levels and consolidation of the Agency for Healthcare Research and Quality (AHRQ) into NIH.

It is important to remember that the Administration’s budget is only a proposal; Congress ultimately determines the federal budget framework.