Trump Administration Calls for Medicare/Medicaid Cuts, Program Reforms in FY 2020 Budget Proposal

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The Trump Administration’s proposed fiscal year (FY) 2020 budget includes extensive health-policy provisions.

Medicare, Value-Based, and Related Reforms

The Administration estimates that its Medicare policy reforms would save approximately $811 billion over 10 years. The Administration states that these proposals are “designed to improve value-based systems of care, exercise fiscal integrity, promote competition, reduce provider burdens, improve the appeals system, and address high drug prices.” Budget provisions that would result in significant Medicare savings include the following (savings are over the 10-year period of FYs 2020-2029): 

  • Site neutral payments between on-campus hospital outpatient departments and physician offices for certain services (e.g., clinic visits). [$131.4 billion]
  • Payment for all off-campus hospital outpatient departments under the physician fee schedule (PFS) effective CY 2020. [$28.7 billion]
  • Expansion of the durable medical equipment (DME), prosthetics, orthotics, and supplies (DMEPOS) competitive bidding program to all areas of the country. The proposal also would reimburse contract suppliers based on their own bids rather than a single payment amount.  [$7.1 billion]
  • Consolidation of federal spending for graduate medical education (GME) programs. [$211.8 billion in Medicare savings].

Other legislative proposals intended to promote value-based care that are not expected to have a budget impact include the following:

  • Consolidation of four existing inpatient hospital quality programs (the Hospital Inpatient Quality Reporting Program, Hospital Readmissions Reduction Program, Hospital-Acquired Condition Reduction Program, and Hospital Value-Based Purchasing Program) into a single hospital quality payment program.
  • Implementation of value-based programs for hospital outpatient departments and ambulatory surgical centers, and risk-adjusted payment to these facilities based on the severity of patients’ diagnoses.
  • Creation of a risk-adjusted monthly Medicare Priority Care payment for providers who (1) are eligible to bill for evaluation and management (E/M) services and (2) provide ongoing primary care to Medicare beneficiaries. The payment would be funded by a 5% annual reduction in the valuations of all non-E/M services and procedures under the PFS.

A number of the budget proposals are intended to reduce the burden that Medicare program rules impose on providers and suppliers. For instance, the budget calls forsimplifying the Merit-based Incentive Payment System and Advanced APM rules for physicians; authorizing the Centers for Medicare & Medicaid Services (CMS) not to impose the requirement for a face-to-face provider visit for all DME ordersand aligning the End Stage Renal Disease Quality Incentive Program with CMS’s Meaningful Measures initiative. Other planned Medicare administrative proposals, which do not require Congressional approval and which are not expected to have a budget impact, include:

  • Episodic bundled payment arrangements for certain “high-value devices” under which the device manufacturer would bear some or all of the risk.
  • Additional CMS guidance regarding the Medicare coverage process, including sub-regulatory guidance on the evidence standards the agency utilizes in assessing coverage and in the appeals process.
  • A proposal to strengthen the existing FDA/CMS parallel review process to improve device manufacturer participation and increase transparency.
  • For beneficiaries participating in clinical trials, a proposal to provide Medicare coverage of devices approved through the Breakthrough Device Program for up to four years from the date of FDA approval.

The budget includes a reference to adding ventilators and certain orthotics to the next round of the DMEPOS competitive bidding program, which is estimated to save $6.1 billion over 10 years.

Program Integrity Proposals

The budget also features program integrity legislative proposals that the Administration estimates would save $19.6 billion over 10 years, in addition to a number of related regulatory proposals.

  • Establishing a prior authorization program for high-utilization practitioners of radiation therapy, therapy services, advanced imaging, and anatomic pathology services.
  • Implementing targeted pre-payment review requirements for chiropractic services, and to confirm documentation of diagnoses in support of Medicare Advantage risk-adjustment payments.
  • Authorizing civil monetary penalties for failure to report changes to information provided during enrollment or re-validation.
  • Requiring Physician Owned Distributors (PODs) to report under the Open Payments program (while providing the Secretary with flexibility to extend certain Open Payments reporting deadlines).

The Administration’s budget proposal covers many other HHS policies, such as Medicaid updates, Medicare appeals system improvements; medical liability reforms; changes to survey and certification policies; Medicare/Medicaid dually eligible beneficiary policies; and provisions to address the opioid epidemic. Congressional committees have begun holding oversight hearings on the HHS budget proposals. Additional consideration of the President’s recommendations, along with alternative health policy proposals, can be expected throughout the FY 2020 budget cycle.

Read the budget repot here: Fiscal year (FY) 2020 budget

Read the HHS brief here: Budget Brief