President Trump’s full fiscal year (FY) 2018 budget proposal, A New Foundation for American Greatness, suggests major funding reductions in health that, if enacted, could shake the foundation of the U.S. healthcare system. The proposal does not appear poised to be taken up in congressional appropriation measures. Even Republican senators have indicated the proposal is a non-starter, with some going as far as to declare it “dead on arrival.”
Nevertheless, the proposal highlights Trump administration priorities and can give stakeholders insight into future policy changes that could be included in efforts to “repeal and replace” the Affordable Care Act (ACA) or through other legislative vehicles.
Five key takeaways for healthcare stakeholders from the President’s budget proposal include:
- The safety net is on the chopping block. Amid proposed reductions to several other safety net programs, the President’s budget calls for a reduction in federal Medicaid spending of $610 billion over the next 10 years. The proposal would achieve this by altering the traditional entitlement program to a capped federal contribution to states based on either a block grant or a per capita allotment. This proposal is similar to that contained in the American Health Care Act, which was passed earlier this year by the House of Representatives and is currently being considered by the Senate.
- CHIP’s future is an open question. The budget calls for extending funding for the politically popular Children’s Health Insurance Program through FY 2019. However, the proposal also calls for a 23% reduction in the federal matching rate for CHIP and would cap eligibility for the program at 250% of the federal poverty level. CHIP funding reauthorization remains a hot legislative item as federal funding for the program is currently set to expire September 30, 2017.
- Shifting focus for public health programs. Trump’s budget proposal would reduce funding for the CDC by $1.3 billion in FY 2018. Despite the overall funding reduction, the proposal provides for $500 million for the creation of the America’s Health block grant, which would give funding for states to implement their own intervention programs. The combination of an aggregate funding reduction coupled with a shift of resources to states appears to be a favorite policy proposal from the administration and could potentially be proposed elsewhere moving forward.
- Deep cuts to research. The proposal calls for more than $5.5 billion worth of cuts in funding for the National Institutes of Health, the federal agency focused on supporting and funding medical research.
- Increased reliance on private funding for the FDA. The proposal calls for a $1.3 billion increase in user fees to fund the work of the FDA. Coupled with an $854 million reduction in federal funding, the administration expects the agency to see an increase of $456 million in funding compared to FY 2017 levels.
Health and Human Services Secretary Tom Price defended the cuts in testimony to Congress on June 8, arguing that America’s health programs are “broken” and in need of overhaul, not more funding.
Also, noteworthy, the budget proposal is silent on Medicare. It in effect honors President Trump’s campaign promise not to cut Medicare, though the head of the Office of Management and Budget has suggested that fiscal discipline will make it necessary to consider cutting Medicare down the road.
Robert Atlas is a strategic advisor and president of EBG Advisors, Inc. He serves as an executive consultant on strategy, policy analysis, program development, and performance improvement for healthcare providers, payers, policymakers, product makers, investors, and others.
Timothy J. Murphy is an associate in the Health Care and Life Sciences practice, in the Washington, DC, office of Epstein Becker Green.