Taking Care of Different Priorities

A Comparison of Competing Health Budget Plans

Nicole Cafarella and Karen Davenport examine the cost-reduction priorities that the Obama administration and House Republicans unveiled this week.

President Obama’s continued efforts to bring our nation’s soaring health care costs under control in his budget for fiscal year 2012 and House Republican efforts to gut health care spending without any consideration for the patient—the American people—says it all about the competing budget priorities in Washington today.

The president earlier this week outlined a plan for tackling real problems in our nation’s health care system in FY 2012, which begins in October. These efforts build on strategies in the Affordable Care Act enacted last year that are designed to improve the integrity of government health care programs and reduce wasteful spending across the health care sector.

The Obama administration’s plans stand in stark contrast to the House Republicans’ proposed continuing resolution proposal for the remaining seven months of FY 2011, which is being taken up in the House this week. Those efforts, which will soon become part of the debate about health care spending for FY 2012, would make existing health care problems far worse.

First the president’s proposed changes. His plan will eliminate wasteful health care spending and reduce the national deficit—even after making needed adjustments to Medicare’s payments to physicians. The president’s plan, for example, will allow cheaper generic prescription drugs to reach the marketplace more quickly by reducing the exclusivity period for brand-name drugs and by giving the Federal Trade Commission the ability to prohibit brand-name and generic drug companies from colluding to keep cheaper drugs off the market.

Faster availability of less costly generic drugs will benefit all consumers, not just the federal government. Savings to Medicare and Medicaid alone as a result of these two proposals will be upwards of $11 billion over the next decade.

The president’s budget also takes into account anticipated reductions in the number of uninsured Americans as a result of the Affordable Care Act by reducing supplemental Medicaid payments to hospitals that serve a disproportionate share of the uninsured—thus reducing projected Medicaid spending by $4 billion.

Other proposed changes in the administration’s budget will improve program integrity in Medicaid and Medicare. For instance, the president proposes to align government reimbursement levels for durable medical equipment so that Medicaid receives the same low prices that Medicare is able to negotiate with providers. This will save Medicaid $6.4 billion over the next ten years.

To strengthen the Medicare program, the president’s budget also contains a host of proposals designed to improve the efficiency of existing, typically not-for-profit, organizations that contract with the Medicare program to enhance the effectiveness, efficiency and quality of services that beneficiaries receive. These changes will save Medicare $6.5 billion over the next decade.

As a whole, the president’s budget proposal will strengthen program management, reduce unnecessary spending, and improve efficiency in our nation’s premier public health insurance programs. In contrast, the House Republicans’ continuing resolution proposal currently under consideration would make existing problems in our health care system even worse.

Their plans would cut funding sharply for a number of initiatives that are critical for solving the problems plaguing our health care system—including:

  • The Maternal and Child Health Block Grant, which is specifically aimed at improving the health of mothers and their children
  • The National Health Service Corps, which provides clinicians with educational scholarships and loans in exchange for their providing care in underserved areas
  • The health professions program, which aims to bolster health care workforce shortages by offering training grants and other tools

These short-sighted cuts will cost our nation much more over the long term. If the Republicans slash these investments in preventive and primary care, health care costs will continue to rise.

Indeed, the continuing resolution also cuts funding for community health centers, institutions that deliver care to traditionally underserved communities. These critical health care providers deliver invaluable primary care services to typically lower-income Americans who may or may not have health insurance coverage. Community health centers are a foundation for efforts to build capacity to serve the nation’s future primary care needs.

In short, President Obama’s health budget plans are defined by careful, surgical program improvements to strengthen our health care system by promoting more effective and efficient care while yielding budget savings, while the House Republicans choose instead to target funding for programs that serve vulnerable Americans and would build the health care infrastructure we need to meet future needs.

But even this contrast does not do justice to the full difference between these two approaches. The president’s budget is built on top of the reforms in the Affordable Care Act, the new health care law that will reduce the federal budget deficit by $143 billion over 10 years. House Republicans offer their program cuts on top of the recent vote to repeal the Affordable Care Act, thus forgoing these budget savings.

A full repeal of the Affordable Care Act also would wipe out provisions that will extend affordable health coverage to 32 million uninsured Americans, create new incentives for improving the quality and efficiency of health care, and reduce the growth in health care costs. Taken together, the House Republican agenda will not only repeal the progress of the Affordable Care Act but also weaken the health care system we have today.

The priorities of the president and House Republicans are clear. So, too, is the choice facing the American people.

Karen Davenport is Director of Health Policy at the Center for American Progress. Nicole Cafarella is the Health Payment Reform Project Manager and Policy Analyst at the Center. To read more about the Center’s health reform proposals go to the Health Care page of our website.

The positions of American Progress, and our policy experts, are independent, and the findings and conclusions presented are those of American Progress alone. A full list of supporters is available here. American Progress would like to acknowledge the many generous supporters who make our work possible.


Nicole Cafarella

Payment Reform Project Manager and Policy Analyst