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The Bush Budget: No relief in sight. (View on Washington).

President Bush revealed his long-term plans for spending in the budget released in February. Remarkably, given all that has happened since he took office, this was the first opportunity that the administration had to develop a budget from scratch. The spending numbers presented in the budget for fiscal years (FY) 2003 to 2007 presumably reflect the real spending priorities of President Bush and his advisors.

Those spending priorities spell trouble for long-term care.

Future spending on long-term care cannot be determined from the glossy budget issued by the President's Office of Management and Budget. This year, the official "budget document" is an upbeat, chatty volume that does not identify how much money will be spent for programs. Instead, most information on spending must be teased out of a separate analytic document that lacks either text or explanations for such items as "change in uncollected customer payments from Federal sources."

The decision to issue a budget document without comprehensive spending figures and a a second budget document that presents the information in obscure accounting language reflects the harsh realities of today's public-relations-obsessed Washington. The truth is that even the optimistic economic projections used by the Bush administration envision slower growth in federal spending on healthcare, even as the first wave of the postwar baby-boom generation turns 60 years old (in 2006). The President's promise to simultaneously keep to the schedule of last year's ballooning tax cuts, spend billions more on countering terrorism and return to a balanced budget by the end of his first term can only be accomplished by reducing discretionary spending. In real terms, that means cutting spending on healthcare.

Consider, for example, the proposed budget of the Department of Veterans Affairs. In 2001, the Veterans Health Administration spent $21.6 billion on all medical care for veterans, and this year it is expected that spending will increase 7% to just under $23.1 billion. The President proposes another 7.8% increase for the next fiscal year, estimating that spending will reach $24.9 billion.

In the following year, however, the President's budget estimates that veterans' healthcare spending will increase by only 2.2% and by less than 2% in FY 2005. The budget does not explain how a health system serving thousands of surviving veterans of World War II and the Korean War can take on the additional burden of 60+-year-old Vietnam veterans with increases that are below the rate of today's inflation.

The Administration on Aging (AoA) also faces hard times in the President's budget. For the next year, proposed spending on the AoA will increase 14%, from $1,137 million to $1,295 million. However, for this money, AoA will be tasked to administer all of its existing programs plus the Elderly Nutrition Services Incentive Program now housed in the Department of Agriculture. The Administration on Aging will receive ever-smaller increases through 2007, despite the growing number of low-income elderly depending on federal assistance to ensure an adequate diet.

The President's budget also provides no answer on the expiration of the Balanced Budget Amendment changes that provided relief on Medicare payments to nursing homes and other facilities. It states that "Medicare's extremely complex provider payment systems, based on regulated prices, do not always function smoothly and equitably overtime....The Administration is willing to work with the Congress to smooth out such payment adjustments through reforms in payment policy that, in both the short and long term, are budget neutral across provider payment updates." In other words, the President is willing to support a change in the payment system that doesn't cost money. Devising a "budget neutral" reform that can restore reasonable reimbursement rates will be a challenge for congressmen who want to support the President's budget and simultaneously help keep long-term care solvent.

No parallel problem is faced by the health insurance industry that has bailed out of the Medicare+Choice managed care plans. During the past three years, 128 plans have terminated their contracts to provide Medicare+Choice, eliminating coverage for nearly two million enrollees. The President's budget acknowledges that "the most important reason that private plans are withdrawing from Medicare is that federal payments to Medicare+Choice have not kept pace with rising health care costs in many areas of the country. The pricing system that controls payments to Medicare+Choice plans has artificially held down payment increases to plans as health care costs have steadily risen." The President proposes to spend $600 million in incentives to encourage health plans to participate in Medicare+Choice next year. The proposed incentive payments will increase to $1.2 billion in FY 2004 and $1.5 billion in FY 2005. After FY 2005, the budget declares that the bonus payments made to health plans will discontinue because uns pecified "competitive reform" will have been implemented.

It is doubtful that the President's advisors seriously expect Congress to accept budgets for such popular programs as veterans' healthcare and nutrition for the elderly that result in much lower levels of service after FY 2003. It is more likely that the administration wants Congress to accept the responsibility for future budget deficits by raising agency appropriations above the levels proposed by the President. This places even greater pressure on long-term care reimbursements, which lack the "crowd appeal" of other areas of spending. Caught between a president who offers relief for health plans but not health providers, and a Congress that wants to protect popular programs, the long-term care industry might well face a very difficult time on Capitol Hill during the remainder of the Bush administration.
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Author:Stoil, Michael J.
Publication:Nursing Homes
Article Type:Brief Article
Date:Apr 1, 2002
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