Proposed 2020 White House Budget Includes Block Grants, Medicaid Work Rules, Increased HIV Funding

The president has released his budget for fiscal year (FY) 2020, which calls for converting Medicaid to a system of block grants and requiring all able-bodied Medicaid recipients to hold a job or perform community service. The $87.1 billion allocated to HHS, a 12% cut, would include increases to federal HIV funding, but drops in global funding, as well as cuts to the National Institutes of Health (NIH). The blueprint also includes efforts to lower drug prices by changing how Medicare pays for therapies.

However, the proposed budget is expected to be dead upon its arrival in Congress, where Democrats have controlled the House of Representatives for nearly 3 months, and Senate Republicans may not want to get entangled in another debate over healthcare proposals on Medicaid and Medicare, which was a factor in deciding the midterms last year.

Medicaid

The administration’s budget includes most of the healthcare proposals championed by conservatives, including making all Medicaid beneficiaries have work or community engagement requirements, similar to those receiving Temporary Assistance for Needy Families; changing the financing system to one of per capita caps or block grants; and ending Medicaid expansion as allowed under the Affordable Care Act (ACA).

In addition, the ACA would also be replaced with grants that states could use to subsidize private insurance coverage.

“A new Federal-State partnership is necessary to eliminate inefficient Medicaid spending, including repeal of the Medicaid expansion, inefficient Medicaid spending, including repeal of the Medicaid expansion, and reducing financing gimmicks such as provider taxes,” according to a brief released by the White House. It also calls for increasing copayments for what it would consider “non-emergency use” of the emergency department.

Medicaid work requirements are the subject of a lawsuit filed by the National Health Law Program and the Southern Poverty Law Center, which released a joint statement Monday condemning the proposed plan.

“Conditioning Medicaid on work requirements is also illegal, and the policy is at the heart of litigation the National Health Law Program, Kentucky Equal Justice Center, Legal Aid of Arkansas, Jenner & Block, and the Southern Poverty Law Center have brought on behalf of Medicaid beneficiaries in both states,” the organizations said.

The federal judge in the case, James Boasberg of the US District Court for the District of Columbia, will hear oral arguments on the legality of Medicaid work requirements in Arkansas and Kentucky on Wednesday. About 18,000 people in Arkansas have lost their health coverage so far, and it is estimated that 90,000 in Kansas will lose coverage, if the court allows the program to go forward on July 1.

The budget also proposes to remove the cap on Medicaid manufacturer drug rebates. In addition, the administration would allow states to test a closed formulary and negotiate prices directly with manufacturers.

Medicare

For the first time, Medicare fee-for-service would use prior authorization, similar to commercial insurance plans and Medicare Advantage. CMS Administrator Seema Verma has repeatedly called the growth in Medicare spending unsustainable, and the White House budget seeks to cut spending by $845 billion over the next 10 years. The plan calls for targeting waste and abuse, and by changing payments to providers.

For instance, in the 340B drug program, CMS would begin to implement a change it put in place last year, where outpatient hospital payments were cut from average sale price plus 6% to ASP minus 22.5%. Beginning next year, only hospitals providing at least 1% of patient care costs in uncompensated care will receive redistributed savings based on the percentage of all uncompenstated care they provided compared with other faciltiies.

It would also cut $4.3 billion from the Medicare Outpatient Prospective Payment System's pass-through payments for newly approved drugs, biologics, and biosimilars. Currently, those drugs are paid for at ASP plus 6% for 3 years when the cost exceeds a certain threshhold, but in the budget plan, payments for those drugs would shift to the 340B porgram, which pays less.

It would also cap payment for Part B drugs to the consumer price index.

HIV

During the State of the Union, President Trump announced the ambitious plan of ending the HIV epidemic within the next decade, with a goal of reducing the number of new HIV infections by 75% within 5 years and by 90% within 10 years. For the first phase of this initiative, the proposed 2020 budget includes $291 million in funding for HIV efforts.

The budget places a large emphasis on the importance of access and adherence to pre-exposure prophylaxis (PrEP). While there are more than 1.2 million Americans who are at high-risk for HIV and for whom PrEP is indicated, only about 10% are currently on the pill.

The allocated funding for HIV includes $140 million for CDC to work with state and local health departments for testing and diagnosing new cases, providing efficient linkage to care, expanding HIV surveillance, and ensuring access to PrEP for those at risk. This would be an 18% increase over fiscal year 2019.

The budget also includes $120 million for the Health Resources and Services Administration, of which $70 million would be dedicated to the Ryan White HIV/AIDS Program, which serves as a safety-net program for low-income people. In 2016, approximately 85% of Ryan White HIV/AIDS Program users were virally suppressed, and funding for the program would focus on efforts to further increase viral suppression rates. The other $50 million would be allocated for community health centers to expand PrEP services, outreach, and care coordination.

Indian Health Services would also receive $25 million in new funding for HIV screening, as well as prevention and treatment efforts for hepatitis C, which has a high prevalence among people living with HIV.

The budget marks the first time in recent years that safety-net and prevention programs would see substantial increases in funding.

However, globally, HIV efforts would see cuts through the proposed budget, including a 22% cut to the President’s Emergency Plan for AIDS Relief, commonly known as PEPFAR, which provides global relief to people living with or at risk for HIV overseas, particularly in Africa. Trump is also looking to decrease the amount that the United States contributes to the Global Fund to Fight AIDS, Tuberculosis, and Malaria, proposing $1.1 billion for fiscal year 2020, down from the current $1.35 billion.

NIH

With a proposed budget of $34.4 billion for 2020, NIH would see a 12.6% drop in funding, down from $39.3 billion allocated for the institutes in 2019. With a 14.6% decrease, the National Cancer Institute would get the biggest hit, dropping from $6.14 billion in funding in 2019 to $5.25 billion in 2020.

In addition, the National Institute of Allergy and Infectious Disease would see a dip for the second year in a row, dropping 13.9%, from $5.52 billion in 2019 to $4.75 billion in 2020.

The proposed funds for NIH include $492 million in resources available through the 21st Century Cures Act and $150 million in mandatory resources.

As it did last year, the budget proposed killing off the Agency for Healthcare Research and Quality as an independent agency within HSS and moving it inside the NIH, with funding of $256 million, much less than the $451 million allocated by Congress.

The Ad Hoc Group for Medical Research, a coalition of about 300 universities, medical associations, patient groups, and others, decried the proposed NIH cuts, saying they would “undermine progress on research to find treatments and cures for patients nationwide while threatening our narrowing competitive edge in an increasingly innovation-based international marketplace.” They had asked for an appropriation of at least $41.6 billion for the NIH, a $2.5 billion increase over the NIH’s program level funding in FY 2019.