President Bush’s (FY) 2006 Budget Proposal

To: National Association for the Advancement of Orthotics and Prosthetics

From: Peter Thomas, Dustin May, Emily Niederman

Date: July 20, 2004

Re: Legislative Update . Medicaid and Appropriations

The following is an update of activity in Congress that has occurred within the past two weeks. Appropriations issues are in full swing with the House of Representatives considering the annual FY 2005 Labor, HHS, and Education spending bill. Controversy surrounds the Family Opportunity Act, which is bogged down over a provision that would pay for the bill using funds currently devoted to Medicaid targeted case management. Additionally, legislation has been introduced to increase the federal Medicaid match and reinstate funding lost from last year.s temporary state fiscal relief that expired on June 30, 2004.

It appears that HR 1811, a bill combining the Family Opportunity Act (FOA) and the Money Follows the Person (MFP) Initiative, is stalled in the House of Representatives as supporters attempt to agree on an acceptable offset that would pay for the bill. As mandated by the recently passed House Budget Resolution, legislators must find an equal amount in budget savings from programs under the jurisdiction of the Energy and Commerce Committee to consider the legislation, and Republican leaders have looked to other programs within Medicaid programs for these savings.

FOA, originally sponsored by Senate Finance Committee Chairman Charles E. Grassley (R-IA) and passed by the Senate in May, provides Medicaid coverage for children with disabilities whose families’ incomes are at or below 250 percent of the federal poverty level. MFP supports Medicaid beneficiaries as they transfer out of institutional settings into their own homes.

In terms of the offset, lawmakers have focused on Medicaid.s targeted case management (TCM) program. The offset would level the federal matching assistance percentage (FMAP) in this program to a flat 50-50 rate, down from a higher matching. While such a change would not affect several states that currently have an FMAP of 50 percent, the low-income states that have higher matching rates could potentially be forced to reduce services.

The proposed Medicaid offset put legislators and the disability community in a difficult position, essentially having to choose between two important Medicaid programs. Key Senate supporters of FOA, including Chairman Grassley and Senator Edward Kennedy (D-MA), have publicly stated their disapproval of Medicaid cuts in the bill and it remains uncertain whether the House will identify more acceptable offsets in the near future. We will update you as developments occur.

In 2003, the federal government granted states $10 billion in fiscal relief to temporarily increase federal Medicaid payments. However, on June 30, 2004, those increases expired and states are expected to see significant drops of up to 3 percentage points in the amount states are reimbursed by the federal government for Medicaid expenses, otherwise known as the .Federal Medical Assistance Percentages. (FMAP). Although states. financial situations have generally improved since the relief was granted last year, many Medicaid programs are still fragile and will likely suffer with the reduction of this federal assistance.

Late last week, Senators John D. Rockefeller (D-WV) and Gordon Smith (R-OR) introduced S. 2671, a bill to extend the FMAP fiscal relief. It provides $4.8 billion over 15 months in fiscal relief for Medicaid, as well as reimburses states for the $1.2 billion in net costs from the Medicare drug bill. It is possible that the Senators will look to an appropriations or omnibus bill as a possible vehicle. We will keep you updated as developments occur.

On Wednesday, July 14, 2004, the House Appropriations Committee approved by voice vote legislation setting fiscal year 2005 funding levels for federal health agencies and programs. The FY 2005 spending bill for the departments of Labor, Health and Human Services, and Education totaled $492.3 billion, with $142.5 billion funding discretionary programs.

Overall, health care related funding remains relatively flat, with a small increase in discretionary funding . $202 million dollars more than President Bush requested in his budget proposal and a 2.2 percent increase from the 2004 fiscal year.

The following numbers are for the House bill only. The Senate is not expected to begin consideration of a bill until September.

Under the spending bill, total HHS spending would increase 3.9 percent to $374.3 billion.

Funding for the Centers for Disease Control (CDC) would receive $4.48 billion, a $138 million decrease from FY 2004, under the House.s spending bill, although that is actually $15 million more than the President.s FY 2005 request.

The Centers for Disease Control.s Birth Defects/Developmental Disabilities/Disability and Health programs would receive an increase of $6.5 million from the $113 million in FY2004. This program provides for research and epidemiological patterns of diseases and conditions that precipitate birth defects and developmental disabilities. It also studies research into potential cures.

CDC.s Chronic Disease Prevention and Health Promotion program was funded at $853 million in FY 2004 and a proposed $915 million for FY 2005, an increase of 7.27 percent.

CDC Injury Prevention and Control would receive level-funding from last year, although the $155.5 million is $2 million more than the President.s FY 2005 budget request. CDC is the lead Federal agency for injury prevention and control. Programs are designed to prevent premature death and disability and reduce human suffering and medical costs caused by: fires and burns; poisoning; drowning; violence; lack of bicycle helmet use; lack of seatbelt and proper baby seat use; and other injuries. The national injury control program at CDC encompasses non-occupational injury and applied research in acute care and rehabilitation. Funds are utilized for both intramural and extramural research as well as assisting State and local health agencies in implementing injury prevention programs.

The Agency for Healthcare Research and Quality (AHRQ) is slated to receive level funding at $327 million in the FY 2005 Appropriations Bill, consistent with the President.s FY 2005 Budget. Although AHRQ is level-funded, funding for projects related to the Medicare bill has lowered the budgets for other AHRQ programs in general. The Agency was established in 1990 to promote improvements in clinical practice and patient outcomes, promote improvements in the financing, organization, and delivery of health care services, and increase access to quality care. AHRQ is the federal agency charged to produce and disseminate scientific and policy-relevant information about the cost, quality, access, and medical effectiveness of health care.

The NIH received an overall increase of 2.7 percent increase in the House.s spending bill, as requested by the President.s budget proposal. The NIH was funded at $28.044 billion in FY 2004 and the FY 2005 budget proposes funding at $28.773 billion. Within the NIH budget, the National Institute of Diabetes and Digestive and Kidney Diseases (NIDDK) received a 2.96 percent increase from $1.822 billion in FY 2004 to $1.876 billion in FY 2005. The National Institute of Child Health and Human Development (NICHD) received a 3.14 percent increase from $1.242 billion in FY 2004 to $1.281 billion in FY 2005. The NICHD is the institute that houses the National Center for Medical Rehabilitation and Research (NCMRR), and that center should receive at least this level of increase. The National Institute of Neurological Disorders and Stroke (NINDS) received a 2.93 percent increase from $1.501 billion in FY 2004 to $1.545 billion in FY 2005.

Vocational Rehabilitation State Grants received a modest increase in funding of $51.6 million, from $2.584 billion in FY 2004 to $2.635 billion in the spending bill and the President.s proposed FY 2005 budget. These grants fund vocational rehabilitation in each of the states.

Assistive Technology state grants received $15 million under the FY 2005 Appropriations bill and the President.s budget proposal. That is a 42 percent decrease from the $26 million that Congress gave the program in FY 2004 after the FY 2004 budget proposed to eliminate funding for the program. The Assistive Technology program is designed to improve occupational and educational opportunities and the quality of life for people of all ages with disabilities through increased access to assistive technology services and devices. It provides grants to States to develop comprehensive, consumer-responsive statewide programs that increase access to, and the availability of, assistive technology devices and services. The National Institute on Disability and Rehabilitation Research administers the program.

The National Institute for Disability and Rehabilitation Research (NIDRR) received level funding of $107 million in the spending bill and the President.s FY 2005 budget, the same figure as the final funding level in the FY 2004 spending bill. This is $3 million less than the FY 2003 funding level. This decrease is largely attributable to across the board reductions due to the multiple continuing resolutions before funding levels were settled.

Separate funding for Supported Employment State Grants was eliminated again under the President.s FY 2005 budget but this program was flat-funded under the spending bill at $37.7 million. Similar to Projects with Industry, VR funds have been used to continue to fund these programs. The Supported Employment program assists persons who may be considered too severely disabled to benefit from vocational rehabilitation services by providing the ongoing support needed to obtain competitive employment. Short-term vocational rehabilitation services are augmented with extended services provided by State and local organizations. Federal funds are distributed on the basis of population.

It is unlikely that Medicaid legislation will be considered prior to the November elections. The activity surrounding Medicaid is likely to set the stage for greater reform in the next Congress. With regard to appropriations, the House.s quick action on appropriations this year will be stalled in the Senate until September. A final bill is unlikely to occur before the national elections; most likely it will occur in a .lame duck. Congressional session following the elections.

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