FY 2021 Budget Proposals Impacting Rehabilitation and Disability

Peter W. Thomas, JD, Principal, Powers Pyles Sutter & Verville, PC

Joseph Nahra, Legislative Director, Powers Pyles Sutter and Verville, PC

10 AMRPA Magazine / March 2020 The Trump administration’s FY 2021 budget proposals impact a wide variety of programs that affect rehabilitation and disability providers and consumers, although perhaps more indirectly than some of the proposals involving Medicare, such as Post-Acute Care (PAC) payment reform and prior authorization in the fee-for-service program. Following is a summary of some of the many rehabilitation and disability-related proposals the administration has put forward for Congressional consideration. While many of these proposals will not survive the appropriations process, the administration has significant regulatory authority to proceed with its agenda without congressional approval and the budget serves as a roadmap for the administration’s intentions.

Rehabilitation and Disability Research and Services This year’s budget would be more alarming if the administration were proposing its domestic (non-defense) funding levels for the first time. The fact is that the Trump administration has proposed many significant cuts to a wide variety of federal rehabilitation and disability programs in the last three years only to be overridden by Congress. While many proposed funding levels continue to be gravely concerning, they are (again this year) not likely to be enacted into law as the onus now shifts to Congress to determine funding levels for agencies and program for the coming fiscal year, which begins on October 1, 2020.

The FY 2021 budget proposes a $2.9 billion cut to the National Institutes of Health, bringing the total NIH budget from nearly $42 billion down to $38.7 billion, a huge cut on a percentage basis that would eliminate a wide variety of grants. The National Institute of Child Health and Human Development (NICHD) is slated for a $140 million cut in funding, bringing its budget down to $1.41 billion. NICHD houses the National Center for Medical Rehabilitation Research (NCMRR) which receives a 6.5 percent set-aside of the NICHD extramural research budget and, therefore, rehabilitation research would also be negatively impacted. These cuts would wipe out the $2.7 billion increase in funding Congress and the president just enacted in December 2019. In sum, it is highly unlikely that Congress will reverse course on its recent bipartisan support for increases in NIH funding and there will be plenty of stakeholders making that case.

The National Institute for Disability, Independent Living and Rehabilitation Research (NIDILRR) is housed in the Department of Health and Human Services’ Administration for Community Living (ACL). NIDILRR supports applied research and data collection in the rehabilitation and disability areas. It has funded the Traumatic Brain Injury, Spinal Cord Injury and Burn Model Systems for years as well as investigator-initiated research in the areas of rehabilitation, disability, and independent living. NIDILRR has received increases to its budget of $3 million for each of the last two years, bringing its total budget this year to $112 million. However, the FY 2021 budget proposes to slash NIDILRR funding by $22

million, to $90 million. This would be a devastating blow to this vital agency for people with disabilities and the providers who serve them. Like NIH, this proposed cut in funding is very unlikely to survive due to bipartisan support in Congress for NIDILRR.

There are some relatively positive signs in the FY 2021 budget for the administration for Community Living. While developmental disability programs are, once again, slated for significant funding decreases, the TBI state grants, the Paralysis Resource Center and the Limb Loss Resource Center were all flat funded, i.e., given the same budget as this current fiscal year. This equates to $11 million, $7 million and $4 million, respectively.

In prior years, the current administration proposed to “zero fund” the two resource centers, which would have discontinued those programs, and significantly cut the TBI state grants. However, with AMRPA and many other stakeholders opposing these cuts each year, Congress has saved these programs by either restoring the proposed funding cuts or even increasing annual funding for these programs. The Trump administration finally appears to realize that Congress supports these programs and chose not to propose another bloodbath in funding this coming fiscal year.

Restructuring Research Programs For the first two years of the Trump administration, the budget proposed to move NIDILRR to the NIH and couple the Agency for Healthcare Research and Quality (AHRQ) and the National Institute of Occupational Safety and Health (NIOSH), creating a new agency focused on quality and safety at NIH. These past budget proposals also mentioned blending this new agency into the existing NIH structure and eventually eliminating a separate budget for these programs. The rehabilitation and disability community, led by the Disability and Rehabilitation Research Coalition (DRRC)—of which AMRPA is an active member—strongly opposed this proposal. Congress agreed and explicitly stated in FY 2019 report language its disapproval of relocating NIDILRR. This year, the budget did not address the movement of either NIDILRR or NIOSH to NIH, but it still contains a proposal to move the AHRQ to NIH. The FY 2021 Budget consolidates the activities of the AHRQ into the NIH structure as the new National Institute for Research on Safety and Quality.

Centers for Disease Control and Prevention: Chronic Disease and Health Promotion Despite the recent focus on infectious disease due to the coronavirus outbreak in China and throughout the world, the president’s budget proposes significant cuts in funding for the Centers for Disease Control and Prevention (CDC). The overall discretionary funding level for CDC would be slashed by more than $1.2 billion, down almost 19% from the FY 2020 level of over $6.9 billion. The budget also seeks to pare back funding for perceived non-priority focuses within CDC, instead targeting funding increases to combatting infectious diseases and specific public health crises, like the HIV epidemic. Specific programs receiving funding increases include immunization and respiratory diseases ($40 million), domestic HIV/AIDS efforts ($279 million), and child vaccines ($533 million), while the National Center for Birth Defects and Developmental Disabilities would be cut by $49 million and the CDC’s environmental health efforts would be cut $31 million. Most surprisingly, the budget includes a proposal to drastically reduce CDC-wide funding for chronic disease prevention, suggesting a 34% cut for a total funding level of $813 million (down from $1.24 billion in FY 2020). Within this budget line lies a proposal to implement the “America’s Health Block Grant,” which would consolidate funding for a variety of chronic diseases into a single block grant for states. While the administration proposes that this will serve as an opportunity to reform state-based chronic disease programs and would “provide states flexibility” to address chronic diseases highly prevalent in their populations, it mirrors the administration’s efforts to convert Medicaid funding to a block grant. The overall funding for these efforts is also significantly reduced through the block grant proposal from what was available in the past for multiple diseases including tobacco control, heart disease and stroke, diabetes, and arthritis. This elimination of dedicated program funding would likely result in a decreased focus on many of the previously targeted chronic diseases.

Medicaid “Reforms” Prior to the release of the president’s budget, the Centers for Medicare and Medicaid Services (CMS) issued their long-gestating “Healthy Adult Opportunity” proposal, which would essentially allow states the flexibility to convert their Medicaid funding to a block grant. Advocates have decried the proposal as likely to slash services, reduce access to care, and worsen coverage under the Medicaid program, but the administration has pressed on with its efforts (though the waivers are sure to face serious litigation and may not go into effect).

The budget builds on this work, touting the administration’s efforts to “usher in a new era of state flexibility” for Medicaid, and projects that these changes will save a whopping $920 billion over 10 years (which, of course, largely reflects proposed cuts to Medicaid funding and services). Continuing efforts to cap Medicaid funding and institute work requirements on beneficiaries are two linchpins of the administration’s Medicaid vision, and these are sure to remain a major focus of advocates aiming to protect the Medicaid program.

Reform and Expand DME Competitive Bidding The budget contains a number of provisions on Medicare competitive bidding of durable medical equipment (DME), which would go into effect in calendar year 2024. For instance, the budget proposes to change the way Medicare pays for DME under the competitive bidding program, from a single payment amount based on the maximum winning bid to each winning suppliers’ own bid amounts. As a result, Medicare payment to low bidders will equal their low bid amount. This will increase pressure on “low-ball” bidders (whose focus is to gain market share at all costs) to bid more realistically, because they will be held to providing the DME benefit at their bid amount. Currently, all the bids are combined into a composite bid so low-ball bidders routinely get paid more than they actually bid under the program.

The budget would also expand competitive bidding to additional geographic areas, including rural areas, and includes inhalation drugs as a service category for the first time. To reduce burden on suppliers, this proposal also removes the need for a surety bond, which requires all DME suppliers to secure a surety bond for every

competition. In the event that fewer than two suppliers submit bids in a rural area, CMS will base prices on information from similar rural areas. Expanding competitive bidding will allow CMS to base prices for DME items and services in rural areas on competition in those areas rather than setting fee schedule prices in rural areas based on competition in urban areas. This is expected to save the Medicare program $7.7 billion over ten years and Medicaid $435 million over ten years.

Another DME budget proposal would allow CMS to annually update DME fee schedules based on retail prices through rulemaking, without using the “inherent reasonableness” (IR) process, a cumbersome regulatory process that requires CMS to amass sufficient evidence before altering fee schedule amounts. The budget documents state that this change will allow Medicare prices to adapt to rapidly changing and often cheaper technology and reduce Medicare costs as DME prices drop in the retail market. It is projected to save $1.6 billion for Medicare savings and $85 million in Medicaid over 10 years. The reality is that CMS seeks to take advantage of the discounted prices available on the internet for certain types of DME. This, of course, fails to consider the expense built into the fee schedules for the clinical expertise and service element that often accompanies the proper selection, fit and training of various types of DME.

There are two additional significant DME proposals in the budget. The first proposal would allow CMS flexibility in the enforcement of the face-to-face physician visit requirement for most Medicare providers and beneficiaries when obtaining a prescription for certain DME, eliminating what CMS now calls an “overly burdensome requirement.” While this is not expected to save the Medicare program any money, it is designed to be less burdensome on providers and beneficiaries. The face-toface requirement was originally established to reduce fraud and abuse. This indicates how strongly the current administration views reduction of provider burden as a priority. Finally, the budget includes a provision that would require CMS to issue additional guidance around the Medicare coverage process, including sub-regulatory guidance on the evidence standards that CMS utilizes in assessing coverage and the process to appeal coverage determinations, in an effort to improve clarity around Medicare coverage. Prescription Drug Pricing Rather than proposing specific provisions to lower prescription drug prices as the administration did in last year’s budget, the 2021 budget simply includes an allowance for savings of $135 billion over 10 years for bipartisan drug pricing proposals. The administration supports legislative efforts to improve the Medicare Part D benefit by establishing an out-of-pocket maximum, improving incentives to contain costs, and reducing out-of-pocket expenses for Medicare beneficiaries, mirroring the proposals in the Senate Finance Committee’s legislation. The administration also supports changes to bring lower-cost generic and biosimilar drugs to patients. The budget documents state that these efforts would increase competition, reduce drug prices, and lower out-of-pocket costs for patients at the pharmacy counter, but the administration appears to be punting to Congress to determine exactly how to achieve these goals.

Graduate Medical Education Effective in FY 2021, the budget proposes to consolidate federal graduate medical education spending from Medicare, Medicaid, and the Children’s Hospital Graduate Medical Education Program into a single grant program for teaching hospitals. Total funds available for distribution in FY 2021 will equal the sum of Medicare and Medicaid’s 2017 payments for graduate medical education, plus 2017 spending on Children’s Hospital Graduate Medical Education, adjusted for inflation. This amount will then grow at the CPI-U minus one percentage point each year. Payments will be distributed to hospitals based on the number of residents at a hospital (up to its existing cap) and the portion of the hospital’s inpatient days accounted for by Medicare and Medicaid patients.

The new grant program will be jointly operated by the administrators of CMS and the Health Resources and Services Administration (HRSA). The budget asserts that these changes modernize graduate medical education funding, making it better targeted, transparent, accountable, and more sustainable. However, these changes are also expected to save $52.2 billion in government-wide savings over 10 years which constitutes a huge reduction in financial support for graduate medical education.

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