Even as health center advocates remain rightly focused on the conclusion of the FY2011 Appropriations process, House Budget Chairman Paul Ryan’s (WI) recently released budget proposal is scheduled to be debated on the House floor at the end of this week.  Chairman Ryan’s budget proposal is the House Majority’s first bite at the FY2012 budget apple.  It  sets the tone for the FY2012 budget discussions we’re about to pivot into, and it identifies some of the policy questions Congress will be grappling with over the coming months.  It is important to note that, this budget resolution, even if it passes both chambers  exactly as it is (which no one expects), will not change federal law – it is simply a blueprint that sets the level of spending Congress plans to commit for broad government functions.  However, Chairman Ryan’s budget, if adopted as proposed, would restrict the level of funding available for programs such as Medicaid and Medicare.

Overall, Chairman Ryan’s proposal seeks to address the growing federal deficit by proposing a total of $6.2 trillion in cuts to government spending compared to the President’s budget.  This is achieved largely by block-granting the Medicaid program, repealing some portions of the Affordable Care Act, and converting Medicare into a voucher system, which would impact all Americans below 55 when they become Medicare-eligible.

Here is an overview of some of the major policies behind Chairman Ryan’s FY2012 budget:

Block Granting Medicaid

The supporting documents to Chairman Ryan’s budget propose to save $750 billion over ten years by converting the federal share of Medicaid spending into a block grant starting in 2013, which would then be indexed by inflation and population growth in future years.  Additionally, in 2022, Medicaid block grant payments would be reduced to exclude spending for acute care services, Medicare premiums for dual-eligible beneficiaries(see below), and cost sharing paid by Medicaid.  The Congressional Budget Office’s (CBO) analysis concludes that the proposal would shift some of the burden of Medicaid’s growing costs to the states, and that on balance, federal payments to states would be significantly lower than under current law. CBO highlights that if the costs for medical services for Medicaid beneficiaries continue rising faster than allocated block grant amounts, states will have to decide how to respond – whether that means providing additional state funding, or reducing provider reimbursement, benefits or eligibility.

Discretionary Funding Cuts

Chairman Ryan’s proposal provides $50.122 billion in FY2012 funding for all discretionary health spending except that for military and veterans health.  This proposal represents a 13.5% percent cut relative to FY2010 and takes discretionary health funding back to pre-2008 funding levels.

Repealing Provisions in the Affordable Care Act (ACA)

The Ryan proposal achieves significant reductions in spending by repealing portions the Affordable Care Act related to insurance expansions, while leaving in place some of its cost-saving provisions such as ACA changes to Medicare, according to the CBO analysis.  Supporting budget documents state his intention to roll back the Medicaid expansion, and to modify or eliminate the state insurance exchanges and premium subsidies to individuals to purchase health insurance on the private market.

Medicare Changes

Chairman Ryan’s proposal would make significant changes to the Medicare program for those who turn 65 in 2022 and later.  This group, upon becoming eligible for Medicare, would begin receiving a premium support payment (a subsidy) so they could purchase their own private insurance coverage through a new Medicare insurance exchange.  Beginning in 2022, the federal government would establish a medical savings account for certain low-income beneficiaries, with annual payments going to these privately held accounts for medical expenses.  CBO projects that the premium subsidy amount will not fully cover the costs of Medicare beneficiaries’ coverage and care, and that ultimately seniors will bear more of the costs of their own health care than they would under current law.

Chairman Ryan’s Budget proposes many significant policy changes and while all parties agree it has little chance of passing the Senate, it is important to recognize that it represents a starting place for the discussions and negotiations in both chambers and the Administration about how to control the nation’s spending and reduce the debt in the next fiscal year.  Federal Affairs has a new Medicaid webpage up with resources and information about health centers, Medicaid and the 112^th Budget process and we’ll continue to follow the FY2012 budget closely for changes that may impact health centers. Stay tuned to the blog for updates on the politics and policies under discussion in this year’s budget…and the next one.