THE FISCAL YEAR 2008 PRESIDENT'S BUDGET PLAN

February 6, 2007

On February 5, President Bush sent his $2.9 trillion budget request to Congress, with a promise to balance the federal budget by 2012.  While a laudable long-term goal-one that congressional Democrats say they support as well-neither side has a realistic short-term plan to back that up. 

Projections by the Congressional Budget Office show a $170 billion surplus in 2012, but that number quickly turns into a deficit when more realistic assumptions are factored in, including an expected fix to the alternative minimum tax, added costs for military and diplomatic operations in Iraq and Afghanistan, and a plan to provide a standard deduction for health insurance while taxing a portion of employer-sponsored coverage. 

Both national parties agree that controlling spending, in large part, requires the government to address the unsustainable growth of entitlement programs, such as Social Security, Medicare and Medicaid.  To that end, the President's budget asks Congress to adopt a series of legislative proposals that would save $78.6 billion over the next five years--$65.6 billion from Medicare and $13 billion from Medicaid.  Most of the Medicare savings would come in slowing the growth of payments to hospitals and other providers, but $11.5 billion would result from boosting insurance premiums paid by the wealthiest Medicare recipients.  For the Children's Health Insurance Program (SCHIP), the President is proposing a reduction of $223 million, or four percent, from this year's level, noting that some states currently cover children from families with income more than twice the poverty level.

On the discretionary program side, the President's budget would continue to assign priority to defense and homeland security, while proposing elimination or sharp reduction of 141 federal programs—cuts that Congress has generally rejected in the past—for savings of $12 billion over five years.  Overall domestic spending would be held below the rate of inflation.     

While the President and Congress acknowledge that balancing the budget is a worthwhile goal, the question is whether both are prepared to make the tough choices it takes to achieve that goal?

Following is a summary of the President's budget blueprint for selected health and education programs.  

HHS Overview

The President's FY2008 budget proposes a total of $698 billion to operate programs administered by the Department of Health and Human Services, including $67.6 billion to continue discretionary programs at virtually the same level as the FY2007 continuing resolution. 

[See the .pdf attachment to the e-mail titled "CRD Associates Special Report 'The Fiscal Year 2008 President's Budget Plan'" sent on 2/6/07 to see the "HHS Budget by Operating Division" information.]

Food and Drug Administration

The FY2008 budget request for the FDA totals $2.1 billion, a net increase of $263 million over the FY2007 continuing resolution.  Highlights include $787 million for drugs and biologics, including $307 million to be derived from industry-specific user fees to help improve the review of new drugs and biologics.  To respond to the rise in new drug applications for generic drugs, the budget includes $87 million for generic drug review activities, an increase of $23 million over FY2007, including a $16 million industry-funded user fee.   

The budget proposes to further strengthen the drug safety system by increasing that program to $139 million, or $16 million more than the FY2007 level.  The budget also proposes modest increases to food safety and medical device review activities conducted by the agency.

 

Health Resources and Services Administration

 

The budget proposes $5.8 billion for HRSA programs, a reduction of $251 million below the FY2007 funding level.  Within that total, an increase of $224 million is proposed to create 220 new access points to primary care through the Health Centers program, and $95 million is requested for the Ryan White, HIV/AIDS program to increase state grants and drug assistance programs.  Maternal and child health block grants are continued at the $693 million, and children's hospital graduate medical education is cut 63 percent, to $110 million. 

 

Once again, the President proposes to terminate most health professions training programs, including Training in Primary Care Medicine and Dentistry (-$48.8 million), the Health Careers Opportunity program (-$4 million), Centers for Excellence (-$12 million) and Faculty Loan Repayments (-$1 million).  The budget proposes only to continue Scholarships for Disadvantaged Students at the $10 million level, a $37 million reduction below FY2007.

[See the .pdf attachment to the e-mail titled "CRD Associates Special Report 'The Fiscal Year 2008 President's Budget Plan'" sent on 2/6/07 to see the "HRSA" information.]

Centers for Disease Control and Prevention

For CDC, the budget proposes $5.8 billion, a reduction of $20 million below the FY2007 funding level.  Included in this total is $1.8 billion for activities related to the prevention and control of infectious diseases such as HIV/AIDS, and to expand immunization services to children and adults.   

Grants to state and local governments for bioterrorism preparedness would be reduced by $125 million, shifting the focus to cooperative agreements with those entities; health promotion/disease prevention and birth defects activities would be continued at $834 million and $125 million, respectively; and vaccines for children would be cut by $143 million, reflecting a reduced pediatric vaccine stockpile purchase.

[See the .pdf attachment to the e-mail titled "CRD Associates Special Report 'The Fiscal Year 2008 President's Budget Plan'" sent on 2/6/07 to see the "CDC" information.]

National Institutes of Health

The budget request for NIH totals $28.6 million for research institutes and centers programs funded through the Labor-HHS-Education appropriations bill.  But under the budget proposal, $300 million of that will be transferred to the Global Fund to Fight HIV/AIDS, Tuberculosis and Malaria, leaving $28.3 million for NIH-supported research.  When compared to the amount provided for NIH research activities in the FY2007 continuing resolution, $28.8 million, the proposed budget for FY2008 actually represents a $511 million decrease. 

Of the amount requested, $486 million is allocated to support trans-NIH Roadmap/Common Fund initiatives designed to focus on the discovery of new disease treatments, prevention strategies and diagnostics that transcend individual research institute missions. 

The budget does not request funding for the National Children's Study, which was allocated $69 million in FY2007; the study would cost $111 million to continue in FY2008.

The budget document indicates that enough funds are provided to support 10,188 new and competing grants, an increase of 566 grants over FY2007.  Under the President's budget, the average cost of research grants is expected to be $350,000, with no increases permitted for inflation.  However, it is important to note that these estimates do not take into account the $620 million increase for NIH included in the FY2007 continuing resolution. 

[See the .pdf attachment to the e-mail titled "CRD Associates Special Report 'The Fiscal Year 2008 President's Budget Plan'" sent on 2/6/07 to see the "NIH" information.]

Substance Abuse and Mental Health Services Administration

The budget proposes $3.1 billion for SAMHSA, a net reduction of $159 million.  While most activities would be continued at their current operating level, reductions are proposed for substance abuse treatment (-$47 million) and prevention (-$36 million) as well as mental health programs of regional and national significance (-$77 million).

The budget includes $34 million to for suicide prevention, including activities authorized by the Garrett Lee Smith Memorial Act, suicide prevention for American Indian and Alaska Native youth, a national hotline and a suicide prevention resource center.

Agency for Healthcare Research and Quality

For the first time in several years the budget proposes to increase funding for AHRQ by $11 million, to $330 million.  The increase includes new funding to launch a Personalized Health Care initiative ($15 million) to improve the quality and effectiveness of health care, and a Value-driven Health Care initiative ($4 million) designed to enhance person- and population centered care.

The budget also includes $34 million to support a variety of patient safety activities; $26 million for the Ambulatory Patient Safety program; and $159 million to support research and dissemination activities in prevention, pharmaceutical outcomes and other activities.

The budget proposes to fund the entire agency though transfers from other HHS programs.

Centers for Medicare and Medicaid Services

As previously noted, the budget includes a series of proposals aimed at reining in the costs of Medicare and Medicaid.     

The Medicare budget includes a set of legislative and administrative proposals intended to save $5.3 billion in FY2008 and $75.9 billion over five years; Medicaid proposals would produce five-year savings of $13 billion through legislative changes and $12.7 billion through administrative changes.  For SCHIP, which is due to expire this year, the budget proposes $5 billion to reauthorize the program for the next five years, reportedly less that half of what is needed to maintain coverage for children currently enrolled. 

Among the list of Medicare savings proposals the President has included in his budget plan are:

• impose a surcharge on premiums for Medicare's new prescription drug benefit;

• reduce the update for inpatient hospitals, ambulatory surgical centers, outpatient facilities, hospices and ambulance services by 0.65 percent annually, while providing 0 percent updates for skilled nursing facilities, inpatient rehabilitation facilities and home health agencies;

• eliminate duplicate indirect medical education payments to hospitals for Medicare Advantage beneficiaries;

• establish budget-neutral value-based purchasing incentives for hospitals and create minimum benchmarks for low-quality hospitals; and

• require group health plans and other third-party payers to report Medicare as secondary payer data and extend MSP status from 30 months to 60 months; establish a clearinghouse for data sharing with other federal health programs.

Administration for Children and Families

The ACF would be funded at $45.3 billion, a net decrease of $1.9 billion below the FY2007 level.  Under the proposal, Head Start, Child Care block grants and child welfare programs would be continued be continued at their current levels, while reductions are proposed for low-income heating and energy assistance (-$480 million) and the Community Services block grant (-$630 million).

Administration on Aging

The budget proposes $1.3 billion to support AoA programs, a slight reduction below the FY2007 level.  The budget includes $28 million to launch a Choices for Independence demonstration program, offset by eliminating two ongoing programs: preventive health services (-$21 million) and the Alzheimer's state matching grant program (-$12 million).  The National Family Caregiver Support program would be funded at $154 million, or $2 million less than the FY2007 level.

Department of Education Overview

For FY2008, the President is requesting $56.0 billion in discretionary funding for the Department of Education, the same as the FY2007 level.  Highlights of the request include-

• $24.5 billion for No Child Left Behind programs, including an increase of $1.2 billion for Title I grants to local school districts and $500 million for school improvement grants;

• $365 million for programs to improve math and science instruction in grades K-12;  

• $300 million to expand private school choice and supplemental education services options; and

• an increase in the maximum Pell grant to $4,600 per college student, compared to $4,310, as called for the FY2007 continuing resolution.

Among the Department's categorical programs, the budget proposes $24.3 million to continue the Ready-to-Learn program, $17.6 million for the American Printing House for the Blind, and $25 million for Reading Is Fundamental.

In addition, the Department is proposing to terminate funding for 44 programs totaling $2.2 billion, including Ready to Teach.

Program Terminations

Following is a listing of programs proposed for termination in FY2008.

[See the .pdf attachment to the e-mail titled "CRD Associates Special Report 'The Fiscal Year 2008 President's Budget Plan'" sent on 2/6/07 to see the "Program Terminations" information.]