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President's FY 2003 Budget Proposal Outlines Important "First Steps" on Improving Medicare Program, Access to Health Care

Several Critical Program Areas Need More Money

(Washington, DC): President George W. Bush's budget proposal for Fiscal Year 2003 proposes many important first steps in reforming the Medicare program and expanding access to care, according to a statement released today by William Hall, MD, FACP, president of the American College of Physicians - American Society of Internal Medicine (ACP-ASIM).

"ACP-ASIM appreciates the commitment of the Bush administration to improving the Medicare program," said Dr. Hall. " The College agrees with the priority the President has placed on first providing prescription drug coverage to low-income beneficiaries, through proposals that can be implemented quickly, as a step toward enacting a comprehensive benefit."

"The budget summary acknowledges the problems caused by volatility in Medicare physician payments and expresses the administration's willingness to work with Congress to fix the problem, both short and long term," said Dr. Hall. "We are disappointed, however, that while acknowledging the problems caused by excessive cuts, the administration still insists that a fix be budget-neutral. This year's 5.4 percent reduction, and the threat of further such reductions in future years, when combined with a rapidly increasing Medicare population and steady increases in the cost of providing care, has ominous implications for the Medicare program."

The College strongly supports the recommendation of the Medicare Payment Advisory Commission (MedPAC) to replace the Sustainable Growth Rate based formula with a formula that would base updates on estimated changes in physicians' input prices for the coming year. The College also urges enactment of legislation as soon as possible to restore this year's 5.4 percent reduction before it results in irreparable harm to the Medicare program's ability to provide quality care to its beneficiaries.

Dr. Hall also commended the President for allocating funds to support a refundable tax credit to help low-income individuals purchase health insurance coverage. "ACP-ASIM is especially pleased to see that the President's budget recognizes the importance of establishing the tax credit at a high enough amount to make coverage affordable to low-income workers, by paying for as much as 90 percent of the premium cost of buying health insurance coverage."

Dr. Hall made the following comments on the president's budget.

Medicare Reform: The budget proposed to spend $190 billion over ten years for improving the Medicare program. A prescription drug program would receive $77 billion to help states cover prescription drugs for Medicare beneficiaries between 100 and 150 percent of poverty. The remaining $113 billion would be used to overhaul the Medicare plan and provide a universal drug benefit.

  • ACP-ASIM urges the Administration to consider a greater commitment to financing a modernized Medicare program-$190 billion may be too little to provide a comprehensive drug benefit, add important preventive and screening procedures, and assure adequate reimbursement for covered services.
  • Until sustainable, predictable financing is assured to support a comprehensive drug benefit, ACP-ASIM believes that the highest priority should go toward providing coverage to low-income beneficiaries who lack access to drug coverage under other plans.

ACP-ASIM also believes that sufficient money must be set aside to assure an adequate update in Medicare payments for physician services and to halt cuts in payments to teaching hospitals and other critical "safety net" providers. ACP-ASIM is pleased that the budget summary acknowledges the problems caused by constant changes in Medicare physician payments and expresses the administration's willingness to work with Congress to fix the problem, both short and long term. However, it does not appear that the budget sets aside a specific amount of money to fix the problems caused by the existing flawed update formula. The budget also suggests that any correction would need to be budget-neutral. Therefore, ACP-ASIM strongly believes that Congress must include sufficient funding in the budget resolution to replace the existing flawed formula with one that assures fair and predictable payment updates for 2003 and future years.

  • The President's budget does not provide any relief for teaching hospitals from scheduled budget cuts in Medicare's share of payments for the indirect costs of training hospital residents. ACP-ASIM urges a halt to further cuts in Medicare funding for the indirect costs of graduate medical education and modification of the budget to at least maintain funding at current levels. The College is alarmed that the budget instead proposes further unspecified cuts of $570 million over ten years.

Tax Credits for the Uninsured: The President proposes that families making under $25,000 per year could collect tax credits of up to $3,000 per year to spend on health coverage, while individuals earning up to $15,000 per year could collect $1,000 in credits. The proposal also includes ACP-ASIM recommendations that tax credits be refundable and payable in advance so that low-income uninsured people will be able to purchase insurance.

  • ACP-ASIM supports, as a starting point, the President's proposal to provide $89 billion over the next decade in the form of refundable tax credits to assist people without health insurance. The amount of the tax credit has also been increased, compared to previous proposals from the administration, to cover as much as 90 percent of the cost of health insurance premiums, as ACP-ASIM has recommended. However, the total dollar limit on the amount of the credit may still be insufficient to make coverage truly affordable for many low-income individuals, especially in markets where affordable individual insurance plans are not available. Therefore, Congress should consider increasing the total amount of the credit to cover 90 percent of the premium costs of a health plan with actuarial benefits equal to the Blue Cross and Blue Shield standard option plan, offered under the Federal Employees Health Benefits Program. The President's proposal would establish insurance risk pools and purchasing groups to help make coverage affordable, concepts also supported by ACP-ASIM.

State Child Health Insurance Programs (SCHIPs): The President's proposal for $3.2 billion in 2003 and $40 billion over 10 years for the State Child Health Insurance Programs (SCHIPs) will help to expand access to health care for low income persons. The proposal would allow some states to cover low-income parents of children covered by the SCHIP plan.

  • ACP-ASIM supports the proposal to increase funding to enroll more children in the SCHIP program. However, additional funding will be needed for Medicaid and SCHIP expansion to cover more uninsured low-income workers and their families. All parents of SCHIP-covered children should be eligible for enrollment in the program. Medicaid should cover all individuals living at or below the federal poverty level.

National Institutes of Health (NIH) and Bioterrorism Funding: The President's budget increases NIH's budget by $3.7 billion - the largest one-year increase ever for NIH - for a total of $27.3 billion. Approximately $1.5 billion will be devoted to proposed bioterrorism research, a five-fold increase over the amount budgeted for the previous fiscal year. NIH's plan includes expansions in basic research, such as sequencing the genome of potential bioterrorism agents; accelerating development of next-generation anthrax vaccines; and improving diagnostic tools. Overall, the FY 2003 bioterrorism budget is $4.35 billion.

  • The College applauds the Administration's commitment to doubling the budget of NIH from 1998 to 2003 as well as other provisions in the budget to provide a long-overdue infusion of funds to strengthen the nation's public health infrastructure. We urge that the increased spending on bioterrorism efforts not come at the expense of the NIH's primary mission of basic biomedical research.
  • ACP-ASIM supports the President's request for $4.35 billion in funding for bioterrorism preparedness as an important first step in preparing the country for a potentially catastrophic event. However, we believe that additional funding will be necessary to prepare public health departments, physicians, and hospitals for the challenge of recognizing, treating, and minimizing the risk of further infection from bioterrorism agents. Funding is also needed to improve food safety and to prepare for chemical attacks.

Workforce Issues: The President's budget would cut by over 70 percent other existing programs under Title VII and VIII of the Public Health Service Act that are designed to increase access to health care in underserved areas. It would increase funds by $114 million for community health centers and provide an increase of $44 million next year in funding for the National Health Service Corps.

  • The College urges Congress to assure continued funding for the Title VII and VIII programs.
  • ACP-ASIM supports the proposed increases in funding for community health centers and the National Health Service Corps.

Agency for Healthcare Research and Quality (AHRQ): The President's budget proposes to drastically curtail the important work of the Agency for Healthcare Research and Quality (AHRQ). The budget for AHRQ would decline from $300 million in 2002 to $251 million in 2003, a decrease of 16 percent.

  • The College favors increasing AHRQ funding to $390 million so the agency can carry out its congressional mandate to improve health care quality, including reducing errors in medicine and advancing health outcomes research. The Administration's request includes $60 million for patient safety research, an increase of $5 million over FY '02. This amount however will likely be insufficient to accomplish the needed work.

Department of Veterans Affairs (VA) Medical Programs: ACP-ASIM strongly supports the Administration's FY '03 request of $25.5 billion for Veterans Medical Care, an increase of $2.7 billion from FY '02. However, the President's request for the VA Medical and Prosthetics Research Program falls short of what the College recommends for this essential program.

  • The College believes that a $460 million budget allocation for FY '03 is necessary to maintain the VA medical and prosthetics research program's current level of biomedical research in priority areas.

"We are pleased that the President's budget outlines important first steps toward providing drug coverage to Medicare patients, expanding access to health insurance coverage, and preparing the nation for chemical or biological attacks" said Dr. Hall. "We are concerned, however, that the budget does not assure that Medicare payments for physicians and teaching hospitals will be sufficient to assure that patients have access to essential services. We are also concerned that other proposed cuts will shortchange important health programs, such as those sponsored by the Agency of Health Care Research and Quality. We will work with the President and Congress to assure that sufficient funds are provided to fund critical new health care priorities and to continue the important work of existing programs."

ACP-ASIM is the nation's largest medical specialty society and the second largest professional medical association. The College represents over 115,000 physicians who specialize in internal medicine and medical students with an interest in internal medicine.


Jack Pope, (202) 261-4556, jpope@acponline.org
Jennifer Whalen, (202) 261-4575, jennw@acponline.org

Page updated: 11-04-03

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