Obama budget freezes physicians' Medicare pay for 10 years

If Congress follows the White House proposal, $371 billion would go toward reversing planned annual cuts but would not
increase Medicare rates.

Washington -- President Obama promised spending freezes during his first State of the Union address, but his $3.8 trillion fiscal 2011
budget request still would protect physicians from Medicare pay cuts and extend enhanced federal support for state Medicaid
programs.

Obama's proposal, unveiled Feb. 1, sets aside $371 billion over a decade to pay for the cost of preventing Medicare pay cuts under the
sustainable growth rate formula. But the funding would only be enough to turn annual reductions into rate freezes, not to fund pay
raises. Also, the president left the specifics of how to prevent the cuts up to Congress, said Jonathan Blum, director of the Centers for
Medicare & Medicaid Services Center for Medicare Management.

"There's lots of different ways to reform physician payment in the long term," Blum said. Health and Human Services Secretary
Kathleen Sebelius said she was confident Congress would prevent the cuts, which are scheduled to begin with a 21.2% reduction on
March 1.

American Medical Association President J. James Rohack, MD, said the AMA "commends President Obama for recognizing that
permanent reform is crucial to preserving physician care for current and future seniors who rely on Medicare." The AMA has urged
Congress to pass a long-term overhaul that results in cost-based physician rate increases, not freezes.

Obama's $911 billion fiscal 2011 Dept. of Health and Human Services budget proposal also calls for several one-year spending
increases, including $250 million more to fight health care fraud, a $290 million increase for community health centers and $1 billion
more for biomedical research through the National Institutes of Health.

Obama asked for these hikes and others, despite pledging to freeze federal spending for three years starting in fiscal 2011. He
exempted Medicare, Medicaid, Social Security and national security spending from the pledge -- more than 80% of the federal budget,
according to Steve Bell. He is a former staff director and chief of staff for retired Sen. Pete Domenici (R, N.M.) and a visiting scholar at
the Bipartisan Policy Center, a think tank focused on middle-ground solutions in health care, the budget and other areas.

"He deserves credit for even wanting to do that, which will draw great opposition from Congress -- especially the appropriators," Bell
said.

Republicans criticized Obama for proposing a budget with a $1.3 trillion deficit, one of the biggest in history. "The president's new
budget is like the last one -- more spending, more taxes and more debt -- at a time when the national debt has reached an alarming
level," said Sen. Lamar Alexander (R, Tenn.), chair of the Senate Republican Conference.

Obama said on Feb. 1 that previous legislation -- including the 2001 and 2003 tax cuts and the Medicare drug benefit -- created much
of the debt he faced when he entered office. He also inherited a deep recession, said Peter Orszag, PhD, director of the White House
Office of Management and Budget.

"If we had taken office during ordinary times, we would have started bringing down these deficits immediately," Obama said.

House Appropriations Committee Chair David Obey (D, Wis.) said his panel would adhere to the president's fiscal 2011 spending
targets. "We will not exceed his requested level for appropriations, but we will also not exempt any department or activity from review ...
because none of them are without waste."

Medicaid funding extension

Obama's budget plan would help states by providing a six-month, $25.5 billion extension of enhanced Medicaid funding through June
2011. This would continue support from the most recent stimulus package, which increased the federal share of Medicaid by a total of
$87 billion through the end of 2010.

"This is the president's statement that two more quarters [of federal assistance] are absolutely essential," Sebelius said. State Medicaid
directors, governors and policy experts have warned that significant Medicaid cuts will be necessary if the stimulus act's Medicaid
funding expires.

But the administration has not decided if it will support continuing the enhanced Medicaid funding beyond June 2011, the end of most
states' fiscal years, said Cindy Mann, director of the CMS Center for Medicaid and State Operations. Medicaid enrollment typically
remains high until an economic recovery is well under way, according to policy analysts. Although the administration's budget proposal
assumes stronger economic growth, it still projects unemployment to be at about 8% at the end of 2012, Orszag said.
Health programs expanded

Obama's HHS budget also would help maintain health coverage through community health centers. It calls for a 13% increase for the
facilities in fiscal 2011.

The additional funding would help create 25 new sites for health care access in communities without existing centers. It also would
expand access to the more than 1,200 community health centers in the U.S., Sebelius said.

Medical research also received significant support from Obama. The boost to $32.2 billion "is the largest proposed funding increase for
NIH we have seen in a president's budget in eight years," said Mark O. Lively, PhD, president of the Federation of American Societies
for Experimental Biology. The budget also adds $208 million for research on the comparative effectiveness of different medical
treatments and drugs, and for translating research findings into treatments, among other work.

The Obama budget proposes raising funding for the Health Care Fraud and Abuse Control program to $1.7 billion. This would allow an
HHS/Justice Dept. anti-fraud task force to work in 13 additional cities.

Sebelius said the administration is working aggressively to hire a CMS administrator, the highest-ranking position still vacant at HHS.
CMS has been without a permanent administrator since Mark B. McClellan, MD, PhD, left in October 2006. "We hope to have someone
named in the not-too-distant future," Sebelius said.