The president’s fiscal year (FY) 2017 budget request for nearly $420 billion in 10-year Medicare payment cuts to providers “would jeopardize hospitals’ ability to keep the promise of maintaining access to vital health care services,” the AHA said last week.

On a more positive note for hospitals, the Feb. 9 budget request seeks an additional $27.6 billion over 10 years for Medicaid and the Children’s Health Insurance Program (CHIP) – a move welcomed by the AHA.

The president’s budget request is not expected to gain much traction on Capitol Hill. Still, there’s the possibility that the president’s proposals to cut providers’ Medicare payments could become legislative fodder for some lawmakers on Capitol Hill – as was the case with last year’s budget proposal to equalize site-of-service payment between hospital outpatient departments (HOPD) and physicians’ offices.

The FY 2016 budget proposal on site-neutral payment inspired negotiations late last year between Congress and the White House that led to a measure in the 2015 Bipartisan Budget Act – enacted in December – that excludes certain HOPDs from the facility fee under Medicare’s outpatient prospective payment system (see related story on page 1). The president’s FY 2017 budget does not propose any changes to the site-neutral payment policy.


Medicare. Among other Medicare-related changes, the president’s budget plan over 10 years would reduce bad debt payments to providers, including hospitals, by $32.9 billion; and lower critical access hospital (CAH) payments from 101% to 100% of reasonable costs for reductions of $1.7 billion. It would eliminate the CAH designation for hospitals located fewer than 10 miles from the nearest hospital for reductions of $880 million; and reduce and change how indirect medical education is paid by $17.8 billion over 10 years. 

The budget proposal also includes the following policy changes over 10 years:

  • Increases Teaching Health Centers’ graduate medical education (GME) payments by $527 million.
  • Reduces the payment updates for post-acute care providers by $86.6 billion.
  • Raises the “60% Rule” threshold for inpatient rehabilitation facilities back to 75% for reductions of $2.2 billion.
  • Implements bundled post-acute care payments for reductions of $9.9 billion.


The budget also provides $295 million in mandatory funding for Children’s GME in each of FYs 2017 through 2021 for a total of $1.47 billion.  

The proposed Medicare “reductions are ill-advised at a time when Medicare and Medicaid do not cover the costs of caring for patients,” said Ashley Thompson, the AHA’s senior vice president for public policy analysis and development. “This budget proposal would strain the ability of teaching hospitals to train the next generation of physicians, would harm care for vulnerable populations in rural communities by reducing funding for critical access hospitals, and would limit vital specialized care delivered by post-acute care providers.”

But Thompson added that the budget’s proposed CHIP expansion and “promise to fund Medicaid expansion in states that have not yet done so are welcome news.”

AHA members received a Feb. 9 Special Bulletin with further details on the budget request. 

The release of the president’s budget kicks off the FY 2017 budget and appropriations process, which is expected to begin soon in the House. House Budget Committee Chairman Tom Price, R-Ga., intends to mark up a budget resolution this spring.