2009 budget attacks escalating Medicare costs

President Bush’s fiscal 2009 budget for the Health and Human Services Department takes tentative steps to address the escalating cost of Medicare by proposing program cuts and tying physician and hospital payments to Medicare spending.

The budget provides a package of Medicare legislative and administrative reforms to strengthen the long-term viability and financial security of Medicare. These proposed reforms would save $183 billion over five years and slow the program’s annual growth rate during that time period from 7.2 percent to 5 percent, said HHS Secretary Mike Leavitt in a briefing today. HHS will outline later how it plans to restructure provider payments.

This illuminates the hard policy decisions any presidential administration will face every year until Medicare is fixed, he said today. “We are approaching an emergency. If it is left on autopilot, there will be nothing left in 11 years.”

Bush’s budget would cut Medicare spending by $12.4 billion in 2009 and by $178.2 billion over five years. Lower payments to physicians and hospitals, which were reduced by 0.4 percent over six years, account for much of the savings.

Medicare’s inefficient systems have contributed to the dilemma because it sets prices in its traditional fee-for-service category. Leavitt praised the Medicare Advantage plan, although it costs beneficiaries more right now because it depends on market forces. He expects prices to decrease as more beneficiaries use it and competition is broadened.

The budget provides only a slight uptick, or 1.6 percent, in HHS' information technology spending from $5.6 billion to $5.75 billion, the largest amount of any civilian agency and surpassing even the Homeland Security Department. Out of the total, HHS will spend moderately more in 2009 than this year for development and modernization — $1.13 billion — $4.6 billion for maintenance of operations

Of note in the budget is that $42.3 million for HHS’ Unified Financial Management System, which the department has deployed, will go toward steady-state operations and not new development.

Among the development and modernization funding items, the National Institutes of Health would receive $7.6 million for replacing its financial and administrative system with the Unified Management System. The Centers for Medicare and Medicaid Services is targeted to get $35.7 million, which is on a downward spiral from the past two years, for its Healthcare Integrated General Ledger Accounting System, HHS’ other financial management system.

HHS will increase its investments in effective management to $49.7 million from $34.5 million, almost half of that dedicated to the Medicare program integrity modernization to reduce improper payments. Other management initiatives include electronic handbooks at the Health Resources and Services Administration and NIH’s business intelligence system.

The budget request targets $2 million for HHS' share of e-government projects under the President’s Management Agenda initiatives, such as e-Rulemaking and the Business Gateway. HHS e-government initiatives, such as Grants.gov and the Human Resources Line of Business, receive little or no funding as they become more mature.

The request for grants management rose to $25.1 million from $24.7 million, the majority of it for NIH’s Electronic Research Administration processing system.

The biggest single chunk of HHS IT development funds is for grants to state and local governments, such as for immunization registries and the National Electronic Disease Surveillance System.

HHS also seeks $29.5 million for IT infrastructure developments, also trending downward, for its consolidated acquisition and identity and access management systems and consolidated telecommunications, infrastructure and office automation.

About the Author

Mary Mosquera is a reporter for Federal Computer Week.

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