from kaisernetwork.org Daily Reports.
http://www.kaisernetwork.org/daily_reports/rep_index.cfm?DR_ID=15853

ADMINISTRATION NEWS

Bush Releases FY 2004 Budget Proposal; Plan Lacks Specific Details for
Medicare Reform

        President Bush on Feb. 3 sent Congress a $2.23 trillion budget proposal
for fiscal year 2004 that would create a $307 billion deficit in the next
budget year and a deficit of more than $1 trillion over the next five
years, the New York Times reports (Bumiller, New York Times, 2/4).  Under
Bush's budget proposal, mandatory spending, including that for Medicare
and Medicaid, would total $1.188 trillion.  Discretionary spending in
fiscal year 2004 would total $782 billion, a $30 billion increase over
fiscal year 2003, with $28 billion of the increase going to nondefense
homeland security spending (Ghent, CongressDaily, 2/3).

 The Washington Post reports that Bush's proposal holds spending on most
domestic programs at or below projected inflation levels for fiscal year
2004 (Weisman, Washington Post, 2/4).  Because Congress has not yet
approved an FY 2003 budget, all increases and decreases in Bush's
proposed FY 2004 budget are comparisons to his FY 2003 budget blueprint
and rather than to an actual budget (Goldstein/Allen, Washington Post,
2/4).

Overall, HHS would receive a 7% increase in funding, to a total of $537.6
billion under Bush's proposal.  Most of the increase is mandatory
spending on Medicaid and Medicare, but the spending proposal also
includes the new funding for Medicare and Medicaid reform.  Bush's plan
would raise discretionary funding for HHS by 2.6% to $65 billion (Walsh,
Washington Post, 2/4).

Medicare Reform

Bush's FY 2004 proposal calls for a $6 billion "downpayment" on a
10-year, $400 billion Medicare "modernization" plan that the president
mentioned in his State of the Union address and in a speech in Michigan
last week (Walsh, Washington Post, 2/4).  Although neither Bush nor the
administration has released details about the plan, media reports have
said that the plan is expected to establish a prescription drug benefit
for Medicare beneficiaries who enroll in a new managed care program.
According to reports, Medicare beneficiaries could remain in the
traditional fee-for-service program, enroll in regional HMOs that offer
prescription drug coverage or enroll in private health plans with
"enhanced fee-for-service benefits" that include prescription drug
coverage (Kaiser Daily Health Policy Report, 2/3).  Bush's budget outline
"didn't offer any more details about the plan" than had already been
released, AP/Virginian-Pilot reports (Carter, AP/Virginian-Pilot, 2/4).
The budget proposal does say that the proposed "drug benefit would
protect beneficiaries against high drug expenditures and would provide
additional assistance to low-income beneficiaries" (Rovner,
CongressDaily, 2/3).  Further, the Wall Street Journal reports that an
administration official said the "vast bulk"-- as much as 95% -- of the
$400 billion will be designated for the "drug benefit and other improved
benefits," including preventive care and assistance for beneficiaries
with "catastrophically high health costs" (Lueck, Wall Street Journal,
2/4).  HHS Secretary Tommy Thompson said it will be another week before
full details of the plan are made available; CMS Administrator Thomas
Scully said it could be another two weeks before details are released.
As for other Medicare reforms, the Bush budget proposal also seeks
changes in the Medicare physician reimbursement formula, which has
produced payment cuts over the previous two years (Rovner, CongressDaily,
2/3).

Medicaid Plans

Bush's budget plan also includes his "sweeping" proposal to overhaul
Medicaid, CongressDaily reports (Rovner, CongressDaily, 2/3).  Under the
proposal, announced Jan. 31 by Thompson, states would have more freedom
to decide what Medicaid benefits they provide to the one-third of
beneficiaries states choose to cover.  States would no longer need to
apply for federal waivers to deviate from federal standards for Medicaid
eligibility and benefits.  Rather, for "non-mandatory" beneficiaries, the
proposal would allow states to change Medicaid rules and regulations,
simplify and alter eligibility requirements and "tailor" or cut benefits
at their own discretion.  In addition, the proposal would give states
that choose this new option a fixed amount of federal money for the
beneficiaries they voluntarily choose to cover -- a shift away from the
current system, under which the federal government matches every dollar
that states spend based on each state's economic circumstances.  Under
the proposal, states would be required to preserve comprehensive Medicaid
coverage for the roughly two-thirds of Medicaid beneficiaries whose
income levels are low enough that the federal government mandates that
they be covered (Kaiser Daily Health Policy Report, 2/1). Bush's FY 2004
budget proposal would allot states $3.25 billion in additional Medicaid
funds to alter their programs, and an additional $12.7 billion over seven
years, though reductions in federal subsidies to states in later years
would offset these increases (Rovner, CongressDaily, 2/4).  The Wall
Street Journal reports that Bush's plan also calls for drug companies to
increase the prescription drug rebates they offer Medicaid, a change that
would save the government $13.2 billion over 10 years.  Congress rejected
a similar plan last year, in response to opposition from the drug
industry (Wall Street Journal, 2/4).

Other Health Spending

Bush's FY 2004 budget outline includes:$3.6 billion for bioterrorism
prevention efforts;$125 million for a disease prevention program to
combat diabetes, obesity and asthma (Walsh, Washington Post, 2/4);$15
billion in new spending over five years to combat HIV/AIDS in African and
Caribbean nations, supplemented by $200 million request to fight
international famine ;$200 million for a new substance abuse treatment
program, which would provide people vouchers that could be used at
"faith-based" or secular drug treatment centers (Weisman, Washington
Post, 2/4);An increase in funds for programs that help pregnant young
women who to their pregnancies to term (Goldstein/Allen, Washington Post,
2/4);A $2.1 billion increase for the Veterans Affairs department, $1.9
billion of which would go toward health care for veterans.  Nearly $28
billion of the department's budget would go toward health care, a 7.7%
increase over the amount Congress is expected to provide the VA for
health care (Walsh, Washington Post, 2/4).  Currently enrolled veterans
with higher incomes and health conditions unrelated to their service will
be required to pay an enrollment fee and higher copayments for outpatient
care and prescription drugs.  The budget proposal also includes a
previously announced plan to halt enrollment for higher-income veterans
with conditions unrelated to their service.  In addition, the proposal
calls for restrictions on long-term nursing care for veterans with severe
disabilities related to their service (AP/Minneapolis Star-Tribune, 2/3);


and$890 million to create new vaccines for smallpox, anthrax and
botulinum toxins, as part of the "first installment" of funds for the new
Project Bioshield (White House press release, 2/3).  The proposal calls
for nearly $6 billion over the next decade for Project Bioshield (Curl,
Washington Times, 2/4).

Funding Reductions

The budget also calls for reductions to a $300 million-per-year program
that provides funds to train potential doctors for "needy communities"
and to a program that assists some hospitals in purchasing equipment such
as X-ray machines.  Further, Bush's proposal would reduce funding for a
program initiated by the Clinton administration that provides more than
$100 million annually to facilitate cooperation between community health
centers, hospitals and drug treatment centers.  The proposal would keep
NIH funding for FY 2004 flat, adjusted for inflation (McKinnon/Hitt, Wall
Street Journal, 2/4).  Under the proposal, NIH would receive $27.9
billion in funding, and annual 4% increases in funds for
"cost-of-doing-research" for current grants would decrease to 1% per year
(Kaiser Daily Health Policy Report, 2/3).

Additional Resources and Coverage

Materials about Bush's budget proposal, including a Web cast of an HHS
press conference on the budget, are available online at kaisernetwork.org

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