President’s FY20 Budget Overview – Prepared by Van Scoyoc Associates

Portions of the president’s FY20 budget request were released yesterday and can be found on the OMB website (HHS section on pages 43-52). The president’s plan calls for a 5 percent cut to current caps for non-military spending, coupled with a boost to $750 billion for national defense programs. It also includes $8.6 billion for a border wall with Mexico, raising the threat of a funding showdown that may trigger another government shutdown this fall.

While the budget appendix and congressional justifications are not expected until next week, HHS has released its Budget in Brief document (also attached), which includes some additional details regarding HHS programs. Fact sheets on several topics were also released, including one on Combatting the Opioid Epidemic and another on Lowering Drug Pricing and Payment.

Overall, the Department of Health and Human Service’s Total Discretionary Budget Authority would be reduced by $11.981 billion, from $99.496 billion in FY2019 to $87.515 billion in FY2020, for a 12.04% reduction. The proposal calls for nearly $1.25 trillion in mandatory savings from various health programs, including cutting more than $456 billion from Medicare over the next decade, but offers $25 million in new funds to address the opioids crisis and $2.1 billion in new funding for health center programs and public health research. The budget also provides $291 million to fund Trump’s new initiative to end the HIV epidemic by 2030, including roughly $140 million in new funding for the CDC to improve diagnosis and testing for HIV, a $70 million boost to the Ryan White HIV/AIDS Program and an additional $50 million to expand community health center services.

The budget also assumes changes to Medicaid, including partially converting it into a grant program, that would add up to $143 billion in savings over the decade. The White House also touted a series of initiatives aimed at lowering drug prices that it says will cut about $19 billion alone in Medicare spending through 2029. The request additionally assumes that Congress will succeed in repealing and replacing Obamacare.

The administration is also requesting $480 million in fiscal 2020 for an “Unaccompanied Alien Children Contingency Fund.” In fiscal 2018 and 2019, the administration transferred $446 million and $385 million respectively from other areas in HHS to address the increase in children in the department’s care due to the administration’s practice of separating immigrant families.

While details on many specific programs are not yet available, the following are highlights of interest:

National Institutes of Health

  • The National Institutes of Health Total Program Level would be reduced by $4.938 billion, from $39.306 billion in FY2019 to $34.368 billion in FY2020, for a 12.56% reduction. An NIH funding chart can be found on page 56 of the HHS Budget in Brief.
  • $1.3 billion for opioids and pain research across NIH as part of the government-wide effort to combat the opioid epidemic, including $500 million to continue the Helping to End Addiction Long-term (HEAL) Initiative and nearly $800 million to support ongoing research.
  • National Cancer Institute:  $5.247 billion, $897 million less than FY19
  • National Institute on Drug Abuse: $1.296 billion, $123 million less than FY19


Centers for Disease Control and Prevention

  • For CDC, the budget proposes a $1.27 billion reduction in CDC’s Total Discretionary Budget Authority, from $6.553 billion in FY2019 to $5.277 billion in FY2020, for a 19.47% reduction.
  • $476 million for CDC to continue current activities in support of all 50 States and Territories, as well as local jurisdictions, to track and prevent overdose deaths. CDC would prioritize expanding support to States and Territories to collect and report real time overdose and robust overdose mortality data.
  • $58 million for CDC to address the infectious disease consequences of the opioid epidemic. CDC would focus on areas most at risk for outbreaks of HIV and hepatitis due to injection drug use.
  • $2 million to support CDC’s continued work to advance our understanding of neonatal abstinence syndrome and translate these findings to improve the care of mothers and babies.
  • Occupational Safety and Health: $190 million, $146 million less than FY19
  • Global Health: $457 million, $39 million less than FY19

Substance Abuse and Mental Health Services Administration (SAMHSA)

  • $5.5 billion for SAMHSA, $62 million less than FY19
  • $3.9 billion for SUD prevention and treatment activities, including:
    • Substance Abuse Prevention and Treatment Block Grant: $1.858 billion, equal to FY19
    • $1.9 billion for programs that specifically address opioid misuse, abuse, and overdose. The budget narrative indicates that it will continue all existing opioid related programs and allocate this money as follows:
      • $1.5 billion for the State Opioid Response grants, equal to FY19 funding levels.
      • $89 million to expand the availability of MAT, “the most effective evidence-based treatment for opioid use disorder.”
      • $48 million for training and equipping first responders on the use of opioid-overdose reversing drugs.
      • $4 million for a new program authorized in The SUPPORT Act to provide grants to medical schools and teaching hospitals to develop curricula that satisfy the requirements to prescribe MAT.
  • Programs of Regional and National Significance: $430 million, $31 million less than FY19
  • $244 million substance abuse prevention, such as a demonstration program to fight underage drinking and expanding tribal behavioral health services. This includes $100 million for the Drug Free Communities Program.

Drug Pricing

  • Changes to the Medicare Part D Prescription Drug Benefit
    • The Budget addresses the misaligned incentives of the Part D benefit structure with changes that are designed to: encourage utilization of higher value drugs by eliminating cost-sharing for generic drugs for beneficiaries who receive the low income subsidy; remove the competitive disadvantage placed on generic drugs that increases spending for both beneficiaries and the Government; and provide beneficiaries with more predictable annual drug expenses through the creation of a new out-of-pocket spending cap.
    • The Budget excludes manufacturer discounts from the calculation of true out-of-pocket costs to correct this misaligned incentive and treats brand and generic drugs the same when calculating out-of-pocket costs
    • Eliminates beneficiary cost sharing above the catastrophic coverage threshold and increases Part D plan sponsors’ responsibility for these costs to 80 percent, with Medicare covering the remaining 20 percent.
  • Reduce Costs for Part B Drugs
    • The Budget addresses unnecessary barriers to free-market competition in Part B and proposes reforms to payment for Part B drugs, which heavily influences physician-prescribing behavior.
    • The Budget includes proposals targeted at: removing the three-year payment protection of average sales price (ASP) plus six percent for certain new drugs provided in outpatient hospitals; deterring anti-competitive behavior from drug manufacturers that exploit aspects of the patent system to keep out competition; and moving coverage of some Part B drugs to Part D to reduce spending while protecting beneficiaries from increased out of pocket costs.
    • Limits growth in Part B drug payment to an inflation benchmark and mandates manufacturers report ASP data for all Part B drugs to improve payment accuracy.
    • The Budget also modifies hospitals’ payment for drugs acquired through the 340B drug discount program by rewarding hospitals that provide charity care and reducing payments to hospitals that provide little to no charity care.
  • Increase Access to More Affordable Generics Through Greater Competition
    • Reform the current 180-day exclusivity forfeiture provision for first generics so that first generics do not block subsequent generics from U.S. Food and Drug Administration (FDA) approval.
    • Clarify FDA’s approach in determining whether a new drug is a new chemical entity to ensure that only truly innovative new drugs receive an additional five years of exclusivity.
    • Enhance FDA authority to address abuse of petition process so FDA has greater flexibility to summarily deny petitions when circumstances indicate that the primary purpose of the petition is to delay FDA approval.
    • Enable FDA to tentatively approve a subsequent generic application, which would start the 180-day exclusivity clock, when a first to file generic application cannot be approved due to deficiencies.
  • Lowers Costs and Increases Flexibility for Medicaid Prescription Drugs
    • Proposes removing the cap on Medicaid manufacturer drug rebates, to ensure rebates reflect all price increases for a drug.
    • The Budget includes new demonstration authority allowing States to test innovative approaches for Medicaid prescription drug coverage. Under the demonstration, participating States would test a closed formulary and negotiate prices directly with manufacturers.
    • The Budget also prevents manufacturers from using authorized generics to lower their rebate obligations, and includes payment changes so State Medicaid programs do not overpay for generic drugs, saving money for States and taxpayers.
  • 340B Reforms
    • The Budget seeks to improve the integrity of the 340B program and ensure that benefits are used to help low-income and uninsured patients.
    • The proposal includes broad regulatory authority for the 340B Drug Pricing Program to set enforceable standards of program participation and requires all covered entities to report on use of program savings.
    • The Budget also modifies hospitals’ payment for drugs acquired through the 340B drug discount program by rewarding hospitals that provide charity care and reducing payments to hospitals that provide little to no charity care.
    • Proposes the savings from 340B hospitals that provide uncompensated care equaling at least one percent of their patient care costs are redistributed to hospitals based on their share of aggregate uncompensated care. Hospitals not meeting that threshold are not eligible for the redistribution, and the savings from their payment reduction will be returned to the Medicare Trust Fund.


  • The Budget proposes adding additional transparency to several Medicare payments to hospitals, by financing payments not directly related to Medicare’s health insurance role outside the Medicare Trust Fund and tying future growth to inflation growth.
  • The Budget also reduces Medicare’s spending on beneficiaries’ unpaid cost sharing obligations, consistent with private sector business practices.
  • The Budget proposes to expand seniors’ personal control and introduce more consumer power into the healthcare market by allowing Medicare beneficiaries to make tax deductible contributions to HSAs associated with high deductible health plans offered by their employers or Medicare Advantage plan.
  • Expand the Medicare program’s authority to conduct prior authorization on items or services at high risk of fraud and abuse. The proposal helps ensure that the right payment goes to the right provider for appropriate services and saves taxpayer dollars from paying for Medicare services that are not medically necessary.
  • Expands CMS’s work in notifying providers that prescribe drugs or perform procedures in excess of their peers.
  • Strengthens  Medicare Advantage program integrity by ensuring initial risk-adjustment payments are paid correctly and expands risk-adjustment data validation audits.
  • Strengthens CMS’s ability to partner with States to address improper payments and ensures Federal recovery of incorrect eligibility determinations, an area of concern identified by the HHS Office of Inspector General.
  • Allows States flexibility to more frequently assess beneficiary eligibility, ensuring resources are available for the millions of Americans who depend on Medicaid’s safety net.


  • Supports enactment of legislation modeled after the Graham-Cassidy-Heller-Johnson bill proposed in September 2017, followed by enactment of additional reforms to help set government healthcare spending on a sustainable fiscal path that leads to higher value spending.
  • Beginning in 2021, the Market-Based Health Care Grant Program, the Medicaid block grant, and the per capita cap program are set to grow at the Consumer Price Index. These programs would support States as they transition to more sustainable healthcare programs and encourage States to pursue innovative ideas that aim to curb costs moving forward.
  • The Budget would give States additional flexibility around benefits and cost-sharing, such as increasing copayments for non-emergency use of the emergency department to encourage appropriate use of healthcare resources.
  • States can consider savings and other assets when determining Medicaid eligibility.
  • Allow States to streamline appeals processes and delegate authority to another entity, to help eliminate duplicative appeals and reduce beneficiary confusion.
  • Proposes eliminating loopholes that some States use to shift and increase costs to Federal taxpayers, and for the Centers for Medicare and Medicaid Services (CMS) to issue guidance ensuring that State Medicaid supplemental payments to hospitals and other providers are supported by robust and timely data.
  • Realign the Federal matching payments for State Medicaid eligibility workers with other administrative costs, providing a fair balance between Federal and State resources for these activities.
  • Extends current law reductions in Medicaid disproportionate share hospital payments, and proposes to limit reimbursement to Government providers to no more than the cost of providing services to Medicaid beneficiaries.
  • Money Follows the Person Demonstration – states that are awarded competitive grants receive an enhanced Medicaid matching rate to help eligible individuals transition from a qualified institutional setting to a qualified home or community-based setting.
  • This proposal would phase down this match rate for Medicaid eligibility workers to 50 percent by FY2024.
  • The Administration intends to issue a regulation requiring more complete and timely provider-level data on supplemental payments, including the financing of such payments.

As you know, the budget is only a request to Congress and Congressional action is required to actualize any of the proposals in the budget.  We will continue to keep you posted as more analysis and details become available.

Budget in Brief PDF

Katie Weyforth Vanlandingham

Van Scoyoc Associates

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