Trump’s Proposed Budget

Trump’s Proposed BudgetImage (C) Gage Skidmore (permission granted via Wikimedia Creative Commons)

I. Introduction
II. The ACA and Medicaid
III. CHIP Funding
IV. Biomedical Research and Development
V. Nutrition Support Programs (SNAP)
VI. Social Security Disability Insurance
VII. Department of Veterans Affairs
VIII. Planned Parenthood
IX. External Discussion and Analysis


I. Introduction

 

On May 23, 2017, President Donald Trump and his administration released their proposed budget for the federal government for fiscal year 2018.  This budget refers to and relies on their earlier budget proposal, which was released on March 13, 2017.  These budgets propose several major cuts to healthcare spending, including Medicaid.  Although some prominent lawmakers have declared the proposal “dead on arrival,” Congressional leaders seeking to dismantle the Affordable Care Act (“ACA”) share the general aim of scaling back on spending for these programs. Even if Trump’s budget is not adopted wholesale, some cuts may be likely.

 

Below is a summary of the proposed budget changes affecting healthcare.  You can read the full language of the May 2017 budget, titled “A New Foundation For American Greatness,” on the White House website.  You can view the White House’s summary of the proposal here.  You can also read the Trump administration’s March 2017 budget proposal, titled “America First: A Budget Blueprint to Make America Great Again,” here.  That budget is used in conjunction with the May 2017 proposal.

 


 

II. The ACA and Medicaid

 

As made clear by President Trump’s campaign promises, executive orders, and public endorsements of the American Health Care Act (“AHCA”), Trump and his administration want to repeal and replace the ACA.  They again emphasize this in their proposed budget and reiterate their support for states to assume additional responsibility for healthcare programs.  As a result, they suggest that the budget only fund critical activities for the Health Insurance Exchanges, though they do not give any specific details on what they mean.  The administration also hopes to eliminate ACA taxes, and specifically mentions repealing the surcharge on capital gains and dividends.

 

With respect to Medicaid, the Trump budget promotes the reforms proposed in the AHCA and would go even further to accelerate the process of transforming the Medicaid program from an open-ended funding system to one in which states receive a set amount of funding, regardless of actual costs.  As an extension of its support of the AHCA, the Trump budget also promotes reform of Medicaid where states could choose to fund their programs either through a per capita cap or a block grant system.  Although the AHCA would already do this, the proposed budget would go even further; the AHCA limits the block grant option to adult and children populations, but the budget proposes this as an option to all populations.

 

However, it is unclear how the Trump administration intends for these cuts to interact with similar proposals in the AHCA. The Trump proposal seems to contain $610 billion in cuts over ten years, but it is not clear whether this is in addition to the $834 billion in cuts already contained in the AHCA.  When questioned, one White House official explained that the cuts would amount to over $610 billion, but below $1.4 trillion, suggesting that the figures are partially additive.  If the figures were to be taken together completely, it would amount to nearly half of Medicaid’s budget.  Even if the government decreased the Medicaid budget by only $834 billion, this would amount to a 25% cut to Medicaid and the Children’s Health Insurance Program (“CHIP”).

 

The Congressional Budget Office (“CBO”) has projected that under the AHCA and all its amendments, by 2026, 14 million fewer people would be enrolled in Medicaid compared to under the ACA.  This amounts to a 17% difference in insurance coverage rates between the AHCA and the ACA.  If Congress were to cut even more funding to Medicaid by adopting the Trump proposal in a cumulative manner, it would likely result in millions more people losing coverage.

 

These cuts would also have an especially negative impact on those 31 states and Washington, D.C. that expanded Medicaid.  Under the ACA, the federal government paid 90% of the Medicaid costs for the expansion population.  The AHCA would effectively reverse the Medicaid expansion by ending federal funding for new Medicaid enrollees who do not meet the pre-ACA eligibility requirements.  Although states could choose to retain ACA eligibility levels, they would have to do so entirely at their own expense which they may be unlikely to do.

 


 

III. CHIP Funding

 

Trump’s budget proposal also details how it will address CHIP and targets provisions of the ACA that extended coverage for children under CHIP.  The Trump administration first proposes to extend CHIP funding for two years through 2019.  However, because the administration hopes to repeal the ACA, the budget would reduce CHIP’s funding to the pre-ACA matching rate (reducing the funds by 23%).  Additionally, it would eliminate the ACA’s maintenance of effort requirement, which mandates that states keep Medicaid and CHIP eligibility levels at least as high as those in place at the time the ACA was enacted until September 30, 2019.

 

The budget also proposes to cap the eligibility level for which states could receive federal CHIP matching funds at 250% of the poverty level.  As of January 2017, 23 states and Washington D.C., have CHIP income eligibility limits above 250% of the Federal Poverty Level (“FPL”), and 19 of those states cover children at or above 300% FPL.  If the budget were to be passed as is currently written, these states would likely need to reduce CHIP eligibility for children to save money.  This is doubly true since the maintenance of effort requirement would no longer apply.  For more information on how the proposal would impact eligibility levels for CHIP, read the Kaiser Family Foundation’s article on the issue.

 

According to the Kaiser Family Foundation, these changes would result in net savings of $5.8 billion over ten years.  However, the Kaiser Family Foundation also projects that if the proposal were adopted, it “would likely reverse the recent progress achieved in making affordable coverage available to working families and reducing the children’s uninsured rate to a record low of 5%.”  For more data as it pertains to CHIP funding, read the Kaiser Family Foundation article here.

 


 

IV. Biomedical Research and Development

 

The Trump administration’s budget proposes reducing federal funding for biomedical research and development.  Most significantly, the budget would drastically cut funding for science and research across the United States.  NIH would receive an 18% cut, bringing its overall budget from $31.8 billion to $26 billion.  Several scientific research, medical research, and disease prevention programs would also receive drastic cuts, including the following:

 

Agency for Healthcare Research and Quality – Eliminated
Centers for Disease Control and Prevention – $1.2 billion cut, which amounts to a 17% reduction
Food and Drug Administration – $2.74 billion to $1.89 billion, which amounts to a 31% cut (though this may be offset by increased user fees for drug applications)
National Cancer Institute – $1 billion cut
National Heart, Lung and Blood Institute – $575 million cut
National Institute of Allergy and Infectious Diseases – $838 million cut
National Science Foundation – $776 million cut, which amounts to a 11% reduction

 

Note that this list does not include the many agencies and organizations that are not directly related to healthcare but would also receive decreased funding, including those related to environmental protection.

 

Many former and current heads of these programs have expressed their outrage and disappointment at the cuts.  For more detail on these cuts, read The Washington Post’s article on the proposed budget.

 

Another area targeted for cuts are indirect costs for all projects under federal grants.  Indirect costs are the funds universities receive to cover expenses associated with conducting federally funded research.  According to Science Magazine, that can include “everything from paying the utility bills for a faculty member’s lab to the salaries of the staff needed to comply with federal rules on using animals in research.”  In exchange, the Trump administration proposes that it will reduce regulatory burden on the National Institute of Health (“NIH”) so that researchers can more efficiently complete projects. This is part of a broader proposal “to improve efficiencies in the research enterprise,” but it is unclear what this larger effort would entail.

 


 

V. Nutrition Support Programs (SNAP)

 

The budget also makes significant changes and cuts to the Supplemental Nutrition Assistance Program (“SNAP”), the program formerly known as “Food Stamps” that provides credits for food to low-income individuals.  SNAP provides benefits to about 44 million individuals in the United States, many of whom are concentrated in the states with the highest numbers of Trump voters.   Under current law, states pay half the costs of administering SNAP.

 

The Trump budget includes $193 billion in cuts over a decade, which amounts to 25% of the program’s overall budget.  The proposal would transfer the burden of these costs to states, requiring them to pay $100 billion for SNAP.  In 2020, a state, on average, would match 10% of the federal funds, gradually increasing to 25% by 2023.  The federal government would, in turn, allow states to limit eligibility levels for individuals and determine the level of SNAP benefits that they could provide.  Additionally, the budget would impose work requirements on non-disabled individuals, though it does not provide detail as to how those requirements would operate.

 

Critics question the effectiveness of these proposed changes.  According to a 2010 United States Department of Agriculture study on SNAP, the program grows the retail, wholesale, and transportation economies; every $1 billion spent on SNAP generates $1.79 billion in GDP.  Additionally, every $1 billion increase in SNAP creates 9,000 to 10,000 full-time jobs.

 

Several lawmakers, both Republican and Democrat, have released statements that criticize the cuts to SNAP.  Republican Senator Bob Corker from Tennessee has said that “We can solve our fiscal issues without harming those who depend on these important programs [like SNAP].”  Democratic Representative David Kustoff, also from Tennessee, has also released a statement that rejects the “deep cuts to programs essential to many Americans such as food stamps (SNAP).”

 


 

VI. Social Security Disability Insurance

 

The budget also proposes to reform Social Security Disability Insurance (“SSDI”). This program provides disability benefits to people who cannot work because they have a medical condition that is expected to last at least one year or result in death.  Each applicant must wait five months before receiving benefits, and the amount a beneficiary receives depends on their earnings record.

 

Because 20% of people in the SSDI program work, the administration suggests that the federal government ensure that only participants who remain eligible continue receiving benefits.  Reform proposals include “efforts to improve program integrity, close loopholes that make the program more susceptible to fraud, and address inequities in the system.”  The budget says an example of this would be to hold those who commit fraud liable for overpayment.  Another example would be to implement a new system where, “instead of the automatic current lifetime appointment for federal staff reviewing applications, have a probationary period for all new Administrative Law Judges hired.”


The administration further proposes to test new program rules and require program applicants and participants to participate in training and work programs.  Qualified individuals would transition out of the program.


Many analysts, such as Gene Sperling, economistic and editor at The Atlantic, are critical about the cuts to SSDI.  First, Sperling points out that the proposal breaks Trump’s campaign promise that there would be no cuts to Social Security, Medicare, and Medicaid.  Secondly, he argues that the Trump administration misrepresents the program and its beneficiaries.  For example, to be eligible for SSDI a person has to have worked five of the last ten years, and the average person on SSDI worked 22 years before getting benefits.  Furthermore, there are significant barriers to receiving SSDI.  According to Dana Lee Baker, author of Disability and U.S. Politics: Participation, Policy, and Controversy, the application process is complex and lengthy.  Appeals are also lengthy, expensive, and often result in inconsistent resolutions.

 

For more information on the cuts to SSDI, read The Atlantic’s article, Disability and U.S. Politics: Participation, Policy, and Controversy, Buffalo Law Journal’s article, and Hastings Law Journal’s article.  You can also read the qualifications for SSDI on the Social Security Administration website.

 


 

VII. Department of Veterans Affairs

 

The Trump budget proposes funding to extend the Veterans Choice Program, a Department of Veterans Affairs (“VA”) program that allows eligible Veterans “to receive health care in their communities rather than waiting for a VA appointment or traveling to a VA facility.”  The Veterans Choice Program was set to end in August 2017, though Congress passed legislation in April allowing the program to continue until it runs out of money.

 

The Trump administration says it will work with Congress to improve the program, and that it will offset the costs by targeting “programmatic changes to mandatory benefits programs to better align them with programmatic intents,” which seems to suggest that there may be benefit cuts forthcoming.  The proposal asks for $2.9 billion in 2018 and $3.5 billion for subsequent years.

 

However, as a tradeoff, the budget reduces veterans’ cost-of-living adjustments and cuts off monthly stipends to some disabled, unemployed veterans.  According to the Military Times, this “would impact more than 225,000 veterans receiving the payouts today.”  The proposal calls for $82.1 billion in discretionary spending for the VA, an increase of about 6% from 2017.  Once mandated funding is included, the budget would be over $186 billion.  For more information on some of the other ways the proposed budget would affect veterans, read Military.com’s article here or The Military Times’s article here.

 


 

VIII. Planned Parenthood

 

As currently written, the AHCA prohibits Planned Parenthood from participating in the Medicaid program.  The Trump administration’s budget proposal takes this a step further and completely defunds Planned Parenthood; it would be ineligible to receive any federal dollars.

 

However, both the AHCA and the budget aim to “defund abortions” from Planned Parenthood even though the federal government has not paid for any abortion services since passage of the Hyde Amendment in 1976.  That amendment, which is passed alongside the Department of Health and Human Services appropriations bill every year, blocks all federal funding of abortion services (with some narrow exceptions).  Both the AHCA and the proposal would defund Planned Parenthood completely, including its family planning and women’s health care services.  For more information on the history of the Hyde Amendment, read NPR’s coverage of the issue.

 


 

IX. External Discussion and Analysis

Not Even the White House Knows How Much It’s Cutting Medicaid
CNN Money
May 24, 2017

Trump’s Budget Proposal Aims to Cut All Federal Funds to Planned Parenthood
The Washington Post
May 24, 2017

Budget of the U.S. Government: A New Foundation For American Greatness, Fiscal Year 2018
Office of Management and Budget
May 23, 2017

Lawmakers Declare President Trump’s Budget Proposal ‘Dead on Arrival’
NBC News
May 23, 2017

Here’s Trump’s Plan to Destroy the US Science Budget
The Verge
May 23, 2017

How Trump’s Budget Would Weaken Public Health
The Atlantic
May 23, 2017

President Trump’s 2018 Budget Proposal Reduces Federal Funding for Coverage of Children in Medicaid and CHIP
Kaiser Family Foundation
May 23, 2017

The Fuzzy Claims Used to Justify Cutting Social Security Disability Insurance
The Atlantic
May 23, 2017

Trump’s Big VA Budget Request Comes with Proposed Trims to Veterans Benefits
Military Times
May 23, 2017

Trump Budget Cuts Social Security And Medicaid, Breaking Major Promises
Forbes (Editorial)
May 23, 2017

Trump Budget Seeks Huge Cuts to Science and Medical Research, Disease Prevention
The Washington Post
May 23, 2017

Trump’s Budget Would Hit These States the Hardest
NBC News
May 23, 2017

Trump’s Cuts to SNAP and Social Security Would Hit the Rust Belt Hard
The Atlantic
May 23, 2017

Trump’s New Budget Plan Guts Medicaid. Here’s What You Need to Know
CNN Money
May 23, 2017

Trump Takes a Big Bite out of His Voters’ Food Stamps
Mother Jones
May 23, 2017

Why Trump Cutting Food Stamps Could Starve America’s Economy
NBC News
May 23, 2017

Trump’s Budget Cuts Deeply Into Medicaid and Anti-Poverty Efforts
The New York Times
May 22, 2017

Trump Budget Proposes Massive Cuts to Medicaid, Science, and Biomedical Funding
STAT News
May 22, 2017

Trump Budget Takes Aim at University Grants to Cover ‘Indirect’ Research Costs
STAT News
May 22, 2017

Trump Reportedly Considering New Cuts to Biomedical Research
The Atlantic
May 17, 2017

National Congressional Health-Care Bill ‘Defunds’ Planned Parenthood
The Washington Post
May 4, 2017

Why Trump’s N.I.H. Cuts Should Worry Us
The New York Times (Editorial)
March 22, 2017

Trump’s NIH Budget May Include Reducing Overhead Payments to Universities
Science Magazine
March 17, 2017

Abortion Funding Ban Has Evolved over the Years
National Public Radio (NPR)
December 14, 2009