Centers for Medicare & Medicaid Services: President’s FY2014 Budget

Alison Mitchell, Coordinator Analyst in Health Care Financing

Federal law requires the President to submit an annual budget to Congress no later than the first Monday in February. The budget informs Congress of the President’s overall federal fiscal policy based on proposed spending levels, revenues, and deficit (or surplus) levels. The budget request lays out the President’s relative priorities for federal programs, such as how much should be spent on defense, education, health, and other federal programs. The President’s budget may also include legislative proposals for spending and tax policy changes. While the President is not required to propose legislative changes for those parts of the budget that are governed by permanent law (i.e., mandatory spending), such changes are generally included in the budget. President Obama submitted his FY2014 budget to Congress on April 10, 2013.

The Centers for Medicare & Medicaid Services (CMS) is the division of the Department of Health and Human Services (HHS) that is responsible for administering Medicare, Medicaid, and the State Children’s Health Insurance Program (CHIP), among other activities. CMS is the largest purchaser of health care in the United States, with expenditures from CMS programs accounting for roughly one-third of the nation’s health expenditures. In FY2014, it is estimated that one-inthree Americans will be provided coverage through Medicare, Medicaid, and CHIP. CMS is also responsible for implementing many of the private health insurance provisions in the Patient Protection and Affordable Care Act (ACA, P.L. 111-148).

The CMS budget includes a mixture of both mandatory and discretionary spending. However, the vast majority of the CMS budget is mandatory spending, such as Medicare benefits and grants to states for Medicaid.

For budgetary purposes, CMS is divided into the following sections: Medicare, Medicaid, CHIP, program integrity, state grants and demonstrations, private health insurance protections and programs, the Center for Medicare and Medicaid Innovation, and program management. The President’s FY2014 budget contains a number of legislative proposals that would affect the CMS budget. Some are program expansions, and others are designed to reduce federal spending.

The President’s proposed budget for CMS would be $854.3 billion in net mandatory and discretionary outlays for FY2014. This would be an increase of $60.2 billion, or 7.6%, over the net outlays for FY2013. This estimate includes the cost of the Medicare physician payment adjustment ($15.4 billion), the estimated savings of the legislative proposals (-$5.8 billion), and the estimated savings from program integrity investments (-$0.1 billion).

This report summarizes the President’s budget estimates for each section of the CMS budget. Then, for each legislative proposal included in the President’s budget, this report provides a description of current law and the President’s proposal. The explanations of the President’s legislative proposals are grouped by the following program areas: Medicare, Medicaid, program integrity, private health insurance, and program management. A table summarizing the estimated costs or savings for each legislative proposal is at the end of each of these sections.


Date of Report: May 15, 2013
Number of Pages: 67
Order Number: R43073
Price: $29.95

To Order:

R43073.pdf  to use the SECURE SHOPPING CART

e-mail congress@pennyhill.com

Phone 301-253-0881

For email and phone orders, provide a Visa, MasterCard, American Express, or Discover card number, expiration date, and name on the card. Indicate whether you want e-mail or postal delivery. Phone orders are preferred and receive priority processing.

The Next Farm Bill: Changing the Treatment of LIHEAP Receipt in the Calculation of SNAP Benefits

Randy Alison Aussenberg
Analyst in Nutrition Assistance Policy

Libby Perl
Specialist in Housing Policy

As Congress formulates the next farm bill—an omnibus bill that reauthorizes a range of agriculture and nutrition programs—program integrity and deficit reduction have been leading themes. One of the cost-saving measures in the 113th Congress’s farm bill proposals would address the way in which Supplemental Nutrition Assistance Program (SNAP) benefits are calculated. The SNAP statute allows for certain deductions from income when calculating a household’s benefit level, including an excess shelter deduction which incorporates utility costs. If a family receives benefits through another federal program, the Low Income Home Energy Assistance Program (LIHEAP), this deduction from income can be higher, allowing for a higher SNAP benefit for the household. Both the Senate Committee on Agriculture, Nutrition, and Forestry and the House Agriculture Committee have reported bills (S. 954 and H.R. 1947, respectively) that would limit the deduction associated with LIHEAP, particularly seeking to end a practice that has been referred to as “Heat and Eat.” Similar proposals were considered in the 112th Congress but were not enacted.

Under current law, a SNAP household can use a LIHEAP payment (regardless of the amount of that payment) to document that the household has incurred heating and cooling costs. This documentation triggers a standard utility allowance (SUA), a figure intended to represent typical state-specific utility costs that enters into the SNAP benefit calculation equation. Unless the household is receiving the maximum SNAP benefit already, a household’s monthly benefit can increase if the inclusion of an SUA results in an excess shelter deduction.

In addition to current law, current practice of, most recently, 17 states also affects the interaction between these benefit programs. While virtually all SNAP states consider LIHEAP in their calculation, approximately 16 states have implemented the so-called “Heat and Eat” policy. “Heat and Eat” is a phrase that the low-income and anti-hunger advocacy community has used to describe state and program policies that leverage nominal (as little as $1) LIHEAP payments into an increase in households’ SNAP benefits that is larger than the initial LIHEAP payment. Also, one state allows SNAP applicants to benefit from an SUA if the household applies for LIHEAP.

In the 113th Congress, the farm bills reported by both the Senate and House Agriculture Committees would limit “Heat and Eat” policies:

• Under S. 954, the Agriculture Reform, Food, and Jobs Act of 2013, only LIHEAP payments above $10 annually would confer this potential advantage. Payments of $10 and below would no longer entitle a household to earn an SUA during the benefit calculation process. If a household received less than $10 in energy assistance, households would have to present alternate documentation of heating and cooling costs in order to have utilities factored into calculating their excess shelter deduction. 
• In H.R. 1947, the Federal Agriculture Reform and Risk Management Act of 2013, only LIHEAP payments above $20 annually would confer this potential advantage. 

In addition, several bills have been introduced in the 113th Congress that would go further than the proposals in S. 954 and H.R. 1947 and eliminate the ability of households to qualify for the SNAP SUA based on receipt of LIHEAP. Instead, households would have to present alternative documentation of utility costs. These bills include S. 458/H.R. 1510 and S. 762 /H.R. 1657.


Date of Report: May 20, 2013
Number of Pages: 15
Order Number: R42591
Price: $29.95

To Order:

R42591.pdf  to use the SECURE SHOPPING CART

e-mail congress@pennyhill.com

Phone 301-253-0881

For email and phone orders, provide a Visa, MasterCard, American Express, or Discover card number, expiration date, and name on the card. Indicate whether you want e-mail or postal delivery. Phone orders are preferred and receive priority processing.

Appropriations and Fund Transfers in the Patient Protection and Affordable Care Act (ACA)

C. Stephen Redhead 
Specialist in Health Policy

Among its many provisions, the Patient Protection and Affordable Care Act (ACA) restructures the private health insurance market, sets minimum standards for health coverage, and, beginning in 2014, mandates that most U.S. residents obtain health insurance coverage or pay a penalty. The law provides for the establishment by 2014 of state-based health insurance exchanges for the purchase of private health insurance. Qualifying individuals and families will be able to receive federal subsidies to reduce the cost of purchasing coverage through the exchanges. ACA also expands eligibility for Medicaid; amends the Medicare program in ways that are intended to reduce the growth in spending; and makes other changes to the tax code, Medicare, Medicaid, and many other federal programs.

In addition, ACA appropriates billions of dollars to support new or existing grant programs and other activities. These mandatory appropriations include funds for a temporary insurance program for individuals who have been uninsured for several months and have a preexisting condition, as well as funding for states to plan and establish exchanges. ACA provides funding for various Medicare and Medicaid demonstration programs, for the creation of a Center for Medicare and Medicaid Innovation to test and implement innovative payment and service delivery models, and for an independent board to provide Congress with proposals for reducing Medicare cost growth and improving quality of care for Medicare beneficiaries.

ACA also appropriates amounts for four special funds. The first fund will provide a total of $11 billion over five years for community health centers and the National Health Service Corps. (A separate appropriation provides $1.5 billion for health center construction and renovation.) The second fund will support comparative effectiveness research through FY2019 with a mix of appropriations and transfers from the Medicare trust funds. The third fund, for which ACA provides a permanent annual appropriation, is intended to support prevention, wellness, and other public health-related programs authorized under the Public Health Service Act (PHSA). The fourth fund is helping cover the initial costs of ACA implementation. Finally, ACA provides funding for health workforce and for maternal and child health programs.

Generally, the FY2013 mandatory appropriations in ACA are fully sequestrable at the rate applicable to nonexempt nondefense mandatory spending under the March 1, 2013, sequestration order triggered by the Budget Control Act.

Lawmakers opposed to ACA introduced numerous bills in the 112th Congress, several of which saw legislative action. They included measures to repeal ACA and replace it with new law; repeal or amend specific ACA provisions; eliminate certain mandatory appropriations and rescind all unobligated funds; and block or otherwise delay ACA implementation. Some of these bills have been reintroduced in the 113th Congress.

In addition to the mandatory appropriations discussed in this report, ACA authorizes new funding for numerous existing discretionary grant and other programs, primarily ones authorized under the PHSA. The law also creates a number of new discretionary grant programs and activities and provides for each an authorization of appropriations. Funding for all these discretionary programs and activities is subject to action by congressional appropriators. A companion product, CRS Report R41390, Discretionary Spending in the Patient Protection and Affordable Care Act (ACA), summarizes all the provisions in ACA that include an authorization of appropriations.


Date of Report: May 15, 2013
Number of Pages: 36
Order Number: R41301
Price: $29.95

To Order:

R41301.pdf  to use the SECURE SHOPPING CART

e-mail congress@pennyhill.com

Phone 301-253-0881

For email and phone orders, provide a Visa, MasterCard, American Express, or Discover card number, expiration date, and name on the card. Indicate whether you want e-mail or postal delivery. Phone orders are preferred and receive priority processing.

Regulation of Dietary Supplements

Amalia K. Corby-Edwards
Analyst in Public Health and Epidemiology

Many Americans take dietary supplements with the intention of meeting their nutritional needs, as well as to improve or maintain their overall health. These consumers want accurate information on the effectiveness and proper use of dietary supplements and access to the dietary supplements of their choice. The federal government has an interest in ensuring that the supplements Americans consume are high quality, free from contaminants, and accurately labeled. Because dietary supplements are intended to supplement the diet, their processing and manufacture are regulated by the U.S. Food and Drug Administration (FDA) in a manner similar to food, with some differences that will be outlined in this report. The Federal Trade Commission (FTC), in coordination with the FDA, regulates dietary supplement advertising.

In contrast with the authority under which drugs and medical devices are regulated, dietary supplements are regulated as food under the Federal Food, Drug, and Cosmetic Act (FFDCA), and the FDA does not take regulatory action on food or dietary supplements until something goes wrong with a product that is on the market. The FDA has the authority to take action regarding supplements that are labeled incorrectly (misbranded) or contain unsafe ingredients (adulterated). The FDA is made aware of potential misbranding or adulteration through inspections, adverse event reports, and citizen petitions.

The Dietary Supplement Health and Education Act of 1994 (DSHEA, P.L. 103-417) authorized the FDA to promulgate regulations for dietary supplement-specific good manufacturing practices (GMP), and established requirements for new dietary ingredients (NDI), labeling, and certain health claims for dietary supplements. Under the Dietary Supplement and Non-Prescription Drug Consumer Protection Act (P.L. 109-462), Congress added requirements for mandatory reporting of adverse events, and the Public Health Security and Bioterrorism Preparedness and Response Act (P.L. 107-188) required registration of food (including dietary supplement) manufacturers, processors, and packers with the FDA. The Food Safety Modernization Act (FSMA, P.L. 111- 353) provided the FDA with mandatory recall authority for adulterated food (including dietary supplements) and food containing undisclosed allergens.

Consumers, the health care and dietary supplement industries, Congress, and federal regulators all have a stake in supplement identification, effectiveness, and safety. Current federal policy toward regulating dietary supplements was intended to balance these competing interests. DSHEA provided FDA the authority to take action against products that were unsafe or adulterated, but emphasized that FDA should not take actions that would impose unreasonable regulatory barriers limiting or slowing the flow of safe products and accurate information to consumers. As the supplement market has grown and diversified, the regulatory and research questions have become more complex. This report discusses current areas of regulatory and legislative concern, including the identification of products as dietary supplements, their role in individuals’ health and health care, and recent issues regarding supplement safety.


Date of Report: May 6, 2013
Number of Pages: 29
Order Number: R43062
Price: $29.95

To Order:

R43062.pdf  to use the SECURE SHOPPING CART

e-mail congress@pennyhill.com

Phone 301-253-0881

For email and phone orders, provide a Visa, MasterCard, American Express, or Discover card number, expiration date, and name on the card. Indicate whether you want e-mail or postal delivery. Phone orders are preferred and receive priority processing.

Status of Federal Funding for State Implementation of Health Insurance Exchanges

Annie L. Mach
Analyst in Health Care Financing

Alex C. Engler
Research Associate

C. Stephen Redhead
Specialist in Health Policy

The Patient Protection and Affordable Care Act (ACA, P.L. 111-148, as amended) requires health insurance exchanges to be established in every state by January 1, 2014. ACA intends exchanges to be marketplaces where individuals and small businesses can “shop” for health insurance coverage. An exchange may be established by the state itself as a state-based exchange; otherwise, an exchange will be established by the Secretary of Health and Human Services (HHS) as either a partnership exchange, whereby a state partners with HHS to establish and administer an exchange, or as a federally facilitated exchange wholly operated and administered by HHS.

ACA provided an indefinite appropriation for HHS grants to states to support the planning and establishment of exchanges. For each fiscal year, the HHS Secretary is to determine the total amount that will be made available to each state for exchange grants. No grant may be awarded after January 1, 2015.

There are three different types of exchanges grants. First, planning grants were awarded to 49 states, the District of Columbia, and four territories. These grants of about $1 million each were intended to provide resources to states to help them plan their health insurance exchanges. Three states returned all or a portion of those funds. Second, there have been multiple rounds of exchange establishment grants. There are two levels of exchange establishment grants: level one establishment grants are awarded to states that have made some progress using their planning funds, and level two establishment grants are designed to provide funding to states that are farther along in the establishment of an exchange. Finally, HHS awarded seven early innovator grants to states (including one award to a consortium of New England states) to support the design and implementation of the information technology systems needed to operate the exchanges. Three states returned their early innovator grant funds.

To date, HHS has awarded a total of $3.8 billion to states and the District of Columbia (DC) in planning, establishment, and early innovator grants.

This report will be periodically revised and updated to reflect important administrative developments and further rounds of exchange grant awards.


Date of Report: May 8, 2013
Number of Pages: 11
Order Number: R43066
Price: $29.95

To Order:

R43066.pdf  to use the SECURE SHOPPING CART

e-mail congress@pennyhill.com

Phone 301-253-0881

For email and phone orders, provide a Visa, MasterCard, American Express, or Discover card number, expiration date, and name on the card. Indicate whether you want e-mail or postal delivery. Phone orders are preferred and receive priority processing.