Endocrine Insider
February 6, 2008

President Bush released his FY 2009 budget proposal on February 4, 2008, cutting more than $14 billion from federal health programs and providing little to no increase for many research-focused agencies. The proposed budget reduces the discretionary funding levels for the Department of Health and Human Services by approximately 2.5 percent from FY 2008 levels.

In order to slow Medicare’s average annual growth rate from 7.2 percent to 5.0 percent, $12.4 billion of the proposed cuts are aimed at Medicare spending. The majority of the cuts are taken from payments to non-physician providers; physician payments are not targeted as a source of cost-savings. Other sources of cost savings include a reduction in Indirect Medical Education payments to hospitals, a reduction in hospital disproportionate share payments for those hospitals that treat a large number of uninsured patients, and elimination of payments to children’s teaching hospitals for training of pediatricians and pediatric sub-specialists. The president believes that these cuts will strengthen the health program’s long-term financial stability and address the Medicare Trustees’ warning that more than 45 percent of projected Medicare expenditures will require funding from general tax revenue – rather than dedicated resources – over the next six years.

In the president’s FY 2009 budget request, some research-focused agencies fare better in their budget allocations than others. For example, the National Institutes of Health (NIH) receives no increase in its discretionary budget when compared to FY 2008 levels, while the National Science Foundation receives a 19 percent increase. In fact, this will represent the sixth consecutive year during which the NIH budget did not keep pace with biomedical inflation, resulting in a loss of approximately 11 percent in purchasing power. The only research-focused agency to receive a cut in funding for FY 2009 is the Veterans Affairs Medical and Prosthetics Research Program. While most programs’ budgets will not be cut under the president’s proposal, the increases are below the levels recommended by The Endocrine Society and most of the scientific community, including the Federation of American Societies for Experimental Biology.

The U.S. House of Representatives and Senate will begin the appropriations cycle shortly, and will identify their own priorities for the upcoming fiscal year. However, it is unlikely that members of Congress will support many of the cuts that the president proposes in his budget request.