President Barack Obama released his budget proposal for fiscal year (FY) 2015 on March 4. Under the FY2015 budget, imaging and other services would be excluded from the in-office ancillary services exception to the physician self-referral (Stark) law. Additionally, the president proposes to extend current statutory provisions allowing for requirements to obtain prior authorization for durable medical equipment to all Medicare services, particularly those at highest risk for improper payment such as advanced imaging and power mobility devices. Both proposals have been made in previous budgets and have not been approved by lawmakers.

The budget also assumes a 10 percent cut in payments to hospitals for the indirect costs of graduate medical education (GME). However, the budget would also create a new competitive, value–based GME grant program funded through the Medicare Hospital Investment Trust Fund. This new program would be funded at a little more than one-third of the cut to current GME funding over 10 years and would be focused on teaching hospitals, children's hospitals and community-based consortia of teaching hospitals and/or other health care entities "to expand residency training, with a focus on ambulatory and preventive care, in order to advance the Affordable Care Act's goals of higher value health care that reduces long-term costs." The proposed new program would incorporate two existing programs, the Children's Hospital GME program and the Teaching Health Center GME program, and would be targeted at primary care physicians and understaffed specialties, as well as those interested in practicing in rural and underserved areas.

The president has proposed extending the Medicaid increase for primary care payments through 2015, including to pediatric cardiologists. Going forward, the budget proposes to expand eligibility for the increases to non-physician practitioners. Additionally, the budget proposes extending funding for a consensus-based entity focusing on performance measurement between 2015 and 2018. A value-based purchasing program would be added for a number of provider types, including hospital outpatient departments beginning in 2016 with at least two percent of payments tied to the "quality and efficiency of care."

The National Institutes of Health would receive a small increase in funding under this budget proposal. Also receiving a small increase would be the Office of Medicare Hearings and Appeals, the office responsible for hearing appeals of audit findings and the like and the subject of much discussion of late because of a lengthy case backlog.

Beneficiaries would experience premium increases under Medicare Parts B and D one year later, reducing the federal subsidy of Medicare costs for individuals with higher incomes. Additionally, generic drug usage would be encouraged over brand name drugs for low-income beneficiaries by lowering copayments for generic drugs. The budget also includes a number of proposals affecting post-acute care facilities.

Please note that this budget proposal is largely a conversation starter, given that the president cannot introduce legislation. Much of what is proposed will not be enacted into law and will likely not even make it into legislative language. Now that the President's budget proposal has been published, the Senate and House will draft their own proposals and proceed accordingly. Stay tuned for developments.

Keywords: Value-Based Purchasing, Drugs, Generic, Medicaid, Physicians, Primary Care, Physician Self-Referral, Budgets, Patient Protection and Affordable Care Act, Hospitals, Teaching, Financial Management, Medicare Part B, Education, Medical, Graduate, Durable Medical Equipment, National Institutes of Health (U.S.)

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