Obama budget: Is it 'austere'?

President Barack Obama's 2014 budget includes increases in spending for setting up health exchanges, increasing scrutiny for food safety, and gun violence and Alzheimer's disease research. It includes cuts to Medicare, such as reducing subsidies for wealthier people and diminishing the pay rate for physicians.

President Barack Obama's proposed 2014 budget includes an increase of $3.9 billion to the health department as it prepares to implement the administration's healthcare overhaul, setting money aside for mental health, but cutting medicare.

The budget asks for $1.5 billion in increased funding to help set up healthcare exchanges and educate consumers on the enrollment process, which is scheduled to begin on Oct. 1. The exchanges are to begin providing coverage on Jan. 1.

The increase would contribute to a budget of $80.1 billion for the Department of Health and Human Services, up nearly $4 billion over 2012. The 2013 budget is still being finalized.

"Even as it invests in areas that we know are critical for our future prosperity, the budget also contributes to the president's goal of cutting the deficit in a balanced way," health secretary Kathleen Sebelius said at a news briefing in Washington on Wednesday.

"That means safeguarding every dollar, cutting waste and duplication, seeking out savings wherever we can and making some very difficult choices we wouldn't have made at other times."

The budget calls for cuts to Medicare as part of a broad plan to reduce the program's costs by roughly $400 billion over the next decade. At the same time, it proposes $130 million in funding for mental health services and additional funding for research into gun violence following the Newtown, Connecticut, school shooting in December.

"While we know the vast number of Americans who struggle with mental illness are not violent, recent tragedies have reminded us of the staggering toll that untreated mental illness takes on our society," Sebelius said.

The Centers for Disease Control and Prevention will receive more than $30 million to support a nationwide violent death surveillance system and conduct research on the causes and prevention of gun violence.

The budget increases funding for the Food and Drug Administration by $821 million and provides $31 billion to the National Institutes of Health to, among other things, fulfill the government's commitment to enhance research into Alzheimer's disease.

Of the FDA's proposed total budget of $4.7 billion, $295.8 million would be earmarked for food safety, including the implementation of the new Food Safety Modernization Act.

The food safety funding would consist of $43.4 million in taxpayer money and the rest in industry fees, including $58.9 million from food facilities for registration and inspection and $165.7 million from food importers.

Under the new safety law, the FDA for the first time will be allowed to penalize U.S. companies that fail to monitor produce they import from abroad. The Act was signed into law in January 2011 and represents the most sweeping reform of food safety laws in more than 70 years.

"The budget proposal is a significant investment in food safety," said Sandra Eskin, project director of the Food Safety Campaign at The Pew Charitable Trusts.

The FDA's commissioner, Dr. Margaret Hamburg, who appeared with Sebelius at the news briefing along with an array of other government health officials, described the agency's budget as "austere." She said 94 percent of the budget would come from user fees paid by industry.

The health department's budget assumes a permanent change to the way Medicare pays physicians. The current formula, known as the "sustainable growth rate" has called for reductions in physician payment rates since 2002, but each year Congress has blocked the reduction.

The government said it supports a period of payment stability lasting "several years" to allow time to develop new payment models that would reward healthcare practitioners who provide high-quality efficient care.

The budget also reduces the federal subsidy of Medicare costs for wealthier people and lists savings from reducing the length of time given to biologic drugs to 7 years from 12 years, allowing generic drugs to enter the market sooner.

Savings are also expected from a proposal that would allow the Federal Trade Commission to prevent branded pharmaceutical companies from paying generic drugmakers to delay the launch of generic rivals, known as "pay for delay" deals.

"This was in Obama's proposal in 2011, so this is not new," said Mark Schoenebaum, an analyst at ISI Group. "What is new is that the savings have increased from $3 billion to $11 billion, so still relatively small."