College of
Human
Medicine

Dean's Update

A Message from Dean Marsha D. Rappley, MD

DEAN'S UPDATE ON SEQUESTRATION

I participated in meetings last week in Washington DC, as a member of the Board of Directors of the Association of American Medical Colleges. Budget reductions for the agencies that are critical to the vitality of medicine, research and medical education will occur through sequestration, which we are all aware went into effect on Friday, March 1, 2013, or through a compromise federal budget that might be crafted over the next several weeks. In either case, reductions will occur and it is important for us to plan accordingly, acknowledging that it is difficult to plan with information coming at the last minute and well into the budget year. I thought that it might be helpful to summarize the kinds of budget reductions that occur with sequestration. It will be apparent to all of you that funds supporting all aspects of our mission will be cut, and that this is true for our partner health systems as well. It will be important for us to be in close alignment with one another to continue to accomplish our important missions for our patients, our learners and our science.

The overall budget reduction in sequestration is approximately $85B, to be applied over the remaining 7 months of fiscal year 2013.

 

The reductions will be taken in both mandatory and discretionary categories, in defense and in non-defense.

 

You will see estimates of more than 5% to more than 7% reductions for these various components. The difference in these numbers appears to be whether the percent is counted over 12 or 7 months.

 

NIH will be reduced by approximately 5%, roughly $1.6B. It is thought that the currently funded non-competing renewals will continue to be funded below the amount committed in the Notice of Award, which may be up to 90% of that amount. Reductions will occur by awarding fewer competing grants. The AAMC estimates that for each $1M reduction in NIH funding, 18 jobs are lost.

 

Medicare will be reduced by approximately 2%. This is approximately $10B. CMS has said that as of April 1, payments to physicians, hospitals, private insurers and the Part D prescription drug plan will decrease by 2%. This is likely to have a ripple effect in payments received from other payers, as well. The AAMC estimates that for every $1M reduction in Medicare payments, 25 jobs are lost.

GME will be reduced by 2% because it is part of the Medicare allocation, as above.

 

NSF will be reduced such that existing grants should not be threatened, but approximately 1,000 fewer grants will be awarded in fiscal year 2013.

 

NSF, CDC and FDA budgets all together will be reduced by approximately $800M. This will affect surveillance, tracking, vaccine programs and processing of approvals through the FDA, among other functions of these agencies.

 

HHS reductions will have an impact on federal funding for mental illness programs, including treatment programs for drug addiction.

 

Student grant and loan programs will be reduced such that Pell grants remain protected, but other sources may be reduced by as much as 8%. I do not have more precise information at this time.

 

I share this information with you so that we might all participate in the important discussions that are happening at MSU and in your institutions about the impact of these reductions. I want to reiterate that reductions will occur. In sequestration, reductions are applied fairly evenly across the budget. In a compromise plan that might evolve, reductions might be applied differentially to various agencies and different programs within agencies.

 

If you wish to examine more data and discussions about this, see the websites below. The AAMC has information on its website about contacting your members of Congress and about what the AAMC is doing in its advocacy role. In addition, I have attached the most recent update from MSU’s Washington Office.  If you are interested in receiving that update on a regular basis, please contact  Jerry Kooiman, Assistant Dean for External Relations jerry.kooiman@hc.msu.edu.

 

While this is bad news regardless of how you look at it,  we have all struggled with the spiraling cost of health care across the nation and the disparate nature of the outcomes of these expenditures. Now is when our innovation and creativity is most needed. This is our opportunity to lead the nation to a better place, where health, education and research thrive for the betterment of all, at a cost we can carry because the return on that investment improves our quality of life for generations to come.

 

Thank you for the passion, commitment, and talent that you bring to your work every day.

  

www.aamc.org

www.ama-assn.org/amednews

www.govhealthit.com

 

Marsha

 

Marsha D. Rappley, M.D.

Dean, College of Human Medicine