Posted on July 28, 2017

From both the campaign trail and the oval office, President Trump promised to offer a budget that cut unnecessary spending. If you ask his supporters what they think of the 2018 fiscal budget, which Trump unveiled in late May, most will tell you he came through on his promise to cut the fat and focus resources on necessary programs. Trump detractors, however, seem to find many of the cuts, particularly those across virtually all federal government health and social programs, a bit too deep.

Here are the 2018 budget facts at a glance:

  • Corporate and personal income taxes will be cut, particularly for higher-income earners
  • Defense spending and border security will see an increase
  • Major cuts to health and social programs
  • Over the next 10 years, the budget proposes to cut Obamacare outlays by $1.25 trillion, resulting in $250 billion in deficit reduction
  • Medicaid spending will be cut by $610 billion
  • CHIP will be cut by $5.8 billion while extending it through 2019

Many Federal Agencies are Feeling the Heat

Trump’s budget cuts don’t stop at Medicaid or CHIPS, but extend throughout a large body of federal agencies. The budget for the Food and Drug Administration, for instance, will be cut by over $850 million. In additional, user fees will increase by $1.3 billion, resulting in a program increase of $450 million.

The Centers for Disease Control will feel budget cuts of $1.3 billion, and funding for the National Institutes of Health will be cut by $5.8 billion. Trump’s proposed budget would also completely eliminate the Agency for Health Care Research and Quality, folding it into the NIH with reduced funding. Substance Abuse and Mental Health budgeted funding would be cut by almost $400 million, however funding for the Center for Medicare and Medicaid Innovation would increase by $114 million.

Making the Switch

The HHS budget will fund whatever operations and activities are necessary to provide Americans a stable transition from the “burdensome requirements of Obamacare to a patient-centered health care system.” $471 million have been allocated for ACA exchanges in 2017, $453 of which will go to program operations such as eligibility, call center operations, and information technology. Hopefully we won’t see the same tech fails we saw at the beginning of Obamacare when the entire website was down for lengthy periods of time!

What We Know Versus What We Don’t Know

As with other proposed federal budgets before it, we know WHAT Trump’s budget proposes to do, but we don’t know HOW it will impact the economy, jobs, and the lives of every day Americans.

Here are some things WE KNOW and some things WE DON’T KNOW:

  • We know that public health and biomedical research are among the groups seeing the biggest budget slashes.
  • We know there is potentially going to be a “major reorganization” in the National Institutes of Health, which supports most of the nation’s research on diseases and treatments. This reorganization includes a cut of $5.8 billion, about 20 percent of NIH’s $30 billion budget, and the absorption of another agency, the Agency for Health Care Research and Quality.
  • We know there will be some kind of reform of funding to the Centers of Disease and Prevention, which will most likely have something to do with a $500 million block grant to states.
  • We know the budget calls for the creation of a new “Federal Emergency Response Fund” that would be designed to “rapidly respond to public health outbreaks,” such as Zika. This is an idea that has been gaining support recently, especially in the wake of the Ebola outbreak in West Africa and the emergence of Zika as a threat to pregnant women and their babies.
  • We know that in certain areas, public health funding will increase under Trump. For instance, his budget provides an additional $500 million for the Department of Health and Human Services to “expand opioid misuse prevention efforts and to increase access to treatment and recovery services to help Americans who are misusing opioids get the help they need.” Another area of investment is in “mental health activities that are awarded to high-performing entities and focus on high priority areas, such as suicide prevention, serious mental illness, and children’s mental health.”
  • We don’t know how the proposed budget will affect the National Science Foundation, which provides about $7 billion a year in grants to researchers in many fields.
  • We don’t know how the more than 2,600 institutions around the country who rely on funding from the NIH will be impacted by these cuts. How will this affect the more than 313,000 full- and part-time employees?
  • We don’t know how this budget proposal will target, or if it will, grants given to university scientists.

It is interesting to think about the affect these budget cuts could potentially have along the university supply chain. For instance, after federal research grant money is handed out to the universities, they turn around and spend billions of dollars to buy equipment, chemicals and other ingredients needed for experiments and services from local companies.

Economist Bruce Weinberg and his fellow colleagues at Ohio State University looked at what happened to federal research dollars that flowed to nine major Midwestern universities. In 2012, these centers for learning received about $7 billion in grant funds, more than half of which came from the NIH, the National Science Foundation and other funding agencies.

The study found that of the total $7 billion, roughly $1 billion was spent on goods and services from American vendors and subcontractors (16% going to suppliers in the university’s home county, over 16% going elsewhere in the state, and the rest going to companies across the United States.).

“We were surprised by how many were small, niche high-technology companies,” Weinberg and his colleagues wrote.

But What is the Practical Worth of the NIH?

Trump is not the first person to ever call into question the sizeable federal budget allottment to the NIH. Though it sounds incredibly impressive that these NIH grants are helping scientists unravel genomes, map the deep interiors of cells and find solutions for problematic diseases, does this $30 billion of taxpayer money really help the average citizen in the long run?

A  recent study is claiming that the benefits of NIH-funded laboratory research to taxpayers are greater than perhaps even first thought.

Researchers from Harvard Business School, MIT and Columbia University searched for links between NIH grants and patents to determine the practical worth of federal funding. They focused on searching for new patents, as these are the first step for ushering new products into the world.

These grant-to-patent connections follow two basic routes: 1) Scientists and their universities may patent discoveries made at their laboratories or 2) commercial developers may license those discoveries. Either way, patent applications must cite scientific publications as evidence for their legitimacy, and these scientific publications cite the NIH grant that funded the research.

It was quite easy for researchers to determine just how many grants supported research that ended up having far-ranging relevance. “These were bread crumbs we were mining and exploiting,” says study author Pierre Azoulay, a professor at the MIT Sloan School of Management.

The team collected data on 365,380 grants awarded between 1980 and 2007 and found that 31% of these grants were cited in 81,462 patent applications submitted by private companies. Another 5% were cited in patent applications by the universities where the research took place.

These rates are quite significant and suggest that NIH-funded research “is not being done in an ivory tower,” says Azoulay. “Companies use it as input in their own discovery efforts.”

While the authors found roughly 4,400 patents that were tied to drugs approved by the FDA, they also admit the average time between initial funding for proposed research and commercial licensing of a laboratory discovery was 10 to 15 years. “We’ve become spoiled, thinking that things go from idea to prototype to product in a month or a few years,” says Azoulay. “That is not the right time scale to think about how medical progress happens.”

Though the study was able to make a connection between federal funding and the emergence of new health solutions coming to market, it does not address whether NIH funding cuts are a good idea, bad idea, or an idea that will not have as big an impact as some feel it will.

Of course, the President’s budget is only a potential one that announces the administrations priorities. Any 2018 spending bill that eventually emerges from congress could look very different. So, as they say, only time will tell what will happen to healthcare funding.