The Frieden Health Defense Funding Proposition

Congress is starting to consider ways to address the budget cap problem that hangs over the entire FY 21 appropriations process for non-defense discretionary (NDD) programs.Last year, Congress broke a long-running stalemate by agreeing to budget caps for FY 20 and FY 21. They decided to front-load the increases, making spending decisions (relatively) easier for FY 20 and (quite a bit) harder for FY 21. To stay under the FY 21 cap, NDD spending can only grow by about $5 billion above the FY 20 enacted level. Any further growth would have to be offset by cuts to many NDD programs. The levels of net reductions would be severe, probably amounting to about $10 to $15 billion.The largest new FY 21 item is $11 billion to pay for veterans’ private medical care services that the VA is obligated to pay. In addition, the President’s request for FY 21 includes sizable increases for Homeland Security and NASA. All of this was before the pandemic, which almost certainly will require increased spending for CDC, NIH, FDA, and BARDA. The Public Health and Social Services Emergency Fund may also need replenishment. The $5 billion increase in the NDD budget cap will not cover all these items without large cuts to other NDD programs.The most efficient solution would be for Congress to increase the caps, overriding the deal from last year. This would probably draw fire from budget hawks and might result in a drawn-out process. Some alternatives may require creativity, but may be less politically difficult for Congress to adopt.In that vein, there had been some speculation in March and April that the NDD cap would be enforced, but increases for front-line agencies that are working on combating COVID-19 would be exempt. This week’s Congressional discussions on the VA were aimed at making the cap issue go away (or at least become much less severe) by voting to pay the VA’s $11 billion increase off-budget. It might well take both in order to sustain the cap while avoiding cuts in NDD programs.A different approach surfaced this week in the form of a proposal to create an off-budget Health Defense Operations (HDO) fund. This was put forth by a witness at the House Appropriations L-HHS Subcommittee, Thomas Frieden, former head of CDC, and is backed by a number of former health leaders (more information available here). This would duplicate for non-defense programs what the Overseas Contingency Operations (OCO) fund has done for defense programs, namely provide a way to boost spending that is not subject to budget ceilings.As described here, the HDO proposal would take $13 billion worth of existing programs in FY 20 (the base) and add about $11 billion more to those programs in FY 21, creating an annual HDO of about $24 billion in off-budget funds. All of FDA’s FY 20 food safety budget ($1.425 billion) would go into the HDO. For FY 21, it would increase by $625 million to just a tad above $2 billion. FDA’s medical products programs are not part of the HDO as proposed.What made the hearing and the proposal noteworthy was Subcommittee Ranking Member Cole joining Democrats in expressing interest in HDO, creating the possibility of bipartisan support. If I understand the proposal correctly -- and so far it doesn’t appear to have been analyzed in this way -- it would take $13 billion of NDD monies out of the FY 20 base, possibly enough money to solve the cap problem for FY 21.Editorial note: The Analysis and Commentary section is written by Steven Grossman, Deputy Executive Director of the Alliance for a Stronger FDA.