President Obama’s budget blueprint includes some wise investments that will yield long-term benefits for the health of all Americans.

First, the administration’s proposed $1 billion increase for the National Institutes of Health (NIH) recognizes the need for sustained, predictable growth in the nation’s medical research enterprise. This boost to NIH funding will help find new cures and treatments; strengthen our economy by creating skilled and high-paying jobs; and produce new products, industries, and technologies.

Second, the president’s proposal assumes no decreases in Medicare funding, while at the same time recommends $371 billion to address Medicare’s problematic physician payment formula. Congress should follow the president’s lead and take immediate action to permanently repeal the current formula, and replace it with one that preserves stable and accessible care for Medicare beneficiaries.

Third, by recommending a 19 percent increase for the National Health Services Corp (NHSC), and an additional $6 million in funding for the Title VII workforce and analysis program, the president’s budget demonstrates continued commitment to strengthening our nation’s health care workforce. The former would enable NHSC clinicians to provide much-needed primary care to some of our most vulnerable populations (and also assist with the costs of physician training), while the latter would enhance the diversity and distribution of the health workforce.

As President Obama has stated numerous times, reform of our health care system is critical to long-term economic recovery and reducing our nation’s budget deficit. The FY 2011 budget reaffirms the Administration’s commitment to these goals while working to extend coverage to the millions of Americans without health insurance, making coverage more affordable and stable for struggling middle class families, and controlling the unsustainable rise in health care costs. The bills passed by both chambers of Congress have brought us closer than ever before to urgently needed reforms that will ensure all Americans are able to get safe, affordable, and effective care in a fiscally responsible way.

Several specific provisions in President Obama’s FY 2011 budget request will provide immediate relief to families as policymakers work to pass historic reform. A six-month extension of the American Recovery and Reinvestment Act temporary increase in the Federal Medicaid match will allow states to continue to cover some of society’s most vulnerable individuals during a time of unprecedented hardship. The budget also includes critical investments to expand the capacity of community health centers while transform ing and moderniz ing our nation’s safety net system and ensuring an adequate supply of health professionals are available in medically underserved areas. Finally, an extension of Federal COBRA premium subsidies will provide much needed relief to employees laid off through the end of the year, a particularly important step given our ongoing and severe economic contraction.

Fiscally responsible health care reform is needed now more than ever. The bills passed by both chambers of Congress represent a historic opportunity to provide all Americans with safe and secure coverage, reduce the nation’s deficit, and lay the foundation for long-term economic growth. It is particularly important to begin rapid testing of innovative payment methods immediately to spur the adoption and spread of high performing health care organizations. The Administration’s FY 2011 budget includes important investments that will benefit us all as we work to build a high performance health care system that works for everyone.

In a time of very tight financial constraints, we all need to be pretty realistic about our expectations. In the context of a freeze on overall domestic non-defense/security discretionary spending, the Obama Administration did show its commitment to supporting a strong public health system that focuses on prevention. Obviously, we’d love to see big increases for public health, however, this budget, combined with large investments about to be released under the American Recovery and Reinvestment Act (ARRA), will significantly increase the capacity of communities to respond to our pressing prevention needs.

However, the question of health reform still looms large. Unless we take action to improve the health of Americans, we lose an important opportunity to reign in health spending. Treating chronic diseases is one of the biggest drivers of health care costs – and until we focus more on prevention in a sustained and comprehensive way, we’re never going to get these costs under control.

Without reform that includes a long-term commitment of resources, we’ll be unable to maintain the short-term gains we were able to achieve with the ARRA funds, and as efforts to balance the budget continue, we could easily fall back into an annual cycle of chronic underfunding of public health prevention and preparedness programs. This is why at the Trust for America’s Health, we along with hundreds of other partners, have called for the establishment of a dedicated funding mechanism for prevention and public health through a Prevention and Public Health Fund and a Community Health Center Fund in the Senate health reform bill, and a Public Health Investment Fund in the House bill.

Overall, the increases to public health in this budget are modest. To really turn the tide on the health challenges facing our nation – to turn to a culture of prevention rather than treatment – we will need the level of investment found in the prevention, wellness, and public health Trust Funds that have been proposed as an essential component of health reform.

Some public health highlights in the budget include:

• A 30 percent increase (to $1.4 billion) for food safety;
• A new $20 million Big Cities Initiative (using funds from cuts in other programs) at the U.S. Centers for Disease Control and Prevention (CDC) to target chronic diseases in up to 10 large cities;
• $10 million for a new Health Prevention Corps, to provide new support for state and local health departments;
• A major increase in support for public health emergency preparedness, including a $136 million increase to $476 million (from $341 million) for Office of the Biomedical Advance Research and Development Authority (BARDA) to support the next generation of medical countermeasures;
• $421 million to support the new Center for Tobacco Products at the FDA (from user fees) to ramp up the public health effort to regulate tobacco products;
• $10 million for a Federal Employee Health and Wellness Initiative to create a culture of wellness, improve employee health, and reduce health care costs through programs at Federal worksites;
• $4 million to support Safe Routes to School Programs to encourage healthy community design;
• $16 million increase for global health initiatives;
• $10 billion over 10 years for a strong Child Nutrition and WIC reauthorization; and
• $50 million for a new Healthy Food Financing Initiative to bring grocery stores and other healthy food retailers to underserved communities.

The most important link between health reform and the budget/economy is to start the decade long process of realigning incentives in our delivery system, so we can get our fiscal house in order through lower medicare and medicaid cost growth. This cannot be done without seriously expanding coverage, because hospitals need to change the most -- so they can cooperate with doctors in coordinating care -- and many simply can't unless we help the uninsured and medicaid patients pay true costs. This is why reform worth doing is a lumpy package, and because even with catalytic medicare payment reform this will take a decade, therefore we should start this afternoon.

You ask: “In his fiscal 2011 budget proposal to Congress this morning, President Obama focused mostly on the need to bolster the economy. Can the economy be improved -- in either the short or the long term -- without also reforming the nation's health care system? How closely are they related, and what and how much needs to be done on health care to positively affect the economy? “

So here’s my answer, in the form of a mini Econ 101 lecture:

At the risk of losing the mathematically challenged, let me summarize the problem we face in the first equation for gross domestic product (GDP) freshman encounter in Econ 101:

GDP = C + I + G + X - M

Here C stands for total national spending on consumer goods, I total national spending on investment goods (housing, business structures, equipment, R&D, Inventory buildups, etc.), G stands for the purchases of goods and services made by governments at all levels (thus it excludes mere transfer payments), X spending by foreigners on US made goods and services and M spending by Americans on goods and services imported from abroad. These are all annual dollar figures.

If any of the components on the right hand side of this equation falls, and the others remain the same, GDP will fall. During the recession 2008-2008, all of them fell except for G.

To “bolster the economy” presumably means bolstering GDP which, it is hoped, will bolster employment as well, even if not proportionately. (In the short run, one can grind out more stuff and sell it even with a given workforce, just through overtime).

But consumption spending is down and will grow slowly, because people are using their money to repay debt and to save more. Investment spending on new homes is down, as is business investments. Exports are down even more than imports. Which does leave G as the donkey that must carry the load.

Conservatives and Liberals are divided on how best to pump up GDP. Conservatives and the economists attached to them believe that if we cut tax rates some more, both C and I would rise, lifting up GDP without increasing G. They also would like China to raise the Yuan/$ exchange rate, so that we can export more to China (but what?)

Liberals doubts that just cutting taxes will make business build more structures and buy more equipment, given the sector has excess capacity and has trouble selling what it can produce with existing capacity. It is not clear why lower taxes would increase new-home building. Lower tax rates would raise disposable income and might raise consumption spending G, but households might just as well just use the added tax savings to repay more debt or save more, or buy Chinese-made goods at Walmart. It is why Liberals and the economists attached to them tend to look to increases in G as the chief workhorse for raising GDP in the short run.

Extra spending on health care by government does increase G. It does create jobs. Indeed, on an August 2006 cover of Business Week, the headline blared that health care had created 1.7 million new jobs net during 2001-2006, and the rest of the private sector, on net, zero. Extra government spending on health care for the now uninsured undoubtedly would increase GDP in the short run.

I personally doubt that tax cuts would, in the short run, do much to boost GDP, because I cannot visualize the mechanism by which those cuts would translate themselves into increased C and I, for reasons indicated.

The picture is more complicated over the longer run. There we must ask what other spending more spending on G, and specifically on health care, displaces and what taxes do to economic growth. It is also germane to ask what a high public debt/GDP ratio does to growth, as was explored in a recent paper by Carmen Reinhart and Kenneth Rogoff.

So this is the dilemma the Administration faces at this time: should it be focused on (a) the short run mainly or (b) the long run shape of the economy? If anyone thinks these are easy choices, they do understand neither economics nor politics.

Unfortunately Republicans, who once claimed the mantle of fiscal probity, have lost the moral platform from which to preach on the subject. The public debt held tripled under President Reagan, almost doubled again under President Bush the Elder, and then doubled again under President Bush the Younger. Not exactly a record of fiscal conservatism!