President Obama Releases Fiscal Year 2013 Budget, Including Changes to Medicare

This week, President Obama released the administration's proposed budget for fiscal year 2013. The budget contains few surprises pertaining to Medicare and Medicaid, as it incorporates the president’s deficit reduction plan released in September of last year. The majority of savings from Medicare will come as a result of changes in provider payments, strengthening of programs that combat fraud, waste and abuse in Medicare, and reforms that lower the cost of prescription drugs for both the Medicare program and beneficiaries. Under one provision modeled after Medicaid policies, drug manufacturers would pay rebates to the Medicare program for drugs provided to Medicare beneficiaries who qualify for the Part D Low-Income Subsidy (LIS) benefit, also known as Extra Help. This proposal, which revives a policy that was in place before the Medicare prescription drug benefit was enacted, would save an estimated $155 billion over ten years. The budget also includes provisions that would allow generic drugs, which are less costly for consumers, to enter the market more quickly. This proposal would save an estimated $8.6 billion.

However, the budget also contains problematic provisions that would save the federal government money only by shifting costs to Medicare beneficiaries. Such provisions include a premium surcharge on those Medicare supplemental policies, also known as Medigaps, that provide the most comprehensive coverage of Medicare out-of-pocket costs. In addition, the proposed budget increases Medicare Part B deductibles and creates new co-payments for Medicare home health services that are currently available with no cost-sharing. Lastly, the budget would further means-test Medicare Part B and Part D premiums, and require over time that one-in-four Medicare beneficiaries pay an increased, income-related premium. Such proposals do not address growing costs in the health care sector overall, the root cause of increasing costs in Medicare—a health insurance program that grows at a slower rate per capita than private insurance.