Tuesday, March 25, 2014
On March 4, 2014, the Office of Management and Budget released President Obama’s budget for fiscal year (FY) 2015, which includes provisions related to federal spending and revenues, including Medicare savings. The President’s budget would use federal savings and revenues to reduce the deficit and replace sequestration of Medicare and other federal programs for 2015 through 2024. This brief summarizes the Medicare provisions included in the President’s budget proposal for FY2015.
The President’s FY2015 budget would reduce Medicare spending by more than $400 billion between 2015 and 2024, accounting for about 25 percent of all reductions in federal spending included in the budget. Most of the Medicare provisions in the FY2015 budget are similar to provisions that were included in the Administration’s FY2014 budget proposal. The proposed Medicare spending reductions are projected to extend the solvency of the Medicare Hospital Insurance Trust Fund by approximately five years.
- More than one-third (34%) of the proposed Medicare savings are due to reductions in payments for prescription drugs under Medicare Part B and Part D. The single largest source of Medicare savings would require drug manufacturers to provide Medicaid rebates on prescriptions for Part D Low Income Subsidy enrollees, a proposal which was also included in the President’s FY2014 proposed budget.
- One-third (33%) of the proposed Medicare savings are due to reductions in Medicare payments to providers, most of which are reduced payments to post-acute care providers (Figure 1). The baseline of the proposed budget assumes no reduction in Medicare payments for physician services, relative to current levels, from 2015 through 2024, in contrast to the sustainable growth rate formula (SGR) under current law, which calls for significantly lower physician payments during this 10-year period. The projected cost for adjusting the baseline for this period is $110 billion, plus additional amounts associated with eliminating cuts in 2014.
- About 16 percent of the proposed Medicare savings are due to increases in beneficiary premiums, deductibles and cost-sharing.