Thursday, February 21, 2008

CRS Report: Medicare: FY2009 Budget Issues

Abstract:  Each February, the President submits a detailed budget request to Congress for the following federal fiscal year, along with projections for the five-year budget window. The budget informs Congress of the President's overall federal fiscal policy, based on proposed spending levels, revenues, and deficit (or surplus) levels. The budget request lays out the President's relative priorities for federal programs, such as how much should be spent on defense, education, health, and other federal programs. The President's budget may also include legislative proposals for spending and tax policy changes. While the President is not required to propose legislative changes for those parts of the budget that are governed by permanent law, such as Medicare benefits, these changes are generally included in the budget. The President's 2009 budget estimates current law Medicare net outlays of $413 billion in FY2009. The budget includes Medicare legislative proposals with estimated savings of $12.2 billion in FY2009 and $178 billion over the five-year budget window. The President's budget also includes Medicare administrative proposals with estimated savings of $645 million in FY2009 and $4.7 billion over the five-year budget window, which brings the estimated savings from the total Medicare budget proposals to $12.8 billion in FY2009 and $183 billion over the fiveyear budget window. Proposals include savings achieved through reductions in many of the Medicare payment updates. The Medicare Prescription Drug, Improvement and Modernization Act of 2003 (MMA, P.L. 108-173) requires the Medicare Board of Trustees to examine and make a determination if general revenue Medicare funding is expected to exceed 45% of Medicare outlays for the current fiscal year or any of the next six fiscal years. An affirmative determination in two consecutive annual reports is considered to be a Medicare funding warning in the year in which the second report is made. The President has indicated that he intends to submit the required legislative proposal, due within the 15-day period following the budget submission to Congress. As part of the budget, the President has proposed reducing Medicare provider payments by 0.4% beginning in any year that the general revenue Medicare funding is expected to exceed 45% of Medicare outlays. This reduction would increase each year, until the percentage falls below the 45% trigger level. This report will be updated.

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