Health Law Daily Medicare would be a source of savings under the President’s 2017 budget
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Wednesday, March 30, 2016

Medicare would be a source of savings under the President’s 2017 budget

By Bryant Storm, J.D.

The federal budget deficit would decline in 2017 and 2018 under President Obama’s 2017 budget proposal, falling to $383 billion in 2018, but would then rise, reaching $972 billion in 2026, according to an estimate by the Congressional Budget Office (CBO). Over the ten-year period from 2017 to 2026, the President’s budget would result in an increase of $1.0 trillion in mandatory spending, arising from a $1.4 trillion increase in immigration, income security, education and other program spending and a $0.4 trillion reduction in Medicare outlays (CBO Report, December 28, 2015).

Medicare proposals. The President’s budget includes several proposals to reduce mandatory Medicare spending (see Presidential budget: $1.8T deficit reduction, health reform plays role, February 10, 2016). Together, the CBO estimates that those proposals would reduce spending by $376 billion from 2017 through 2026. Over that ten-year period the President’s proposal would save:

  • $134 billion by requiring manufacturers to pay rebates to the federal government on prescription drugs dispensed to low income Part D beneficiaries;
  • $72 billion by reducing payments to post–acute care providers;
  • $39 billion by increasing premiums for some beneficiaries under Medicare Part B and Part D;
  • $34 billion by reducing Medicare’s coverage of bad debts that arise from beneficiaries’ failure to pay deductibles and coinsurance; and
  • $26 billion through restructuring of Medicare Advantage payments.

Some of the Medicare proposals would increase spending over the ten-year period. For example, the CBO projects that the elimination of the lifetime limit on inpatient services at psychiatric facilities would raise spending $3 billion and no longer requiring beneficiaries to pay coinsurance for certain colonoscopies would increase spending by $2 billion.

Medicaid and other programs. Increased funding for Medicaid, the Children’s Health Insurance Program (CHIP), and programs administered by the Health Resources and Services Administration (HRSA) would grow mandatory spending by $140 billion from 2017 through 2026, according to the CBO estimate. The proposed funding adjustments would increase spending by:

  • $31 billion for Medicaid reimbursement in Medicaid expansion states;
  • $28 billion for Medicaid spending in Puerto Rico and other U.S. territories;
  • $18 billion to allow states to offer 12 month interrupted Medicaid coverage for beneficiaries regardless of changes in circumstances;
  • $10 billion to expand the Maternal, Infant, and Early Childhood Home Visiting program;
  • $10 billion for a long-term care pilot program;
  • $10 billion for community health center funding under the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148);
  • $9 billion to increase primary care provider rates under Medicaid; and
  • $6 billion to fund CHIP between 2017 and 2019.

The CBO projects the president’s proposal to increase rebates paid to the government by pharmaceutical companies for drugs purchased through Medicaid would reduce spending by $7 billion. Additionally, remittances for Medicare Advantage plans with costs that exceed a minimum medical loss ratio would save $6 billion and another $1 billion in savings would come from reductions in the amount that Medicaid programs pay for generic drugs.

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