President Obama’s Budget Proposes Cuts to Medicare

Yesterday, President Obama sent the first budget of his second term to Congress. While some Republican members have called the proposal “dead on arrival” due to proposed increases in revenue, others were intrigued by the cuts to entitlement programs that were in budget.

Specifically related to the healthcare industry, the budget decreased Medicare spending by almost $400 billion over 10 years, but also increased the overall budget for the Department of Health and Human Services (HHS) for the next fiscal year, largely for implementation of the Affordable Care Act.

MedPageToday reports that the Medicare spending decrease is due to program savings, achieved primarily in two ways. First, HHS would increase the Medicare premiums paid by wealthy seniors. Secondly, the agency would negotiate “lower prices for prescription drugs bought by dual eligibles, or Medicare beneficiaries who are also eligible for Medicaid.” This negotiation may force some Medicare beneficiaries to swap out name brand prescription medications for generic alternatives, but the bulk of the hit would be to drug companies and other healthcare providers.

President Obama’s budget proposal seemed to strike a middle ground between plans already released by the Republican controlled House and the Democrat controlled Senate. The Medicare spending in the President’s budget, for example, was $4 billion less than the Senate plan and $15 billion more than the House plan. More comparisons can be found in this Washington Post article.

Some other highlights of the budget proposal include $31.1 billion for the National Institutes of Health to fund, among other things, HIV/AIDS research and the newly announced BRAIN Initiative, and $11.3 billion for the CDC and the Agency for Toxic Substances and Disease Registry.

The budget released yesterday is just a proposal, and will likely change through negotiations in order for it to be passed by both the House and the Senate. Any budget passed now will go into effect for Fiscal Year 2014, beginning on October 1^st of this year.