Health and Disability

The President’s FY2016 budget proposal would reduce net Medicare spending by $423 billion between 2016 and 2025, and is estimated to extend the solvency of the Medicare Hospital Insurance Trust Fund by approximately five years. This brief summarizes the Medicare provisions included in the President’s FY2016 Budget, with highlights noted below:

• More than one-third (34%) of the proposed Medicare savings are due to reductions in Medicare payments to providers, most of which affect providers of post-acute care (Figure 1).
• Nearly one-third (30%) of the proposed savings are related to Medicare prescription drug spending. The largest single-source of Medicare savings (23% of Medicare savings) is a provision that 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 and FY2015 proposed budgets.
• About one-sixth (17%) of the proposed Medicare savings is due to increases in income-related premiums, increases in prescription drug copayments for low-income enrollees to encourage the use of generic drugs, an increase in the Part B deductible for new enrollees, and a new home health copayment for new enrollees.
• The President’s FY2016 budget would also repeal the Sustainable Growth Rate (SGR) formula and proposes about $54 billion in new Medicare spending, including, for example, provisions to reform physician payments and eliminate the 190-day lifetime limit on inpatient psychiatric care.