Five Ways the President's Budget Would Change
Medicare; Reduce Spending $371 Billion in Decade
Wealthier beneficiaries to pay more for coverage and
future retirees to pay higher copays for outpatient services such as
doctor's visits and home health care
By Mary Agnes Carey, KHN Staff Writer
April 15, 2013 - President Barack Obama's fiscal
2014 budget includes a variety of what he says are "manageable" changes
for Medicare's 54 million beneficiaries as well as for the hospitals,
nursing homes and other health care providers that serve them.
That assessment has drawn concern from some patient
and provider groups that, although recognizing the need to address the
nation's rising health care costs, say seniors shouldn't bear the brunt
of efforts to reduce entitlement spending.
"Instead of making harmful cuts to Medicare or
shifting additional costs onto beneficiaries, we need to look for
savings throughout the health care system, including Medicare," said
AARP Executive Vice President Nancy A. LeaMond.
Obama's budget proposal, which would reduce the
growth in Medicare spending by $371 billion over the next decade, asks
wealthier beneficiaries to pay more for coverage and future retirees to
pay higher copays for outpatient services such as doctor's visits and
home health care. But the gap in Medicare's prescription drug coverage
where beneficiaries cover all the costs -- known as the "doughnut hole"
– would close by 2015, five years faster than current law mandates.
on How Obama Budget Would Up Medicare Costs For Higher-Income
April 15, 2013 - The Associated Press
examines the details on how President Barack Obama's budget
while other news outlets report on reactions from the left and
The Associated Press:
Upper-Income Seniors' Medicare Hike President Barack Obama's plan to raise Medicare premiums for
upper-income seniors would create five new income brackets to
squeeze more revenue for the government from the top tiers of
retirees, the administration revealed Friday. First details of
the plan emerged after Health and Human Services Secretary
Kathleen Sebelius testified to Congress on the president's
budget .... Currently, single beneficiaries making more than
$85,000 a year and couples earning more than $170,000 pay higher
premiums. Obama's plan would raise the premiums themselves and
also freeze adjustments for inflation until 1 in 4 Medicare
recipients were paying the higher charges. Right now, the higher
monthly charges hit only about 1 in 20 Medicare recipients
The Associated Press:
Medicare Hike Could Also Hit Some In Middle Class Retired as a city worker, Sheila Pugach lives in a modest
home on a quiet street in Albuquerque, N.M., and drives an
18-year-old Subaru. Pugach doesn't see herself as upper-income
by any stretch, but President Barack Obama's budget would raise
her Medicare premiums and those of other comfortably retired
seniors, adding to a surcharge that already costs some 2 million
beneficiaries hundreds of dollars a year each. ... Obama's
budget would change Medicare's upper-income premiums in several
ways ... the plan would create five new income brackets to
squeeze more revenue from the top tiers of retirees (Alonso-Zaldivar,
President's Reduction in Social Security
COLA for Future Years Draws Fire
Social Security Advocate: Obama's Budget Is 'Bad Policy. Bad
Politics' Max Richtman stood in the bright sunshine steps from the
White House Tuesday, waiting for his turn on the bullhorn to
assail a policy of a president he usually agrees with. Leaders
of a half dozen liberal and progressive groups -- including
Richtman's National Committee to Preserve Social Security and
Medicare -- shouted to supporters that President Barack Obama's
call in his budget to reduce cost-of-living adjustments to
Social Security and other federal benefits amounted to economic
assault on senior citizens (Holman, 4/12).
Programs Derided By Republicans As Pejorative Entitlements President Barack Obama says Social Security and Medicare
fulfill "the guarantee of a secure retirement," providing
Americans benefits they have earned through a working lifetime
of contributions. Republican House Budget Committee Chairman
Paul Ryan looks at a broad array of so-called entitlement
programs and sees a corrosive effect (Lynch, 4/15).
>> This is part
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addition, our staff of reporters and correspondents file
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The president's plan would eliminate the two
percent payment cut Medicare providers began to feel earlier this month
as part of the automatic across-the-board cuts known as "sequestration."
But hospitals and other providers would see their reimbursements
reduced. Drug makers would be required to pay higher rebates for drugs
dispensed to Medicare's poorest beneficiaries.
Obama's budget plan is far from the last word.
House Republicans have
approved their own fiscal 2014 blueprint, as have
Senate Democrats. And
many of Obama's Medicare proposals have been included in prior budget
proposals that were not approved by Congress.
While Obama offered no surprises, "it's
nonetheless significant that the president is once again recommitting
himself to more than $4 trillion in deficit reduction built upon $400
billion in health program savings," said Eric Zimmerman, a partner at
the Washington office of McDermott Will & Emery where his clients
include hospitals, medical device makers and pharmaceutical companies.
What follows is a closer look at key provisions in
Obama's fiscal 2014 budget that would impact Medicare beneficiaries and
Higher Cost Sharing for New Medicare
Beneficiaries: In 2017, 2019 and 2021, new Medicare beneficiaries
would have to pay an additional $25 for their Part B deductible, for a
three-year total of $75 to be added on to the cost of the Part B
premium, which in 2013 is $147.
The administration says the change would
"strengthen program financing and encourage beneficiaries to seek
high-value health care services." Seniors advocates say it's an
additional cost to people already struggling on fixed incomes. In 2012,
nearly half of Medicare beneficiaries had annual incomes of below
Also starting in 2017, Obama's plan would require
new Medicare beneficiaries to pay $100 for five or more home health care
visits that are not preceded by a stay in the hospital or another
medical facility, such as a nursing home or a rehabilitation hospital.
Home health care is one of the few areas in Medicare that does not have
cost sharing, and its rapid growth in recent years has led panels like
Medicare Payment Advisory Commission
(MedPAC) to recommend beneficiary cost sharing.
Beginning in 2017, new beneficiaries who purchase
supplemental insurance, known as Medigap, with particularly low
cost-sharing requirements - such as "first-dollar" coverage - will face
a surcharge equivalent to approximately 15 percent of the average
Medigap premium. The thought is that more
generous Medigap plans
encourage overuse of services, but seniors rely on these generous plans
to shield them from unanticipated costs.
Joe Baker, president of the Medicare Rights Center,
said that Medicare proposals that "increase deductibles and co-pays, and
tax Medigap plans that ensure financial security, must be rejected."
Wealthier Beneficiaries Pay More: Current
law already requires individual beneficiaries whose incomes are $85,000
and above ($170,000 and above for couples) to pay a larger share
of Medicare Part B (outpatient services like doctor visits and
laboratory services) and Part D (prescription drugs) premisums. While
most beneficiaries pay 25 percent of their Part B premiums,
higher-income beneficiaries pay between 35 to 80 percent, depending on
Obama's plan would increase the lowest
income-related premium to 40 percent and cap it at 90 percent. His plan
would also maintain the current income thresholds until a quarter of
Part B and Part D beneficiaries are paying the higher income-related
In a 2012 analysis, the Kaiser Family Foundation
found that if the proposal to have a quarter of all beneficiaries pay
the higher premiums were implemented last year, beneficiaries with
incomes at or above $47,000 for individuals and $94,000 for couples
would be paying higher income-related Medicare premiums. (KHN in an
editorially independent program of the Foundation.)
The Obama administration says the proposal would
help improve Medicare's financial stability by reducing how much the
government spends on Medicare for beneficiaries who can afford to pay
more. But the Center for Medicare Advocacy fears asking higher income
people to pay a greater share of premiums "might lead to more people
choosing not to participate in Medicare. Fewer participants in
[Medicare] B and D would result in increased costs for the remaining
Doughnut Hole Closing Faster, Higher Drug
Rebates for Low-Income Beneficiaries: Obama's budget plan would
close by 2015 -- instead of 2020 as mandated by the health law -- the
"doughnut hole," that gap in Medicare prescription drug coverage where
seniors pay the full cost of prescriptions until they hit a catastrophic
cap. This acceleration would be financed by increasing the current 50
percent discount that the drug makers give to beneficiaries in the
"doughnut hole" to 75 percent starting in 2015. Beneficiaries would be
responsible for the remaining 25 percent of drug costs. Drug makers
oppose raising the discount amount.
The president's proposal also alters drug costs for
the nine million low-income Medicare beneficiaries who qualify for both
Medicare and Medicaid. These people, known as "dual eligibles," used to
get their drug coverage from Medicaid, the shared federal-state health
insurance program for the poor and disabled. And drug makers returned
back to Medicaid in the form of rebates part of the cost of drugs for
those beneficiaries, just they do now for current Medicaid
media reports say focus of White House is to strike a ‘Grand Bargain’
with Republicans who want to change Medicare into a voucher-style
system; Medicare proposal has one revenue item - higher premiums
for couples making more than $170,000 a year - April 11, 2013
As part of the creation of the Medicare Part D
prescription drug program, the drug coverage for "duals" shifted to
Medicare. But the rebates that Medicare Part D plans negotiate are not
as generous as those that drug makers previously paid to Medicaid, the
administration says. Part D plans also pay higher prices for drugs than
Medicaid does. The administration's proposal would require drug makers
to pay the difference between rebate levels they now provide to Part D
plans and the Medicaid rebate levels.
In a statement the Pharmaceutical Research and
Manufacturers of America, said the rebate proposal would increase
beneficiary premiums and copays.
Provider Cuts: Hospitals are none too happy
about Obama's plans to cut their Medicare payments for bad debt and
graduate medical education over the next decade. Medicare now pays
hospitals 65 percent of debts resulting from beneficiaries' non-payment
of deductibles and co-insurance after providers have made reasonable
efforts to collect the money.
Starting in 2014, the president's plan would
decrease that amount to 25 percent over three years, which the
administration says would be closer to private payers that typically pay
nothing on bad debt. The reductions would be in addition to those
hospitals and other providers face as part of the 2010 health law.
Beginning in 2014, the Obama plan also would cut by
10 percent "add-on" payments to teaching hospitals for graduate medical
education. In its budget document, the Department of Health and Human
Services cites a MedPAC finding that these additional payments
"significantly exceed the actual added patient care costs these
Hospital groups, however, maintain that the cuts to
bad debt reimbursement and medical education payments would weaken
hospitals' ability to provide care and to train physicians, nurses and
other health professionals.
Concerning payments to physicians, Obama's budget
assumes that Congress will once again pass a "doc fix" to avert a
scheduled 25 percent payment cut in 2014. Administration officials say
they want to work with Congress to find a long-range solution to avert
annual crisis over Medicare
What Obama Left Out: The president did not
propose an increase in the Medicare eligibility age from 65 to 67, a
savings mechanism favored by the GOP but assailed by some key Democrats.
Nor did Obama propose combining the premiums
beneficiaries pay for hospital care (Part A) and outpatient services
(Part B). Taking that step, which has the support of
Republican leaders like House
Majority Leader Eric Cantor, R-Va., would reduce Medicare
expenditures and lower beneficiaries' costs for hospital care. But
seniors who mostly use Part B and don't go to the hospital often would
Some analysts wonder if these and other Medicare
overhaul ideas could resurface as part of a larger discussion that
includes overhauling the tax code and entitlements. "This is the first
time in this presidency that I have seen a chance at a bipartisan budget
agreement, so I am cautiously optimistic about that," House Budget
Committee Chairman Paul Ryan, R-Wis.,
told National Public Radio.
House Ways and Means Committee Chairman Dave Camp,
R-Mich., has said his panel will hold a series of hearings to evaluate
ideas including those advanced by Obama and by his
fiscal overhaul commission.
"Given the bipartisan support for various reforms to these programs,
there is no reason we cannot roll up our sleeves and get this done,"
Camp said in a statement.
But the GOP and Obama have widely different
views. House Republicans' fiscal 2014 budget plan, for instance, would
eventually turn Medicare into a "premium support" plan that would give
beneficiaries a set amount for their coverage, which Democrats oppose.
Meanwhile, Obama has said he'll agree to entitlement changes only if
Republicans agreed to higher revenues, which they steadfastly oppose.
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