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Medicare and the Federal Budget: Comparison of Medicare Provisions in Recent Federal Debt and Deficit Reduction Proposals

Introduction

Medicare savings provisions are often included among broader proposals to reduce the federal deficit and debt.  Over the long-term, Medicare faces financial challenges due to the aging of the population and rising healthcare costs (that affect all payers);1 however, over the next decade, Medicare spending, is projected to grow slower than private insurance on a per capita basis, and at about the same rate as the economy.  Total Medicare spending increased by 3 percent in 2012 and is projected to increase by 4 percent in 2013, the lowest rates of growth since 2000.2  Nonetheless, ongoing efforts to constrain the growth in Medicare spending are often viewed as important components of deficit and debt reduction proposals.
Since 2010, policymakers have enacted legislation that includes reductions in Medicare spending and have also made several attempts to constrain the federal debt.  Medicare savings provisions were included in the Affordable Care Act (ACA) of 2010, the Budget Control Act of 2011, the American Taxpayer Relief Act of 2012, as well as other major efforts to reduce the federal deficit and debt.  This brief provides a side-by-side comparison of Medicare provisions included in broad-based deficit- and debt-reduction packages put forward by the President and the Chairmen of the House and Senate Budget Committees:

»         President Obama’s Budget for Fiscal Year 2014, released by the Office of Management and Budget on April 10, 2013;

»         The Senate Concurrent Budget Resolution for Fiscal Year 2014, S.Con.Res. 8, passed by the Senate on March 23, 2013; and

»         The House Concurrent Budget Resolution for Fiscal Year 2014, H.Con.Res. 25, passed by the House of Representatives on March 21, 2013.

The brief also summarizes the Continuing Appropriations Resolution, 2014 (H.J. Res. 59), which was passed by both houses and signed into law by President Obama on December 26, 2013.  The law is a combination of the “Bipartisan Budget Act of 2013” and the “Pathway for SGR Reform Act of 2013” and is projected to lower the federal debt by approximately $23 billion between 2014 and 2023.3 The law postpones until April 1, 2014 a reduction in Medicare payments to physicians that was scheduled to occur on January 1, 2014, and replaces it with a 0.5 percent payment increase between January 1 and April 1, resulting in projected increases in Medicare spending of about $7.3 billion between 2014 and 2023.  It also extends sequestration for two years (with modifications to the sequestration of Medicare spending in FY2023), reduces Medicare payments for some stays in long-term care hospitals, and extends several Medicare programs and payments to providers.  In total, the law is projected to increase Medicare spending by approximately $3.5 billion between 2014 and 2023.4

In addition, this brief summarizes Medicare provisions included in other deficit- and debt- reduction proposals released since January 2012 (Appendix A) and describes recent activities that pertain to Medicare and the federal budget, including Medicare’s role in the ACA, the fiscal cliff and sequestration (Appendix B).

Side-by-Side table