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From Health Law Daily, March 13, 2015

CBO estimates that President Obama’s budget saves through Medicare

By Bryant Storm, J.D.

An analysis of President Obama’s 2016 budget, which examined how the President’s spending proposals would impact current deficits and longer term debt, was issued by the Congressional Budget Office (CBO). Among the President’s proposals with the largest budgetary consequences are the proposed reductions in Medicare spending, which the CBO estimates will reduce overall outlays over the 2016 to 2025 period by $240 billion.

Debt. The CBO report indicates that under current estimates, the federal deficit will be $486 billion in 2015. Additionally, the CBO estimates that, under the assumption that current tax and spending laws remain in effect, the cumulative deficit over the 2016 through 2025 period will reach $7.2 trillion. It is against these benchmarks that the effects of the President’s budget were measured. The White House announced that the President’s 2016 budget “achieves about $1.8 trillion in deficit reduction, primarily from reforms to health programs, our tax code, and immigration” (see Obama’s FY 2016 proposed budget gives to HHS, takes from hospitals, February 3, 2015).

Medicare. Changes to Medicare laws would both increase and decrease spending. The CBO estimates that “the President’s proposal to increase the rates Medicare pays to physicians by 0.5 percent and to replace the current physician payment schedule” will increase mandatory spending over current CBO estimates for 2016 to 2025 by $168 billion. However, the majority of the President’s Medicare spending proposals would decrease overall Medicare spending. Those cost saving measures include plans to: reduce payments to certain health care providers; increase cost-sharing amounts for some beneficiaries; require manufacturers to pay rebates on prescription drugs dispensed to low-income beneficiaries who are enrolled in Part D of Medicare; reduce payment rates for certain biological drugs covered under Part B; and enhance Medicare’s ability to reduce waste, fraud, and abuse. Combined, those alternative measures would reduce Medicare spending by a total of $408 billion over the next 10 years.

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