The plan would also make some changes that directly affect what beneficiaries pay for the program. Beginning in 2017, the administration proposes to increase income-related premiums in Medicare Part B and Part D by 15%. About 25% of beneficiaries would be subject to the higher premiums. That would save about $20 billion over 10 years.
Under the Medicaid program, the president’s proposal seeks to save about $66 billion over 10 years. The administration estimated that it would save about $26 billion by limiting the ability of states to use provider taxes as a way to boost their federal matching payments. Specifically, the administration proposes lowering the Medicaid provider tax threshold from 6% in 2014 to 3.5% in 2017.
The Obama administration is also seeking to replace the Federal Medical Assistance Percentage and enhanced FMAP formulas used by the federal government in determining state Medicaid matching rates. Starting in 2017, the federal government would use a single matching rate specific to each state that would automatically increase if a recession caused enrollment to rise. The proposal is expected to save $14.9 billion over 10 years.
The administration also plans to save about $110 million over the next decade by cracking down on waste, fraud, and abuse in the Medicaid program.
American Medical Association President Dr. Peter W. Carmel commended the administration for "recognizing that any serious plan to address the deficit must include a repeal of the Medicare sustainable growth rate formula (SGR)."
But "honest accounting of our nation’s debt should not assume $300 billion in Medicare physician cuts, which Congress has rejected repeatedly because of the significant, detrimental impact those cuts would have on patients’ access to care," Dr. Carmel cautioned in a statement. "Many bipartisan deficit reduction plans have called for repealing this flawed formula while achieving substantial deficit reduction totals."