President Announces Budget Alternative That Would Preserve Medicare

Yesterday, President Obama announced his administration’s framework for addressing the deficit as an alternative to the current proposal under consideration in the House of Representatives proposed by Budget Committee Chairman Representative Paul Ryan, which would end the current Medicare program replacing it with a voucher system. Rather than saving the government money by shifting large out of pocket costs to Medicare consumers as is the case under voucher proposals, the Administration’s plan attempts to slow the growth of Medicare spending, addressing the root cause of the high costs in Medicare − the growth in health care sector spending overall.

Under the framework outlined by the President, Medicare savings would be achieved through strengthening some of the changes to payment and delivery system reforms included in the Affordable Care Act (ACA). For example, the President’s plan increases the authority of the Independent Payment Advisory Board (IPAB), the body designed to impose policies to slow the growth of Medicare spending, such as reductions in provider payment rates. However, the IPAB is prohibited from proposing programs that would increase cost-sharing for Medicare consumers. Under current law IPAB action is triggered if Medicare spending exceeds GDP plus one percent. Under the proposal released yesterday the trigger would be set at GDP plus 0.5 percent. Also, the framework re info rces many of the delivery system reforms proposed in the ACA that aim to create greater efficiency in health care through improved quality, such as lowering the rate of avoidable hospital readmissions.

In addition, the plan would quicken the pace at which generic drugs enter the market as well as require rebates to Medicare from drug manufacturers for drugs provided under the Medicare Prescription Drug benefit. Moreover, the proposal fully pays for a permanent fix to the Sustainable Growth Rate ( SGR ) provider payment formula.

Take action to prevent cuts to Medicare and Medicaid.


Read Medicare Rights Center President Joe Baker’s statement on the President’s framework.


Read the fact sheet on President Obama’s framework for the budget.


Watch the President’s speech on the framework for the budget.