The President’s FY 2024 budget will lay out President Biden’s plan to invest in America, lower costs for families, protect and strengthen Social Security and Medicare, and reduce the deficit.
Millions of Americans work their entire lives, pay into Medicare every day they work, and want to know they can count on Medicare to be there for them when they turn 65. The president’s budget extends the life of the Medicare trust fund by at least 25 years. It achieves these gains without benefit cuts—in fact, while reducing costs for Medicare beneficiaries.
Expanding Medicare solvency
Proposals in the president’s budget would extend the solvency of Medicare’s Hospital Insurance (HI) Trust Fund by at least 25 years, the Medicare Office of the Chief Actuary predicts. While the latest Medicare Trustees report projected that the HI trust fund would be insolvent in 2028, the president’s budget would extend solvency through at least 2050.
The budget extends the life of Medicare by:
- A modest increase in the Medicare tax rate on income over $400,000. The budget proposes to increase the Medicare tax rate on earned and unearned income above $400,000 from 3.8 percent to 5 percent. Since the passage of Medicare, income and wealth inequality in the United States has increased dramatically. By asking the highest earners to give modestly more, we can keep the Medicare program strong for decades to come.
- Closing existing Medicare tax loopholes and dedicating the Medicare net investment income tax to the HI Trust Fund. High earners are supposed to pay a 3.8 percent Medicare tax on their entire income, but some high-paid professionals and other wealthy business owners have been able to shield some of their income from taxes by claiming it’s not earned income, nor investment income. The budget would ensure that Medicare taxes apply to incomes above $400,000 a year, without loopholes. It would also dedicate revenues from the Medicare net investment income tax to the HI trust fund, as originally intended.
- Crediting Prescription Drug Reform Savings to the HI Trust Fund. Building on the Inflationary Reduction Act (IRA), which gave Medicare the power to negotiate prices for high-cost drugs, the budget strengthens this newly created negotiating power by allowing Medicare to negotiate prices for more drugs and bringing drugs into negotiations sooner , after they start up. It also strengthens the requirement that IRA drug companies pay rebates to Medicare when they raise prices faster than inflation, extending that rule to commercial health insurance. The budget credits the savings from these additional prescription drug reforms, totaling $200 billion over 10 years, to the HI Trust Fund.
Reducing costs for beneficiaries
The president’s budget not only extends the life of the Medicare trust fund without benefit cuts, but also cuts costs for beneficiaries in key areas.
- Lower out-of-pocket costs for drugs, negotiable. By lowering the prices of expensive drugs, expanding the Medicare drug negotiation budget will not only save the federal government money, but also reduce beneficiary out-of-pocket costs by billions of dollars.
- $2 cost sharing for generic drugs for chronic diseases. The budget proposes limiting Part D cost-sharing for some generic drugs, such as those used to treat chronic conditions such as hypertension and high cholesterol, to $2 per prescription per month.
- Reducing the cost of behavioral health care in Medicare. The budget eliminates cost sharing for three mental health or other behavioral health visits per year and requires parity between physical health and mental health coverage in Medicare. It also requires coverage and payment for new types of Medicare providers, such as peer support workers and certified addiction counselors, as well as evidence-based digital apps and platforms that facilitate the delivery of mental health services while removing unnecessary restrictions on beneficiaries’ access to psychiatric hospitals.