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Medicare in the 2020 Trump Budget

President Trump’s 2020 budget proposes nearly $600 billion in net Medicare spending reductions over ten years (see table). Most of the proposals would reduce payments to health care providers and not affect beneficiaries directly.

The proposed changes in the Medicare Part D drug benefit would reduce out-of-pocket costs for some beneficiaries, including those with the highest spending, while raising costs for others. The budget would limit beneficiaries’ annual out-of-pocket drug spending and eliminate cost sharing on generic drugs for recipients of Medicare’s low-income drug subsidy (LIS), which could improve LIS recipients’ access to care and promote medication adherence. At the same time, the budget would raise Part D premiums and charge more to beneficiaries whose drug spending is high but below the threshold at which catastrophic coverage kicks in.

The budget would establish a new payment system for post-acute care, reduce Medicare coverage of bad debts (deductible and coinsurance amounts that are uncollectible from Medicare beneficiaries), limit medical malpractice awards, extend through 2029 the 2 percent sequestration cut in Medicare under the 2011 Budget Control Act, and pay for all doctor and other outpatient services at the same rate regardless of whether they’re provided in a doctor’s office or other setting. Several of these proposals, such as site-neutral payments, are similar to recommendations from the Medicare Payment Advisory Commission.

In two cases — payments to hospitals for graduate medical education (GME) and for uncompensated care — the budget proposes to move spending from Medicare’s trust funds to new, smaller grant programs funded by general revenues. While the budget would reduce Medicare spending by $845 billion over ten years, the reductions amount to $592 billion after accounting for the proposed general revenue payments for GME and uncompensated care.

Medicare’s trustees project that its Hospital Insurance trust fund will be depleted in 2026 under current law, though incoming payroll taxes and other revenue could still pay 91 percent of Medicare hospital insurance costs that year. The President’s budget proposals would extend the depletion date by eight years, according to the Administration.

Savings From Medicare Proposals in President’s 2020 Budget, 2020-2029
Billions of Dollars
Prescription drug proposals -66
Pay hospital outpatient departments and hospital-owned physician offices at physician office rates (move toward site neutrality) -160
Reduce post-acute care payments -101
Promote site neutrality in payments for long-term care hospitals -10
Reduce Medicare coverage of bad debts -39
Modify payments to hospitals for uncompensated care -98
Reform graduate medical education payments -44
Expand durable medical equipment competitive bidding -8
Expand prior authorization in traditional Medicare -6
Reform medical liability -27
Extend mandatory sequestration -41
Interactions between proposals and other 7
Net Medicare savings -592
Less: General revenue payments for uncompensated care and graduate medical education 253
Gross Medicare savings -845

Note: The general revenue payments for graduate medical education are now allocated between Medicare and Medicaid in proportion to the gross savings in each program.

Source: Office of Management and Budget, Department of Health and Human Services