Biden’s FY24 Budget Aims to Extend Medicare Trust Fund Solvency
The budget proposes raising the Medicare tax rate on high incomes and increasing savings from prescription drug reforms to help extend the Medicare Trust Fund solvency to the 2050s.
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- President Biden has announced plans to extend the solvency of the Medicare Trust Fund by at least 25 years in the fiscal year (FY) 2024 budget.
The budget includes proposals to stretch the solvency of Medicare’s Hospital Insurance (HI) Trust Fund into the 2050s while lowering costs for Medicare beneficiaries and avoiding benefit cuts. The most recent Medicare Trustees Report projected that the HI Trust Fund would run out in 2028.
The President’s budget aims to extend Medicare’s solvency through a series of actions. First, it proposes modestly increasing the Medicare tax rate on income above $400,000 from 3.8 percent to 5 percent.
“Since Medicare was passed, income and wealth inequality in the United States have increased dramatically,” the fact sheet stated. “By asking those with the highest incomes to contribute modestly more, we can keep the Medicare program strong for decades to come.”
The budget also proposes to close the loopholes in existing Medicare taxes. While people with high incomes are supposed to pay the 3.8 percent Medicare tax on all of their income, some business owners have avoided this by claiming parts of their income are neither earned nor investment income.
The budget proposal would work to eliminate this loophole and dedicate the revenue from the Medicare net investment income tax to the HI Trust Fund.
The President’s proposal also included a plan to direct savings from prescription drug reforms to the HI Trust Fund.
The Inflation Reduction Act allows Medicare to negotiate prices for high-cost drugs. The budget helps further this legislation by allowing Medicare to negotiate prices for more drugs and begin negotiations sooner after they launch. In addition, it advances the requirement that drug companies pay rebates to Medicare when they increase costs faster than inflation by extending the rule to commercial health insurance.
The savings earned from these reforms, which are estimated to be $200 billion over 10 years, will be credited to the HI Trust Fund, according to the budget proposal.
The budget aims to extend the Trust Fund’s solvency while simultaneously lowering costs for Medicare beneficiaries.
The expanded regulations for drug price negotiations will reduce beneficiaries’ out-of-pocket costs by billions of dollars, according to the fact sheet. Additionally, the budget proposed capping Medicare Part D cost-sharing on certain generic drugs, including those used to treat chronic conditions, to $2 per prescription per month.
The President’s budget proposed eliminating cost-sharing for three mental or behavioral health visits per year and requiring parity between physical and mental health coverage in Medicare. It also proposed requiring coverage and payment for new types of Medicare providers, including peer support workers and certification addiction counselors.
The budget includes coverage and payment for evidence-based digital applications and platforms that facilitate mental healthcare delivery as well.
Physicians faced modest cuts to Medicare reimbursement in 2023. Initially, the CMS Physician Fee Schedule (PFS) included a 4.5 percent payment reduction. However, Congress’ year-end spending package reduced the cut to just 2 percent.
