Obama Budget Proposal Targets Medicare Savings

As expected, President Obama’s budget proposal abandoned a call to change the way annual increases in Social Security benefits are calculated and continued a call for Medicare savings.

BUDGETAnnounced March 4, his plan, which goes next to Congress, would hit some Medicare providers, drug companies and higher-income Medicare beneficiaries as part of $402 billion in estimated health care savings over the next decade.

Among the proposed changes for beneficiaries:

  • Charge higher premiums for Parts B and D for higher-income people starting in 2018. Eventually, a quarter of beneficiaries would pay the higher premiums.
  • Increase Part B deductibles for new beneficiaries starting in 2018.
  • Raise the copays for brand-name drugs for lower-income seniors.


The budget also offers some ideas for reducing prescription drug costs, such as closing Medicare Part D coverage’s so-called doughnut hole faster for brand-name drugs, and requiring drugmakers to offer more rebates for low-income beneficiaries.

>> Related: Obama budget proposal would expand tax credits

AARP took issue with the proposal to increase cost-sharing for some Medicare beneficiaries.

“It’s important to emphasize the need for health care cost containment, not simply cost shifting, said Nancy A. LeaMond, AARP executive vice president, in a statement. “We know that brand name prescription drugs are one of the key drivers of escalating health care costs, so we appreciate the President’s inclusion of proposals to find savings in lower drug costs. But instead of shifting additional costs onto Medicare beneficiaries, we must look for savings throughout the entire health care system, as the rising cost of health care threatens people of all ages.

Max Richtman, head of the National Committee to Protect Social Security and Medicare, said the proposal to broaden means testing in Medicare would reach people with incomes as low as $45,600. “These are not ‘wealthy’ seniors by any measure, he said.

Ariel Gonzalez, AARP director of federal health and family, said higher premiums for higher-income beneficiaries could drive them away from Medicare, resulting in higher premiums for all. AARP also opposes reduced access to brand-name drugs for low-income patients through the higher copays, Gonzalez says.

Many advocates for older Americans said one of the best parts of the budget is what’s not in it — a plan to change Social Security annual cost-of-living adjustments. Obama’s budget proposal last year included this so-called chained consumer price index, which would have meant smaller inflation raises for Social Security beneficiaries.

“We also appreciate that the President recognizes in this budget proposal that Social Security does not contribute to the deficit and that benefits should not be cut in order to reduce the deficit, LeaMond said. “As the President and Congress work to address the challenges facing our nation, AARP believes it is time for responsible solutions that improve the retirement and overall economic security of current and future generations.