Medicare: FY2008 Budget Issues

Publication Date: February 2007

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Health

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Abstract:

Each February, the President submits a detailed budget request to Congress for the following federal fiscal year, along with projections for the five-year budget window. The budget informs Congress of the President's overall federal fiscal policy, based on proposed spending levels, revenues, and deficit (or surplus) levels. The budget request lays out the President's relative priorities for federal programs, such as how much should be spent on defense, education, health, and other federal programs. The President's budget may also include legislative proposals for spending and tax policy changes. While the President is not required to propose legislative changes for those parts of the budget that are governed by permanent law, such as Medicare benefits, these changes are generally included in the budget.

The President's 2008 budget includes Medicare legislative proposals with estimated savings of $4.3 billion in 2008 and $65.6 billion over the five-year budget window. The President's budget also includes one Medicare administrative proposal with estimated savings of $1 billion in 2008 and $10.2 billion over the five-year budget window, which brings the estimated savings from the total Medicare budget proposals to $5.3 billion in 2008 and $75.9 billion over the five-year budget window.

Proposals include savings in many of the Medicare payment updates. The President's budget also includes an automatic reduction to all Medicare payments if general revenue financing is projected to exceed 45% of total Medicare financing, under specific conditions. There are no savings from this automatic reduction proposal in the five-year budget window. The President's budget reflects the passage of the Tax Relief and Health Care Act of 2006 (P.L. 109-432). Therefore, the savings proposals included in the budget are based on changes to law after passage of the act. The current law descriptions provided in this report also reflect changes made by the act.

Each year, the Congressional Budget Office (CBO) conducts an independent analysis of the President's budget. This report will be updated when CBO releases its estimates of savings for the President's proposed Medicare legislation. It will also be updated to reflect further clarification and detailed information, as it become available, on the legislative proposals in the President's budget.