Obama Releases 2013 Budget Proposal

On February 13, President Obama released his budget, which outlines significant new health care investments, some changes in Medicare and Medicaid, and investments in jobs programs.

The Big Picture

President Obama’s fiscal year 2013 budget plan (4.5 MB pdf) would cut taxes by $4.1 trillion over 10 years. Most of this revenue loss results from his proposal to make permanent 79 percent of the Bush tax cuts, which would reduce revenues by $3.5 trillion over a decade. Counting added interest on the national debt, the President’s proposed Bush tax cut extensions would cost $4.2 trillion over a decade.

The budget plan includes some proposals that, together, would raise $1.1 trillion over a decade. The most prominent of these include scaling back tax subsidies for the wealthy, starting to crack down on offshore tax avoidance by U.S. corporations, asking the “too-big-to-fail” banks to pay for their government guarantee, and ending tax subsidies to oil and gas companies.

Health and Human Services

Obama’s budget for 2013 calls for $76.4 billion — $300 million more than last year — for the U.S. Department of Health and Human Services (HHS). Medicare and Medicaid spending could be reduced by $364 billion over 10 years, with most of these savings achieved by weeding out wasteful spending rather than shifting costs to beneficiaries.

Highlights include:

• Medicaid would be cut by more than $50 billion — including $17 billion over 10 years by establishing a new, and already controversial, “blended rate” for Medicaid and CHIP in 2017 and $21 billion by reducing provider taxes and increasing Medicare cost-sharing requirements (which would increase state Medicaid costs since Medicaid pays the Medicare cost-sharing requirements for the “dually eligible”).
• Medicare would see $267 billion in cuts, many of which had been proposed earlier, including $35 billion from reduced provider “bad debt” payments; $9 billion from graduate medical education payment cuts; $56 billion gleaned through payment changes; and $155 billion from requiring drug manufacturers to provide Medicaid rebates for all low-income beneficiaries.
• Funding would increase for both the implementation of health care reform’s state-based insurance exchanges and an acceleration of “state innovation waivers,” which would allow states to implement alternatives to the law in 2014 rather than 2017. The Affordable Care Act‘s Prevention and Public Health Fund would be cut by $4 billion over 10 years.
• $3.1 billion would be invested to support the creation of 25 new health centers nationwide and funding for 2,800 new primary care providers.
• The Administration on Aging budget request is $7.1 million over the total amount enacted for FY12. It includes $8 million for Adult Protective Services, including $7 million for demonstration projects; $10 million in mandatory funding for Aging and Disability Resource Centers (ADRCs); and an additional $9.5 million for Alzheimer’s Disease Supportive Services.

Other Key Provisions

The Obama budget calls for $350 billion in job growth measures, spread mostly between FY 2012 and FY 2015. These include:

• $50 billion in road and transit maintenance and upgrading;
• $30 billion to modernize at least 35,000 schools;
• $30 billion to hire and retain teachers and first responders under Project Rebuild, which will hire workers in low-income communities (to “re-purpose” residential and commercial properties); and
• a new small business tax credit for companies that hire new workers.

Job training and placement funding increases for low-income youth and adults are urgently needed. Thus, the budget supplements existing Workforce Investment Act funds, with a new initiative called Pathways Back to Work. This is a $12.5 billion project that will provide subsidized jobs and training for low-income, low-skilled workers, and summer and year-round jobs and training for youth.

Information on the Medicare/Medicaid and Older Americans Act sections is on the HHS website. (See the HHS Budget in Brief for the Medicare and Medicaid section, which begins on page 48.)

An overview of the budget is available on the Office of Management and Budget website.

– by Carol Regan, PHI Government Affairs Director