While the federal Medicaid program is reportedly safe from cuts in President Obama’s forthcoming fiscal year 2014 budget, the same is not true for Medicare and Social Security, writes the New York Times.
Next week, the president is expected to formally propose cuts to Social Security and Medicare in his annual budget, according to administration officials, in what the N.Y. Times calls a “significant shift in fiscal strategy.”
The White House budget plan is scheduled to be sent to Capitol Hill on Wednesday. In previous years, the president’s budgets have essentially been declared “dead on arrival” by Republicans, but this plan contains compromises, says the Times.
In addition to containing some tax increases, the budget also proposes a new inflation formula for calculating Social Security benefits, called chained CPI, although there will be some financial protections for low-income and very elderly beneficiaries, says the Times citing administration officials.
Using the chained CPI formula—said to more accurately measure inflation compared to how it’s currently calculated—will reduce the cost of living adjustment (COLA) payments for Social Security benefits and could eventually reduce spending by $216 billion in a 10-year time frame, along with generating $124 billion in revenue, according to an estimate from the Congressional Budget Office. That translates to a total deficit reduction of $340 billion, not counting interest savings.
The Medicare program will also likely see more cuts, amounting to $400 billion in savings. Those savings will mostly come from reductions in payments to healthcare providers, according to the Times, which could potentially affect skilled nursing providers. The president is expected to also propose tying Medicare coverage costs to income.
Under the president’s budget plan, projected annual deficits would be reduced by $1.8 trillion in the next 10 years, replacing the sequester’s $1.2 trillion in deficit reduction.
Written by Alyssa Gerace