This article is part of our President’s FY2024 Budget Request Coverage. Visit our Rolling Analysis Page for more.

The budget proposes reforms that it estimates will extend the programs full solvency 25 years. Under current law, Medicare will not be able to pay full benefits in the Hospital Insurance (HI), or Part A, program by the end of the decade. This is being caused by both increased medical costs as well as Baby Boomer generation retirements, meaning there are fewer people paying into the system and more taking benefits out of the system.

The proposal includes an increase in Medicare taxes on those making more than $400,000 a year in earned and unearned income. In addition, it calls for an increase in the number of drugs Medicare can negotiate drug pricing for each year.  It does this by directing the Secretary to concentrate negotiation on a set number of the most expensive drugs each year and by shortening the negotiation grace period (where Medicare is prohibited from negotiating cheaper prices) for drugs newly introduced to the market. In addition, the proposal redirects revenues from the existing Net Investment Income Tax into the Medicare trust fund. This last proposal just redirects revenue from the general treasury into Medicare which will help solvency of the program but won’t reduce deficits.

It is also notable that the budget contains no proposals for Social Security solvency. Trustees estimate that in ten years time, Social Security will be able to pay 75% of full benefits for many of the same reasons that are challenging Medicare. It is perhaps that they are prioritizing tackling one program rather than fighting a two-front entitlement budget battle. While this position could be criticized it may also indicate that the Biden administration is serious about Medicare reform and see it as the more imminent challenge, which it is.