President Bush has brought ideas for shoring up Medicare and Social Security from earlier budget proposals back for his proposed fiscal year 2008 budget.

Fiscal year 2008 starts Oct. 1.

Bush today proposed increasing overall spending to $2.9 trillion in fiscal 2008, from $2.8 trillion in fiscal 2007.

“Discretionary, non-security funding” would increase only 1% between 2007 and 2008, to $376 billion, while “mandatory” federal spending on programs such as Medicare, Medicaid and Social Security would increase 4%, to a little more than $1.5 trillion.

Bush has proposed trying to hold down spending on Medicare, which is set to spend $386 billion in 2008, by:

- Cutting Medicare provider payments automatically in 2008 if Medicare gets more than 45% of its funding from general revenue. Congress enacted a law in 2003 that requires the president to take action in 2008 if Medicare gets more than 45% of its funding from general revenue. The Bush administration also included an automatic provider payment reduction mechanism in its fiscal 2007 budget proposal

- Increasing premiums for Medicare Part B, the program that covers the cost of doctors’ services and outpatient hospital care.

- Increasing premiums for the new Medicare Part D prescription drug benefit.

- Eliminating annual inflation indexing of Medicare income thresholds, so that the rating systems that now apply to the highest income beneficiaries will apply to more beneficiaries.

The budget proposal also would:

- Try to replace the current unlimited deduction for employer-sponsored health coverage with a new, limited exclusion for all insured individuals

- Cut subsidies for the “high risk pools” that help insure people with health problems to $0, from $77 million in fiscal 2006.

- Hold funding for partnerships for long term care steady at $3 million.

- Cut fiscal 2008 funding for the State Children’s Health Insurance Program 4%, to $5.4 billion. Over the next 5 years, the budget would allot only half of what some SCHIP supporters say the program needs to keep the current number of children, parents and low-income adults in the program. Administration officials say they are proposing the cuts because they believe the program should return to its original focus on low-income children rather than seeking to extend coverage to moderate-income children and some low-income adults.

- Cut funding for the long term care ombudsmen program to $14 million in fiscal 2008, from $15 million in fiscal 2006 and fiscal 2007.

- Revive earlier Bush administration proposals to create private Social Security accounts.

Early reactions to the Medicare and Social Security proposals have focused mainly on the proposal to cut payments to Medicare providers automatically if the program draws too heavily on the general fund.

Rep. Jim McCrery, R-La., a member of the House Ways and Means health subcommittee who has worked for years on Medicare reform proposals, has praised the president’s Medicare budget proposals.

“I do not believe this proposal goes far enough in terms of the fundamental reforms we need, but it should start the conversation,” McCrery says. “Entitlement programs are not just an elephant in the room, they are a pachyderm lumbering towards us at full speed.”

Cori Uccelo, a senior fellow at the American Academy of Actuaries, Washington, also is welcoming the Bush proposals as “conversation starters.”

“Public policy makers must address Medicare’s financial problems and rising health care costs,” Uccelo says. “It is important the president recognizes Medicare’s financial challenges, but, with the program’s long-term solvency and sustainability in jeopardy, there remains a need for broad reform.”

Democrats are criticizing the Bush budget.

Rep. Pete Stark, D-Calif., chairman of the House Ways and Means health subcommittee, says the “divisive Bush budget is an exercise in make-believe intended to incite partisanship, not invite policymaking.”

If the administration wants to cut Medicare spending, it should start by cutting support for private Medicare managed care plans, Stark says.

Over in the Senate, Sen. Max Baucus, D-Mont., chairman of the Senate Finance Committee, also says payments to insurers participating in the Medicare Advantage managed care program should be ”on the table” for potential spending cuts.

Links to budget documents are on the Web at Document Link