House Budget Committee Chairman Paul Ryan released his fiscal year 2013 (FY2013) budget proposal on March 19, which covers federal spending proposals for federal appropriations and includes reforms to entitlement programs like Medicare, Medicaid and Social Security beginning Oct. 2, 2012 through Sept. 30, 2013.

Specifically, the House-passed budget caps discretionary spending $19 billion below the previously agreed-to levels under last year’s Budget Control Act; calls for the repeal of health system reform, including the Independent Payment Advisory Board (IPAB); assumes a 10-year fix for physician payments under Medicare (SGR); and cancels the upcoming spending cuts scheduled to begin January 2013 due to the failure of Congress in reaching a deficit-reduction agreement last November, under which physicians could face up to a 2 percent cut.

Summary of major provisions

Medicare reforms

• Change coverage for future Medicare beneficiaries (beginning with 2023 retirees) by shifting to a “premium-support” payment with a list of guaranteed coverage options from which recipients can choose and Medicare would then provide a lump sum payment to subsidize the cost of the plan. The premium-support model would operate similar to the Medicare prescription drug benefit program in that an individual’s payment is adjusted based on income, with additional subsidies for lower-income or sicker beneficiaries.
• Medical liability reform by capping non-economic damages will ensure costs from frivolous litigation are not passed on to consumers.
• Eliminates the Independent Payment Advisory Board (IPAB).
• Assumes a 10-year fix to prevent Medicare physician payment cuts, although no specific policy recommendations are made.

Sequester

• Cancels the automatic spending cuts scheduled to occur in January 2013. Under the cuts to discretionary spending, physicians could face up to a 2 percent cut.
• To replace the sequester savings, House committees are directed to identify savings from mandatory spending programs totaling $261 billion over 10 years. The House committees are required to approve their spending recommendations by April 27.

• Converts the federal share of Medicaid spending into a block grant for states, indexed for inflation and population growth.
• Gives states more flexibility in coverage options for Medicaid population.