The President’s proposed budget, released February 2, includes a number of provisions that will impact the health care industry. Most prominently, the budget would seek savings through modifications to Medicare prescription drug coverage, extend the Children’s Health Insurance Program (CHIP), and continue to push Medicare delivery system reforms.

For the third consecutive year, the Administration’s budget proposes requiring drug manufacturers to provide rebates, at least at Medicaid rebate levels, on behalf of Medicare Part D low-income subsidy enrollees. This part of the proposal is projected to save over $116 billion by fiscal year 2025. The budget proposal would also increase income-related premiums under Medicare Parts B and D.

Federal CHIP funding is set to expire in September. The proposed budget would extend funding for state CHIP programs through fiscal year 2019, at an additional total cost of under $12 billion over the course of the extension.

The Medicare Sustainable Growth Rate (SGR) has been the subject of bipartisan reform efforts, particularly in 2014. The proposed budget would eliminate the SGR and replace it by allowing physicians a choice between performance-based payments or participation in delivery models that account for both costs and quality. The budget also proposes significant cost savings, totaling over $150 billion by fiscal year 2025, by reducing Medicare payments to other providers, excluding certain services, and bundling post-acute care payments.

Joe Records is an associate at Crowell & Moring LLP. He is admitted in Maryland only.