On February 2, 2015, President Barack Obama delivered his Fiscal Year 2016 budget proposal to Congress. The $4.066 trillion budget contains a sequestration replacement plan that would allow a 7%, or $75 billion, increase in defense and domestic discretionary spending.

In his weekly address on January 31, 2015, President Obama described his budget as a “path towards a thriving middle class” and explained that his plan will also support new investments in research, infrastructure, manufacturing, and expanded access to faster internet and new markets. As he announced his budget on February 2, President Obama stated “I want to work with Congress to replace mindless austerity with smart investments.”

The President’s budget aims to eliminate the sequestration process, which was put into place under the Budget Control Act of 2011 and allowed an increase in the debt ceiling in exchange for $2.4 trillion in deficit reduction over the following 10 years. Under the President’s budget, replacing sequestration would be paid for by raising almost $640 billion from reducing various tax benefits for high-income households, and implementing the “Buffet rule” which would require that millionaires pay at least 30% of their income in taxes after considering charitable contributions.

President Obama’s proposal also includes reforms to Medicare and Medicaid that are projected to save more than $400 billion over 10 years. These reforms include payment reforms for post-acute care providers, allowing the Secretary of HHS to negotiate drug prices for certain Part D drugs, extending Medicaid drug rebates to Part D coverage for low-income beneficiaries, reducing Medicare coverage of bad debt, and reducing the federal subsidy for higher income Medicare beneficiaries’ premiums. The budget proposal also includes additional resources to support the Global Health Security Agenda, and increased funding for domestic preparedness efforts to more effectively respond to potential future disease outbreaks, including $522 million to develop next generation countermeasures, $646 million to Bioshield to continue acquiring new medical countermeasures, and $110 million to respond to unanticipated public health emergencies.

The Office of Management and Budget fact sheet is available here, and the White House has posted the budget here. A transcript of President Obama’s January 31, 2015 address is available here.

Reporters, Lauren S. Gennett, Atlanta, + 1 404 572 3592, lgennett@kslaw.com, and Allison F. Kassir, Washington, D.C., + 1 202 626 5600, akassir@kslaw.com.

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