In his budget for fiscal year 2024, which will be released Thursday, President Joe Biden is proposing new initiatives to ensure Medicare's solvency over the next 25 years, including increasing taxes on high-earning Americans and strengthening recent prescription drug pricing reforms.

What's included in Biden's proposed budget

According to the most recent Medicare Trustees Report, Medicare's hospital trust fund will be insolvent by 2028 unless congressional action occurs.

In his proposed budget, Biden outlines new initiatives that aim to extend Medicare's solvency by at least 25 years into the 2050s.

One initiative targets individuals who earn more than $400,000 a year, increasing their net investment income tax from 3.8% to 5%. It would also apply to both "earned and unearned income" above $400,000, according to a White House fact sheet.

"Since Medicare was passed, income and wealth inequality in the United States have increased dramatically. By asking those with the highest incomes to contribute modestly more, we can keep the Medicare program strong for decades to come," the White House said.

According to the White House, this increased tax rate could lead to around $700 billion in net new revenue over the next decade. Separately, the Urban-Brookings Tax Policy Center and the Committee for a Responsible Federal Budget estimate that the change could lead to between $350 billion and $600 billion in new revenue.

In addition to this increased tax rate, Biden proposes strengthening prescription drug reforms from the Inflation Reduction Act (IRA). He proposes expanding the government's ability to negotiate the prices of prescription drugs to include more medications and extend the requirement that manufacturers pay rebates if their drug prices increase faster than inflation to the commercial market.

The funds from these changes would go directly into the Medicare trust fund and could save the federal government an additional $200 billion over a decade, according to the White House.

Biden also proposed several initiatives to lower healthcare costs for Medicare beneficiaries, such as capping cost-sharing for certain generic medications at $2 per prescription per month and "eliminat[ing] cost-sharing for three mental health or other behavioral health visits a year."

Why Biden is proposing these changes

In an op-ed for the New York Times, Biden explained that Medicare is not just "a government program" but also "a rock-solid guarantee that Americans have counted on to be there for them when they retire."

"The budget I am releasing this week will make the Medicare trust fund solvent beyond 2050 without cutting a penny in benefits," Biden writes. "In fact, we can get better value, making sure Americans receive better care for the money they pay into Medicare."

According to Biden, asking the wealthiest Americans to "pay just a little bit more of their fair share" through a "modest" increase in their tax rates will ultimately "strengthen Medicare for everyone over the long term." Strengthening prescription drug reforms in the IRA will also lead to lower drug prices and "makes a lot more sense than cutting benefits."

Overall, Biden said the new initiatives in his proposed budget will extend the Medicare trust fund for another 25 years or more and that they are "common-sense changes that an overwhelming majority of Americans support."

However, the Times reports that it is unlikely that any of these proposed initiatives will make it through the Republican-controlled House, since many oppose both tax increases and efforts to reduce prescription drug prices through regulations.

Budget-focused organizations in Washington, D.C., have also had mixed reactions to the President's proposed budget.

The Committee for a Responsible Federal Budget said that it would "strongly support" the proposals, but said it had reservations about moving revenue from the government's general fund to Medicare's trust fund. The National Taxpayers Union, which supports less federal spending and lower taxes, said the proposals were "a gimmick, not a real reform." (Biden, New York Times, 3/7; Tankersley/Sanger-Katz, New York Times, 3/7; Burns, The Hill, 3/7; Shivaram, NPR, 3/7; Renshaw, Reuters, 3/7; White House fact sheet, 3/7)