On February 3, 2003, President George W. Bush released his proposed budget for Federal fiscal year 2004, which begins on October 1, 2003. In his budget, the President refers to a soon-to-be released proposal to "modernize Medicare" and provide a prescription drug benefit for Medicare beneficiaries. While the details of this modernization proposal have not yet been released, GNYHA expects that the proposal will provide strong incentives for Medicare beneficiaries to join private health plans in order to receive new Medicare benefits, including prescription drug coverage. Such a proposal, if successful, would greatly reduce the number of beneficiaries in the traditional fee-for-service program, which would have a profound impact on provider payments. The President's Medicare proposal would cost an additional $400 billion over 10 years. This amount includes the cost of a prescription drug benefit; a new catastrophic benefit; a proposal to change the Medicare reimbursement rate formula for physicians to include actual data, rather than estimates, so that doctors would not suffer the Medicare reimbursement rate cuts in the future that they have suffered in the past; and a proposal to link increases in Medicare+Choice premiums to health care inflation. With regard to other providers, the President's budget does not specifically call for Medicare reimbursement rate cuts. However, the budget documents state that "the Administration will work with the Congress to monitor payment issues for other providers. Credible sources such as MedPAC and GAO have found that many providers are being paid in excess of adequate returns. The Administration will consider how savings from provider payment adjustments could be used to help support a comprehensive Medicare modernization package." The MedPAC staff has taken the position that the Medicare indirect medical education adjustment for teaching hospitals is too high, although the MedPAC commissioners themselves have rejected recommendations to cut it further. In addition, MedPAC has recommended update reductions for hospitals, skilled nursing facilities, and home health agencies. The Administration's statement about the potential use of savings from provider payment adjustments seems to signal its willingness to support MedPAC's recommendations as ways to help pay for the new Medicare prescription drug benefit, increased payments to private health plans, and increased payments to physicians. GNYHA will be working with Congress and the Administration throughout the year, and will vigorously oppose any new payment reductions for GNYHA members.