President Obama released his proposed budget for FY 2013 on February 13. The proposal would cut federal Medicaid and Medicare expenditures by $360 billion over ten years. The Medicaid/Children’s Health Insurance Plan (CHIP) section of the proposed budget would establish a single “blended” match rate for Medicaid and CHIP, reduce the states’ ability to use provider taxes to generate the state share of Medicaid expenditures, limit Medicaid payments for durable medical equipment (DME) to Medicare rates obtained through Medicare’s DME competitive bidding program, and make further cuts (beyond those in the Affordable Care Act) in Medicaid disproportionate share hospital (DSH) payment adjustments. The proposed “blended” Medicaid/CHIP match rate and the proposed reductions in provider taxes and DSH payments require Congressional approval and would be phased in gradually. The President also proposes to reduce Medicare coverage of bad debts on deductibles and coinsurance, Medicare payments for the costs of graduate medical education (GME), Medicare payments to critical access hospitals (CAHs), inflation adjustments on Medicare payments for post-acute care (nursing facilities, home health, long term care hospitals, and inpatient rehabilitation facilities (IRFs)), Medicare payments to nursing facilities with high rates of preventable readmissions to hospitals, and Medicare payment rates for advanced imaging services (an area of rapid growth for Medicare as well as for many state Medicaid programs). The FY ’13 budget also includes proposals to adopt new restrictions on Medicare/Medicaid CAH and IRF designation, to reduce the difference in Medicare payments between nursing facilities and IRFs for conditions treated in both settings, to require prior authorization of advanced imaging services under Medicare, to increase drug manufacturer rebates under Medicare Part D, to require tracking of high prescribers and users of prescription drugs under Medicaid, and to strengthen coordination of benefits requirements under Medicaid.