Federal law requires the President to submit an annual budget request to Congress no later than the first Monday in February. The budget informs Congress of the President's overall federal fiscal policy based on proposed spending levels, revenues, and deficit (or surplus) levels. The budget request lays out the President's relative priorities for federal programs, such as how much should be spent on defense, education, health, and other federal programs. The President's budget also may include legislative proposals for spending and tax policy changes. Although the President is not required to propose legislative changes for those parts of the budget that are governed by permanent law (i.e., mandatory spending), such changes generally are included in the budget. President Obama submitted his FY2016 budget request to Congress on February 2, 2015. The Centers for Medicare & Medicaid Services (CMS) is the division of the Department of Health & Human Services (HHS) responsible for administering Medicare, Medicaid, and the State Children's Health Insurance Program (CHIP). CMS also is responsible for administering the private health insurance programs established in the Patient Protection and Affordable Care Act (ACA; P.L. 111-148 , as amended). CMS is the largest purchaser of health care in the United States, with Medicare and federal Medicaid expenditures accounting for almost 30% of the total national health expenditures in 2013. In FY2016, CMS estimates 126 million individuals will be covered by Medicare, Medicaid, or CHIP. This report summarizes the President's budget request for each of the following sections of the CMS budget: Medicare, Medicaid, program integrity, CHIP, state grants and demonstrations, private health insurance protections and programs, the Center for Medicare & Medicaid Innovation, and program management. Then, for each legislative proposal included in the President's budget, this report provides a description of current law and the President's proposal. The President's budget includes legislative proposals for the following sections of CMS: Medicare, Medicaid, program integrity, CHIP, state grants and demonstrations, and program management. At the end of each of these sections, a table summarizes the Administration's estimates of costs or savings associated with each legislative proposal. The CMS budget includes both mandatory and discretionary spending. However, a vast majority of CMS spending is mandatory, such as Medicare benefit spending and grants to states for Medicaid. Table 1 shows the President's proposed FY2016 budget for CMS. Current Law: The President's budget projects that under current law CMS mandatory and discretionary net outlays would total $957.4 billion in FY2016, which is an increase of $70.6 billion, or 8.0%, over the estimated net outlays for FY2015. Adjusted Baseline: The President's FY2016 budget would increase baseline Medicare spending by assuming Medicare payments for physician services will remain at current levels rather than decrease significantly according to the sustainable growth rate (SGR) formula under current law. The President's budget estimates this adjustment will increase CMS's net outlays by $5.3 billion in FY2015 and $8.8 billion in FY2016. With this adjustment, CMS's total net outlays are estimated to be $966.2 billion in FY2016. Legislative Proposals: The President's FY2016 budget includes a number of legislative proposals for Medicare, Medicaid, program integrity, CHIP, state grants and demonstrations, and program management. The Administration estimates that if these legislative proposals are implemented, CMS's total net outlays would increase by $5.1 billion in FY2015 and a net of $5.4 billion in FY2016. Total Net Outlays: With the Medicare physician payment adjustment, the estimated impact of the legislative proposals, and the estimated savings from program integrity activities ($0.9 billion), the President's budget estimates CMS's net outlays would be $970.8 billion in FY2016, which is an increase of $73.6 billion, or 8.2%, over the estimated net outlays for FY2015. The CMS budget is divided into the following sections: Medicare, Medicaid, program integrity, CHIP, state grants and demonstrations, private health insurance protections and programs, the Center for Medicare & Medicaid Innovation, and program management. A description of each of these sections appears below, along with a summary of the President's budget proposals for each section. Medicare is a federal program that pays for covered health care services of qualified beneficiaries. It was established in 1965 under Title XVIII of the Social Security Act as a federal entitlement program to provide health insurance to individuals aged 65 and older. Over the years, Medicare has been expanded to include individuals under the age of 65 who cannot work because they have a medical condition that is expected to last at least one year or result in death, have end-stage renal disease (permanent kidney failure requiring dialysis or transplant), or have amyotrophic lateral sclerosis (ALS, or Lou Gehrig's disease). Medicare, which consists of four parts (A-D), covers hospitalizations, physician services, prescription drugs, skilled nursing facility care, home health visits, and hospice care, among other services. The President's budget projects that under current law, Medicare outlays net of offsetting receipts will be $583.5 billion in FY2016, which is an increase of $53.0 billion, or 10.0%, over FY2015 (see Table 2 ). The President's budget makes adjustments to the baseline assuming congressional action preventing a reduction in Medicare physician payments for FY2016, which increases the FY2016 baseline outlays net of offsetting receipts by $8.8 billion. The budget includes a number of legislative proposals for Medicare, including some legislative proposals in the program management section. If implemented, these legislative proposals in Medicare and program management are estimated to decrease Medicare outlays by a net of $1.8 billion in FY2016 and a cumulative $423.1 billion over the next 10 years. With the baseline adjustments and the estimated impact of the legislative proposals, the President's budget estimates that Medicare's total net mandatory and discretionary outlays for FY2016 will be $590.5 billion, which is an increase of $54.1 billion, or 10.1%, over FY2015. Medicaid is a means-tested entitlement program that finances the delivery of primary and acute medical services as well as long-term services and supports. Medicaid is jointly funded by the federal government and the states. The federal government reimburses states for a portion (i.e., the federal share) of each state's Medicaid program costs. Because federal Medicaid funding is an open-ended entitlement to states, there is no upper limit or cap on the amount of federal Medicaid funds a state may receive. The President's budget projects that under current law Medicaid total net outlays will be $344.4 billion in FY2016, which is an increase of $15.8 billion, or 4.8%, over FY2015 (see Table 2 ). The President's budget includes a number of legislative proposals that would impact Medicaid. If these proposals are implemented, the President's budget estimates that total net outlays for Medicaid would increase by $6.6 billion in FY2016 and by a cumulative $26.7 billion over the next 10 years. Including the estimated impact of the legislative proposals, the President's budget estimates FY2016 net outlays for Medicaid would total $351.0 billion, which is an increase of $17.9 billion, or 5.4%, over FY2015. Title II of the Health Insurance Portability and Accountability Act of 1996 ( P.L. 104-191 ) established the Health Care Fraud and Abuse Control (HCFAC) program to detect, prevent, and combat health care fraud, waste, and abuse. HCFAC has traditionally focused on Medicare fraud, waste, and abuse through activities such as medical review, benefit integrity, and provider audits. In FY2009, discretionary funding was appropriated that allowed HCFAC to expand its activities to Medicare Advantage and Medicare Part D, among other things. In addition, HCFAC mandatory and discretionary funding is used to prevent fraud, waste, and abuse in the Medicaid program. Spending on program integrity activities is built into the President's budget summaries discussed above for Medicare and Medicaid and is not explicitly broken out in Table 2 . However, when the funding for program integrity activities is broken out, the President's budget requests total budget authority for those activities of $2.0 billion in FY2016, including $1.3 billion in mandatory funding for program integrity activities and $0.7 billion in discretionary funding. This funding level is an increase of $0.1 billion, or 5.3%, over FY2015. The Balanced Budget Act of 1997 (BBA97; P.L. 105-33 ) established the State Children's Health Insurance Program (CHIP) to provide health insurance coverage to targeted, low-income children in families that have annual income above Medicaid eligibility levels but have no health insurance. Authorization and funding for CHIP has been extended a number of times. Most recently, the ACA extended federal funding for CHIP through FY2015. CHIP is funded jointly by the federal government and the states, and federal CHIP funding is capped on a state-by-state basis according to annual allotments (i.e., federal funds allocated to each state for the federal share of its CHIP expenditures). The President's budget projects that under current law CHIP's total outlays will be $14.0 billion in FY2016, which is an increase of $3.4 billion, or 32.1%, over FY2015 (see Table 2 ). Federal funding for CHIP is expected to increase significantly because under current law, the federal matching rate for CHIP is to increase by 23 percentage points in FY2016. The President's budget includes legislative proposals that would impact CHIP.