Medicare Reform on the Discussion Table


The debt ceiling has been raised, and that means that the government will be looking for ways to control long-term budget expenditures, including those for programs like Medicare.

The debt ceiling has been raised, and that means that the government will be looking for ways to control long-term budget expenditures, including those for programs like Medicare. Currently, the program accounts for 16% of the federal budget, and that percentage is expected to inflate as baby boomers reach retirement age. Projections are that by 2030, there will be an estimated 80 million Medicare beneficiaries. Exactly how to get political parties to agree on how to reform the program is another matter.

Alice Rivlin, a senior fellow in the Economic Studies Program at Brookings, said reforming Medicare goes beyond the costs, though it certainly plays a large role:

Why reform Medicare? The main reason for reforming Medicare is not that the program is the principal driver of future federal spending increases, although it is. The main reason is not that Medicare beneficiaries could be receiving much better coordinated and more effective care, although they could. The most important reason is that Medicare is big enough to move the whole American health delivery system away from fee-for-service reimbursement, which rewards volume of services, toward new delivery structures, which reward quality and value. Medicare can lead a revolution in health care delivery that will give all Americans better health care at sustainable cost.

Back in Washington, a few proposals for Medicare reform are making their way to the discussion table. One solution for Medicare reform? Require wealthier beneficiaries to pay more for Medicare. Most beneficiaries pay 25% of Part B premiums, while higher-income beneficiaries pay between 35% and 80%, depending on income. Pending budget approval, those same high-income beneficiaries would pay an increased 40% to 90% in premiums.

Another suggestion is changes made to Medigap. Some suggest that current models encourage overuse of services, and so starting in 2017, beneficiaries could expect to be required to purchase more generous Medigap plans that would add a 15% surcharge to the average Medigap premium.

Other options include higher beneficiary cost sharing, premium support/higher eligibility age, provider cuts, additional Medicare cuts including amounts paid to hospitals/graduate medical education, and drug rebates. An estimated $123 billion in the budget could be saved if drug costs were altered for the approximately 11 million dual eligibles who qualify for both Medicare and Medicaid.

It is obvious the government has a variety of options to reform Medicare, but regardless of what is done, action must be taken.

“This will not be an easy set of reforms to enact or implement. It will require sustained effort at both the federal and state levels, as well as in the private sector. But there is no simple way to change our complex, fragmented health care system,” says Ms Rivlin. “We believe enactment and implementation of these reforms would not only improve care and save taxpayer dollars in Medicare; it would do the same for the whole health care delivery system.”

Around the Web

Why Reform Medicare? The President's and Other Bipartisan Proposals to Reform Medicare [Brookings]

Tough Medicare Decisions Await Bipartisan Budget Panel [Kaiser Health News]

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