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Medicare Spending Control Ideas

By May 29, 2013Commentary

Medicare spending is one of the most troublesome federal budget problems and in the absence of changes will grow rapidly as the boomer generation becomes eligible for benefits.  Research in the journal Health Affairs suggests several approaches to help control that spending.  In one study, the author suggests that controlling Medicare spending will require more cost-shifting to beneficiaries.   (HA Article)   His basic premise is that much of the rise in total Medicare spending is due to the rapid increase in the number of beneficiaries, not necessarily faster growth in per beneficiary spending, and controlling spending by the government will almost inevitably then require that a greater share of the costs be picked up by beneficiaries.  A second article suggests that the presence of supplemental coverage leads to faster Medicare spending growth.  (HA Article)   This has been an area of focus for the Medicare Payment Advisory Commission, and the authors buttress the notion that while supplemental coverage may save out-of-pocket costs for some beneficiaries, it likely leads to greater total spending growth and perhaps more spending by the Medicare program itself.  Supplemental coverage creates cost insensitivity for beneficiaries, and providers, and may lead to greater use of unnecessary services.  The rate of growth with supplemental coverage was about 1% over that for beneficiaries without such coverage.  In yet another article the authors examine three policy changes that could substantially cut Medicare spending but might result in large numbers of seniors not enrolling in Medicare.  (HA Article)   The changes were a means-tested premium for Part A, a premium support credit and raising the eligibility age to 67.  The Part A change would save about 2.4% of spending through 2036, raising the eligibility age saved 7.2% and the premium support approach saved even more.  But each likely would lead to reduced enrollment in the program.

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