Here's How Lawmakers Can Slash Medicare Spending Without Cutting Benefits

Forbes | By Sally Pipes
 
Politicians don't agree on much these days, but one thing seems to bring even Democrats and Republicans together. And that's refusing to cut Medicare.
 
That position may be politically popular. But it's at odds with the long-term sustainability of the program. Medicare's hospital insurance trust fund is set to go bankrupt by 2028. The program costs taxpayers $747 billion each year—12% of total government spending.
 
Fortunately, there's a way for lawmakers to rein in Medicare spending without cutting benefits. By giving seniors vouchers to spend on privately managed Medicare plans, lawmakers can cut costs while increasing quality of care.
 
Such a model, which already works in one part of Medicare, will help keep seniors healthy while protecting Medicare for future generations.
 
About 35 million Americans were enrolled in "Traditional Medicare," a fee-for-service system that covers hospital insurance, Part A, and medical insurance, Part B. The federal government administers Traditional Medicare directly, paying out nearly every claim submitted—including about 8% of improper claims, which cost the government around $32 billion each year.
 
Shifting to a premium support model would rein in Medicare payments. The federal government would give each senior a voucher for a fixed amount of money that they could spend on privately administered insurance or Traditional Medicare.
 
In other words, insurers would have to compete for seniors' business. They'd have to assemble benefits packages that appeal to potential customers. Competition would drive down costs and improve quality. And that's good news for John Q. Taxpayer, who would ultimately be footing the bill.
 
According to the nonpartisan Congressional Budget Office, if lawmakers had shifted to a premium support model in 2022, Medicare spending could have fallen between $21 billion and $419 billion by 2026, depending on whether existing beneficiaries participated in the model.
Making the shift today would save beneficiaries $333 billion over a decade, and taxpayers $1.8 trillion over 10 years, according to former CBO director and current American Action Forum president Douglas Holtz-Eakin.

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