Medicare Spending

Before the start of the new year, there was constant talk in the news about the “fiscal cliff,” the mix of tax increases and spending cuts that was set to take place on January 1. As anyone following the subject knows, the United States Congress acted at the last minute to avert most tax increases. But the deal that was passed only delayed enormous spending cuts — $1.2 trillion over 10 years, spread over several federal programs — for two months. Among the cuts set to take place is a 2% reduction in Medicare funding, to which administrators of the program would probably react by lowering hospital and/or doctor reimbursement rates.


As is turns out, Congress just canceled a planned 27% cut to doctor pay through Medicare as part of the fiscal cliff deal. That 27% cut, however, was not part of the overall package of spending cuts that Congress created more than a year ago in an attempt to force a bipartisan deficit-reduction deal. As a Forbes article from earlier this month notes, that planned pay cut was the result of a spending formula that Congress enacted in 1997 to limit Medicare spending. Since 2002, however, Congress has temporarily delayed pay cuts 14 times without fixing the formula, so that the drop in doctor pay would be greater each time the temporary fix is set to expire.

The unwillingness of Congress to cut Medicare spending has led New York Times columnist David Brooks to conclude, in a column published last week, that Medicare will be untouchable well into the future — at the expense of all the other worthwhile things the federal government does. Spending on defense, education, scientific research, infrastructure, and poverty relief, Brooks writes, will suffer as health care becomes the chief concern of the federal government. This will happen, he argues, because voters directly feel the benefit of Medicare and other health-care guarantees and will oppose any attempted cuts.

It is true that the federal Department of Health and Human Services (HHS) projects significant growth in Medicare spending in coming years — mostly because of a spike in the number of retirees who will be eligible for the program. But as HHS also notes, Medicare spending per beneficiary has grown at a slower rate than the overall economy in recent years, including just 0.4% in fiscal year 2012. This suggests that Medicare spending growth cannot be significantly slowed just by eliminating frivolous care, or by ensuring that new, expensive technologies do not lead to spending growth. Instead, for Congress to limit Medicare spending in the future, it will have to fundamentally change the structure of the program. It could do this in several different ways: by paying doctors based on the condition being treated, rather than for individual procedures; by cutting doctor pay; by cutting benefits; or by converting Medicare into a voucher-based “premium support” program (see “Medicare Privatization“).

What do you think — should Medicare growth be reined in, or should the program continue as it presently does, even if its cost means that other programs must be cut? What other programs, if any, would you cut to pay for Medicare? Would you favor making Medicare benefits dependent on income, so that higher-income individuals would have to pay a premium for the program or buy private health insurance? Should taxes rise to pay for higher Medicare costs as the baby boomers retire? Leave a comment below!

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  • Joel DeStefano

    Higher income people must pay higher rates to support the program. Do not force retirees to buy private health care. Reform Medicare in responsible ways to reduce costs in all possible ways.

  • Diane

    The penalty for not participating in a drup program is way too low. A 1% penalty after 30 months is still less than $10.00 per month. We need a higher penalty so that the healthy people are supporting the drug progams even if they are not on expensive drugs. Everyone on Medicare should have to buy a drug program.

  • B. Bishop

    Mr.DeStefano hit the nail on the head. But then, in order to reform Medicare in responsible ways you must have”responsible” and “principled” politicians to be courageous enough to tackle the difficult issues rather than continually avoiding the problem.

  • Richard C

    Have every agency that raided Social Security pay back. Specially Ronald Regan Raid.

  • HTT

    I could support medicare premiums based on income as long as they were not excessive, but I am against a privitized or voucher system. Cutting payments to doctors is also problematic because if payment is reduced too much it will become difficult for medicare patients to find doctors willing to accept them.

  • S.Barbour

    I think Medicare should stay much as it is for people making less than 75,000.00 a year. Increase premiums for people making more and continue to investigate fraud. There is so much fraud! Everyone should do their share to help save money for Medicare by taking care of their health! Medicare is not a social program, we have paid in to this program since it was started in 1974 and we continue to pay premiums each month!

  • H Molvang

    1) all legislators to be on medicare at age 62.
    the same program the rest of the country is on.
    This will bring about an immediate fix.
    2) When preventative care is offered make sure it is available. Lack of participation will ensure a fine. 3)If you are illegal in this country and have never paid into the system, or worked and never paid into the system deny care and
    and under certain circumstances deport.

    5)Fraud a concentrated effort to find and prosecute
    with return of funds and always jail time no deals.
    6) time to make government workers who do not pay taxes on time but let thousands of dollars accumulate and then work a deal for 10% of the money owed, pay up no deals this is a common practice.
    7) medicare as it is now works, but now the treatment of the elderly is such that they
    are expendable. Treat them less.

  • Patricia Thomas

    I am against decreasing payment made to doctors. They already are short-changed when treating Medicare patients. If they cut them anymore, it will next to impossible to find a doctor who will treat Medicare patients. The government needs to go after the Medicare fraud in the system. Also, I feel that the millionairs in this country should start paying their fair share. It’s time the millionairs quit getting a “free ride”!

  • joan

    I support most of what has already been mentioned.

    I believe that Medicare needs a review; all government programs should have a review at least every 8 years.
    2. Do not reduce the pay to doctors; we need good doctors, and so far we are only loosing them to retirement at earlier ages.
    3. Those on Medicare should pay on a sliding scale based on financial ability.
    4. Elected Congressional members should pay into Medicare starting at age 62 or 65 like the rest of us do. They should also have the same health care facilities and program choices the voters do; not something extra special just for them.
    5. I support electing responsible Congressional members.
    6. Find and eliminate all fraud.

    What occurs within Congress depends on the Voter. Be smart, self educate and use both to be wiser for whom we vote for.

  • Rob

    A quick fix would be to demobilize the national security state and armed forces watch dog groups claim gobbles up at least half of the federal budget in direct(Pentagon) and hidden (Other programs & agencies) spending.

    A knock on effect would force our government to abandon global hegemony, return our foreign policy to the sound sense of the Monroe Doctrine and base our national defense solely on DEFENSE of the homeland, sans the international meddling and wars our country has been addicted to since the end of WWII.

    This alone would save untold trillions to be spent more wisely on medicare, infrastructure, education, etc., and eliminate our national debt and yearly deficit spending.

  • carol

    DO not require private coverage. We have seen how long term care insurance run by third party insurers has turned out, with a majority of insurers pulling out the past year and the remaining hiking premiums beyond what those who acted responsibly by taking the policies out in the first place can afford. Many are forced to drop the policies which means premiums paid in to date are lost. The alternative option for these long term care folks, is to greatly reduce the “benefit” paid so as to keep the policy in force. Health care policy failure at its finest and that is where privatizing Medicare would end up. Single payer system with cost saving means is the only hope of controlling spiraling health care costs. The “free market” approach, simply doesn’t work in this arena of a ever growing aging, sicker population. WIth obesity, levels increasing, rising diabetes and heart disease, Alzheimers care for a majority of the population is the next “bubble” to appear and burst in healthcare. Who is going to pay for that care? Better to have gym membership coverage as a health plan benefit for Americans, to slow this wrecked train down.

  • Donna C

    I like the idea of putting all members of Congress on Medicare on the day they are sworn in. Of course, they would have to pay the full cost, not just the payroll deduction and the monthly premium. But they should get exactly the same benefits as any other Medicare recipient.
    I think that would motivate them to fix the problems.

    Seriously, though, for the rest of us, I would prefer to have premium support for those who choose that approach. I would prefer to choose my own policy. I don’t like Medicare’s one-size-fits-all approach. It doesn’t suit my needs.

  • Celia Snyder

    Make Medicare a single payer plan. Set a reasonable income level ffor retirees and limit benefits according to need, avoid payments for people who fail to change behavior after expensive treatments such as skiing after knee surgery or other hich risk sports or even those who do not participate in rehab after heart surgery. Let poverty stricken families have full care so they can work again. Cut payments and carefully supervise medical suppliers. Make paperwork sensible for care providers, review all forms with this in mind.

  • Nancy T

    when on vacation a few months ago, many people from Canada were at the facility. Asked them how they liked their healthcare system – no complaints from any of them. What was interesting about their system is that for $150 a month, they receive: healthcare, vision, dental, nursing home care, and prescription drugs. Nobody said they were refused or put of care when “urgent” or “emergency”. After hearing what they had to say, it ade me wonder about the system here in this country.