The cost of providing health insurance to 47 million elderly and disabled Americans through the Medicare program has been taking up a growing portion of the national budget.
It’s not clear if this is caused by beneficiaries using more services, new high-cost treatments, a higher rate of inflation in health care, the provision of unnecessary procedures or outright fraud. It’s likely to be a combination of all of these factors.
Term after term, Congress pokes at the problem by cutting payments to program providers, which they typically reverse as the deadline for the reduction approaches.
Congress has been unable to meaningfully reform the program. In 2003 it did expand Medicare to include broader coverage for prescription drugs, although it failed to fund this addition. Recent rumblings from Washington about reforming the payment method for the program sound promising, though. George Huang, a municipal analyst at Wells Fargo, wrote in a note distributed today:
One idea quickly gaining political currency as a means to rein in long-term federal healthcare spending is the concept of “Medicare premium support.” Under a “free market” premium support approach, each beneficiary would receive a capped amount of dollars (based on a regionally adjusted average cost). He/she would have the flexibility to purchase any qualified commercial health insurance plan that provides coverage of a standard set of healthcare services. Republicans favor this approach because it partly privatizes the Medicare program. Premium support also effectively shifts the program from a defined benefit entitlement program to a defined contribution plan.