New Report: Keeping Medicare Affordable

It’s possible to avoid fiscal catastrophe without cutting current benefits to existing or future retirees

NEW YORK, NY – The debt-ceiling debate has placed a spotlight on federal spending, which is projected to increase from 21 percent of GDP in 2019 to 30 percent in 2050. In a new Manhattan Institute report, senior fellow Chris Pope demonstrates that Medicare spending growth is the greatest contributor to the increase in the national debt—and that most of the bloat comes from the fiscally careless way the federal government approves the coverage of new procedures.

Comparing the growth of Medicare spending, which is expected to double over the next decade, with projected general economic growth, Pope’s report shows that the program is in a good position to continue covering current treatments to existing beneficiaries and future retirees. What it cannot cover, however, is the limitless number of new services that have caused the program’s costs to rise. Reforming Medicare hinges not on cutting current benefits, but on curbing the unrestrained coverage of new services without concern for their costs.

To avoid cutting existing Medicare benefits or hindering medical innovation, Pope proposes the following:

• Leverage Congressional oversight: To slow the addition of new, costly treatments, Pope argues that Congress should be required to formally approve expansions of Medicare's fee schedules, as it already does in the case of fee changes for existing services. This would force Congress to scrutinize the value of new services, relative to other budgetary priorities.
• Rely on Medicare Advantage: Let Medicare Advantage cover new treatments before they are added to the basic Medicare benefit package. Unlike traditional fee-for-service Medicare, Medicare Advantage plans face strong incentives to cover new treatments which restore patients to health at lower cost than existing treatments. They can also charge supplemental premiums for platinum-tier coverage of new cost-increasing therapies, thereby ensuring that health-improving medical innovation continues apace.

Much of the report’s argument is distilled in a new Wall Street Journal op-ed published yesterday.

Read the full report here.