Medicare & Medicaid
Reform 1: Impose an annual budget for Medicare spending
In the 2012 fiscal year, Medicare spending is projected to account for about 4% of the entire economy and 12.6% of all federal spending. It is one of the most expensive single items in the budget, yet Congress has no control over how much money is spent on the program. Instead, the law mandates that the federal government pay for every medical procedure that senior citizens are entitled to under the current Medicare eligibility formula, no matter how high the total cost. This reform would put a cap on the amount of money that the federal government can spend on the Medicare program each year based both on what care seniors need and how much the government can afford to spend.
Medicare costs have spiraled out of control. In 1965, a congressional committee projected that, by 1990, Medicare would cost the government $9 billion. In fact, the government spent $63 billion on Medicare in 1990 and is projected to spend $478 billion for 2012.
The U.S. is the only major industrialized nations without a budget for health care expenditures. The government already pays for about 48% of all health spending in the United States, and without a budget on future spending health care costs will consume the majority of the federal government’s resources.
Out of control health care costs could bankrupt the country. We must achieve a better balance between compassion and cost when public resources are involved.
Reform 2: Make Medicare premium subsidies more income-based
Parts B and D of Medicare, the voluntary programs which cover doctors’ services and prescription drugs, are partially funded by premiums paid by beneficiaries. However, the majority of the cost is paid for from general tax revenue. In fact, the federal government heavily subsidizes Medicare premiums for all but 5% of the most affluent beneficiaries. Almost all beneficiaries receive a 75% subsidy on their premiums, regardless of their income and wealth. This reform would amend the formula that determines Medicare premium subsidies to target the largest subsidies towards lower-income individuals and to increase premium costs for beneficiaries who can afford them.
Almost all Medicare beneficiaries receive the same premium subsidy from the federal government. In 2012, a retiree with a $20,000 income and a retiree with an $80,000 income both paid the same Part B premium each month because the government subsidized both equally. Only 5% of Medicare beneficiaries receive a smaller premium subsidy from the government.
Medicare subsidies used to be much lower. When the program was started in the 1960s the government subsidized 50% of each individual’s premium. Now, the subsidy has risen to 75%. This has contributed to the combined Medicare program being underfunded by an estimated $37 Trillion.
Reform 3: Fund Medicaid through block grants
The federal government is currently required by law to fund a certain percentage of each state’s Medicaid expenditures, no matter how many people that state enrolls in the program. This reform would allow the federal government to pay each state a fixed sum every year (a “block grant”) to be spent on Medicaid coverage that would be indexed annually at a rate lower than the historical health care cost growth. The amount of funding for each state would be based on the number of low-income and high-need individuals the state is required to cover under minimum Medicaid coverage standards.
Currently, the amount of money the federal government spends on Medicaid each year is theoretically unlimited. From 2000 to 2011, Medicaid spending grew (133% unadjusted; 82% adjusted for inflation). Federal Medicaid spending is out of Washington’s control because it is dependent on the amount of coverage that states choose to provide.
As the United States continues to expand primary health care coverage Medicaid will shift to become more of a source of supplementary health insurance for the poor. This will return the program to its purpose of helping those truly in need.
- 79% supported package of Medicare and Medicaid reforms
- 72% support a budget limit on federal Medicare and Medicaid spending
Do you support this package of reforms? We encourage you to use the social media sharing functions below ( for example, Facebook, Twitter, or LinkedIn) to express your support, or if you disagree, make comments about why. In addition, we encourage you to provide other options that you believe should be considered. To find out more about the town hall events or the $10 Million a Minute Bus Tour, click here.