Facing Medicare’s Tax Burden

Medicare’s cost burden will crush taxpayers unless we change how it is financed, according to a study by the National Center for Policy Analysis (NCPA) senior fellows Thomas Saving and Andrew Rettenmaier. “Without significant changes in the program, it is not realistic to think that federal Medicare spending, per capita, can be constrained to grow at the same rate as per capita GDP. Over the next 75 years, from 2016 to 2089, Medicare is projected to grow from 3.53% to 62% of GDP.” The report recommends the following reforms to bring Medicare’s cost growth in line with the growth of GDP:

  1. Raise Beneficiary Premiums.
  2. Raise Deductibles and Copays to Limit Spending to the Baseline Forecast: Retirees would be responsible for rising cost-sharing. Means-tested contributions to health-savings accounts (HSAs) by the federal government could complement the reformed insurance.
  3. Constrain the Federal Payment Rate by Procedure and Service: Rather than paying the CMS-determined reimbursement to each provider, Medicare would give those amounts to the participants. Over time, a real market would emerge for health care as seniors demand lower prices.
  4. Premium Support Payments that Rise at the Same Rate as Per-capita GDP: This would offer a significant  individual choice and individual payment responsibility while limiting the role of CMS in the Medicare market. It provides average premium support payments that follow the trustees’ baseline forecast.

Last Updated 09/12/2019

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