How Much Savings Can We Wring From Medicare?

Study Questions:

How much savings can we wring from Medicare?


With the projected plan to decrease national debt, Medicare is a logical target for savings related to federal spending. Medicare savings are calculated as the difference between projected spending resulting from new legislations and projected spending based on current legislation (i.e., if there were no changes in legislation). Savings can be made without reductions in Medicare spending by slowing the rate of growth in spending over time. Scoring is the projections of the baseline spending and computation of the savings under new legislation. Scoring relies on published literature, consultations with external experts, and professional judgment. It is important to understand that scoring reflects federal spending rather than total spending, which includes spending by beneficiaries. The authors of this perspective suggest that efforts to contain total spending should focus on meeting the projections for baseline per-beneficiary spending growth, rather than aiming to derive significant savings from lower per-beneficiary spending growth. Important questions will include how much to raise taxes to finance the demographic trend, which includes increases in the mean age of the US population. Additional questions to be addressed include how much to cut provider fees or other methods to control costs, and how much to shift costs to beneficiaries.


This thoughtful perspective on Medicare is a ‘must read’ for all of us, given that we will all be impacted by legislative changes in health care.

Keywords: Medicare, United States, Taxes

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