A Fairer and More Fiscally Secure Medicare Program      

 

The Problem: Simply put, Medicare is eating up the federal budget. Already consuming more than 16 percent of all government spending, Medicare costs are projected to increase at more than 7 percent a year over the next decade, significantly faster than GDP or federal revenues, and the single fastest major component of federal budget growth.

The BETTER WAY: As recommended by several bipartisan studies, and detailed in a Congressional Budget Office report, Medicare will be converted to a system in which beneficiaries (except dual eligibles) receive premium support up to a benchmark amount, set as the second lowest priced of the traditional fee-for-service and private health plans in each area. 

Beneficiaries choosing an option priced at the benchmark will incur no cost beyond the Part B premium, those selecting a plan priced below the benchmark will receive a rebate, and those selecting a more expensive plan will pay the difference.

Beneficiaries will receive the same Part A and B benefits (or their actuarial equivalent) as now, with one enhancement: the hospital deductible will be lowered for multiple hospitalizations, thereby reducing financial burdens on the sickest seniors.

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"...the second-lowest-bid option would reduce net federal spending for Medicare by about $45 billion in 2020..." -- Congressional Budget Office, September 2013 

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Savings are conservatively estimated at up to $30 billion a year (6 percent of current total Medicare expenditures) based on implementation in 2017 and net of the effect of enhanced benefits for multiple hospitalizations. The potential of such savings makes unnecessary the spending caps proposed by some earlier studies.

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