Pursuing Medicare Reform in the Context of a Financing Crisis

In this chapter from the recently published Modernizing Medicare: Harnessing the Power of Consumer Choice and Market, Charles P. Blahous discusses the financial challenges facing Medicare and the need for reform. Lawmakers will need to act soon to address Medicare's solvency, which could involve cost reductions, raising eligibility ages, increasing taxes, or a combination of measures. Medicare's hospital insurance trust fund is projected to become insolvent by 2028, while the supplementary medical insurance trust fund faces even more severe cost growth. The rising costs of Medicare have significant implications for federal taxpayers, who finance the preponderance of program expenditures, as well as for beneficiaries, who face higher Medicare premiums that reduce the purchasing power of their Social Security benefits. Several factors could push future Medicare costs even higher than currently projected.

However, the Medicare Advantage program has been successful, with enrollment surpassing previous projections. The chapter cites published evidence that Medicare Advantage offers more value to beneficiaries and that cost reductions have not shifted burdens onto them. The chapter discusses the potential for expanding Medicare Advantage and increasing financial incentives for participants and insurers to achieve further savings. It also mentions premium support proposals as a potential reform model. However, tough choices will be necessary to address Medicare's financial shortfall, considering demographic forces and rising healthcare costs.

Read the full chapter here. Purchase the book at JHUP or Amazon.