Additional Reductions in Medicare Spending Growth Will Likely Require Shifting Costs to Beneficiaries

Policy-makers have considerable interest in reducing Medicare spending growth. Clarity in the debate on reducing Medicare spending growth requires recognition of three important distinctions: The difference between public and total spending on health; the difference between the level of health spending and rate of health spending growth; and the difference between growth per beneficiary and growth in the number of beneficiaries in Medicare.

The primary policy issue facing the U.S. health care system is the rate of spending growth in public programs, and solving that problem will probably require reforms to the entire health care sector. The Affordable Care Act created a projected trajectory for Medicare spending per beneficiary that is lower than historical growth rates. Although opportunities for one-time savings exist, any long-term savings from Medicare, beyond those already forecast, will probably require a shift in spending from taxpayers to beneficiaries via higher beneficiary premium contributions (overall or via means testing), changes in eligibility, or greater cost sharing at the point of service.