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House Budget Cuts, Restructures Medicare

The 2018 budget resolution that the House Budget Committee approved this week would end Medicare’s guarantee of health coverage by converting the program to a premium support system. Overall, it would cut Medicare spending by $487 billion over the 2018-27 period, largely by shifting more health care costs to beneficiaries. President Trump’s budget, by contrast, would spare Medicare from cuts.

The Budget Committee’s description lists the following proposed changes in Medicare:

  • Premium support. The House plan would replace Medicare’s guarantee of health coverage with a flat premium-support payment, or voucher, that beneficiaries would use to help buy either private health insurance or a form of traditional Medicare. Premium support would apply to all new beneficiaries starting in 2024 and to any other beneficiaries choosing to participate. Although the plan lacks the details needed to assess its impact on beneficiaries, most people enrolled in traditional Medicare would pay more than under current law, a previous Congressional Budget Office analysis found.
  • Higher income-related premiums. Most Medicare beneficiaries now pay premiums for Parts B and D (which cover physician services and prescription drugs, respectively) that represent about one-quarter of program costs. Beneficiaries with incomes above $85,000 (twice that amount for couples) pay higher amounts. The House plan would increase these income-related premiums along the lines that President Obama proposed in his 2017 budget.
  • Limits on malpractice awards. The House plan would limit medical malpractice litigation by capping awards and attorney fees, reducing the time for filing claims, and making other changes. The House has already passed such legislation.

In addition, Budget Committee staff have stated that the budget resolution assumes these further Medicare cuts:

  • Raising the eligibility age. The House resolution would gradually raise Medicare’s eligibility age from 65 to 67. At the same time, it assumes enactment of the House-passed bill repealing the Affordable Care Act (ACA), which would eliminate or weaken the ACA’s coverage expansions through Medicaid and the health insurance marketplaces. As a result, 65- and 66-year-olds would have to buy coverage in the individual insurance market, where they would face extremely high premiums and deductibles.
  • Increasing cost sharing. The resolution would add an annual limit on out-of-pocket spending to traditional Medicare, thereby filling the program’s largest coverage gap. But it would increase Medicare cost sharing by establishing a single unified deductible for Parts A and B, imposing uniform 20 percent coinsurance for all covered services, and limiting Medicare supplemental insurance (“Medigap”) policies. Together, these changes would likely increase beneficiaries’ total out-of-pocket costs, on average.
  • Graduate medical education. The resolution assumes reductions in Medicare payments to teaching hospitals for the costs of medical education.

These proposals may not be sufficient to achieve $487 billion in savings, and additional Medicare cuts may be necessary to reach the House target.