NCPA - National Center for Policy Analysis

Why It's So Hard to Cut Medicare

April 17, 2014

Medicare "cuts" keep turning into payment increases, says Peter Suderman, senior editor at Reason Magazine.

Like your friend who always insists he plans to start a diet tomorrow, attempts to cut Medicare follow a similar pattern: lawmakers keep delaying spending cuts, pushing fiscally responsible measures aside until tomorrow.

  • On April 7, the Centers for Medicare and Medicaid Services (CMS) announced that a 1.9 percent proposed cut to Medicare Advantage would not be happening.
  • In fact, the program will most likely see a 0.4 percent spending increase.
  • America saw this same thing play out last year: a 2.2 percent cut transformed into a 3.3 percent spending hike.

Why does this keep happening? It's because of lobbying, from the insurers who get paid by the Medicare Advantage program, and political pressure from lawmakers. This year, a group of 40 senators, led by Republican Senator Mike Crape and Democratic Senator Chuck Schumer opposed the cuts, telling CMS, "Given the impact that payment policies could have on our constituents we ask that you prioritize beneficiaries' experience and minimize disruption in maintaining payment levels for 2015."

The same thing has happened with the Sustainable Growth Rate (SGR). The SGR is a Medicare formula that was created to keep payments to doctors in line with the economy. In 2002, economic growth slowed, and the SGR called for cuts to physicians. Since then, Congress has acted to replace those cuts with spending increases every year. In early April, Congress passed yet another SGR override.

Both parties claim to be fiscally responsible, but their actions on these Medicare cuts tell another story.

Source: Peter Suderman, "This Is Why It's So Hard to Cut Medicare," Reason Magazine, April 8, 2014.


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