At last year’s State of the Union, President Biden declared “if anyone tries to cut Medicare, we’re going to stop it.” A spirited back-of-forth with members of both parties seemed to confirm that such policies were off the table.
But legislation signed when Biden was president and vice president significantly reduced projected Medicare spending.
The Affordable Care Act signed into law by President Obama in 2010 contained changes to Medicare that reduced payments to Medicare Advantage plans and health care providers. The ACA used these Medicare savings to significantly expand Medicaid and finance new subsidies for people who obtain health insurance through exchanges. When the ACA was enacted, CBO estimated the law would reduce Medicare spending by $450 billion over the first decade. By 2015, CBO estimated that the law would reduce Medicare spending by $800 billion.
The Inflation Reduction Act signed into law by President Biden in 2021 also contained significant Medicare payment reductions for prescription drugs. The IRA used a significant portion of these savings on a variety of new government programs, including green energy subsidies. When the IRA was enacted, CBO estimated the law would reduce Medicare spending by $240 billion over the first decade.
Medicare is on an unsustainable financial trajectory and needs to be reformed in ways that improve the efficiency of the program. Making Medicare more efficient is important to extend the life of the Part A trust fund and contain costs for enrollees and taxpayers, but savings from Medicare payment reductions have often been used to expand other government programs. Last month, Paragon put out a thoughtful, targeted package of policies that would improve the Medicare Advantage program while saving taxpayers an estimated $250 billion in the process. Last year, Paragon released a menu of health policies that would reduce inefficient government health care expenditures, including more than $500 billion in Medicare savings that have attracted bipartisan support and would not reduce benefits.