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A Closer Look at the Fiscal Commissions Cost-Sharing Recommendations

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Growing Medicare costs represent the single biggest long-term fiscal challenge facing this country. Under current law, Medicare spending (net of offsetting receipts) will grow from 3.2 percent of GDP in FY 2011 to 4.4 percent by 2030, 6.3 percent by 2050, and 9.8 percent by 2080. Under the Congressional Budget Office’s (CBO) Alternative Fiscal Scenario, which assumes policymakers will continue to waive scheduled reductions to Medicare physician’s payments and that the cost controls from the Affordable Care Act will not continue to slow cost growth beyond this decade, Medicare costs will increase to 5.0 percent of GDP by 2030, 7.2 percent in 2050, and 11.0 percent by 2080.

As the Joint Select Committee on Deficit Reduction (“Super Committee”) deliberates over how to reduce deficits and debt, it is important that they address growing Medicare costs, and that they do so with a special focus on “bending” the health care cost curve. In other words, while it will indeed be necessary to ask providers and individuals to contribute more in order to reduce the level of health care spending, policymakers must first do everything they can do reduce the growth in health spending. Although there are many approaches to slowing cost growth, one of the most straightforward ways to do so is to reform cost-sharing rules so that they no longer serve as an incentive to over-utilize health care services.

To help address projected growth in Medicare and other federal health care costs, the Simpson-Bowles Fiscal Commission recommended four basic changes designed to improve cost-sharing rules and reduce federal health spending.

 

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Nov 16, 2011
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As the Joint Select Committee on Deficit Reduction (“Super Committee”) deliberates over how to reduce deficits and debt, it is important that they address growing Medicare costs, and that they do so with a special focus on “bending” the health care cost curve.