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Market-Based Solutions to Vital Economic Issues
Research
Jan 28, 2021

Solutions for Medicare’s Continual Fiscal Crisis

Excerpt

There are bipartisan Medicare payment proposals that would reduce Medicare payments included in previous Obama and Trump budgets that could go a long way to filling the budget shortfall. While previous policy proposals either proposed new revenue sources or payment reductions, recent policies are pragmatic in nature and attempt to modify either beneficiary or provider behavior.  For example, site-neutral payments, in which Medicare pays the same amount for the same service irrespective of the site where it is performed, may drive providers to choose more cost-effective settings (e.g., knee arthroscopy moving from a hospital outpatient setting to an ambulatory surgery center). Additionally, reforming graduate medical payments could control expenditures and tie payments to performance metrics. If these changes were adopted, they would produce almost half of the needed $500 billion in savings over the next decade and put less pressure on additional policy changes we suggest for producing the remaining savings. However, the recommended policy changes also could be structured to produce the full amount of savings.


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