Federal Government and Medicare

Medicare Health Care Reform

The Medicare is an American health program that is administered by the federal government and serves as a health insurance for people aged 65 years and above. The Medicare is also designed for people with disabilities and people diagnosed with the renal disease. (Davis, Cathy, & Stuart, 2013). The Medicare is currently being funded by the premiums, payroll tax, surtax from general revenue. In 2015, over 55 million American enrolled for the Medicare services where 46 million people are people aged 65 years and above and 9 million are young people. On the average, Medicare covers half of the health costs and the enrollees are to cover the remaining costs through a separate insurance, supplemental insurance, or out-of-pocket. Since the inception of the Medicare, the cost of funding the program continues to increase, and the rising costs of funding are becoming unbearable both for the current and future taxpayers. In 2015, the federal government spent $527 billion on Medicare, and the funding is projected to increase to $1.1 Trillion in 2024. Thus, the federal government is required to implement reforms to address the problem of Medicare rising costs. (Moffit, & Senger, 2013).

The objective of this paper is to recommend solutions to the increase in the Medicare costs.

Solutions to the Problems of Medicare Costs Increase

Since the inception of the Medicare program, the Medicare spending continues to increase and is projected to increase in the future. As being revealed in Fig 1, the actual Medicare spending increased from $446 Billion in 2010 to $505 billion in 2014. (Moffit, & Senger, 2013). However, the net outlay is projected reaching $866 Billion in 2024. Kaiser Family (2015) argues that the projected Medicare is expected to grow by 4.1% between 2014 and 2024 than 1% increase in the previous years between 2010 and 2014.

"Between 2014 and 2024, the associated Medicare the rate of Medicare per capita spending growth is expected to be 0.7%age points larger than projected growth in GDP per capita, while private health insurance per capita spending is expected to grow 1.3%age points faster." (Kaiser Family 2015 p 3).

Fig 1: "Actual and Projected Net Medicare Spending 2010-2014."

Source: (Kaiser Family 2015).

The federal government should implement both the short-term and long-term solutions for the costs control strategies that will assist in reducing the constant increase of the Medicare costs. The first strategy is to implement both the administrative controls and pricing control to enhance the Medicare reform. It is essential to realize that Part A and Part B Medicare payment services are financed through price caps and complex formula. Michael Porter affirms that the system delivers neither economic efficiency and value for Medicare dollars. (Porter, & Lee, 2013). Thus, the government should implement the integrated care management system that will be able to lower the high costs of Medicare. (Golberstein, Kayo, Yulei, et al.2013). The federal government should implement the following short-term reform to control high of Medicare costs. The government should eliminate the HI (Hospital Insurance) trust fund in the next few years, and creating Part A premium temporary Medicare that should be modest which will assist in eliminating or reducing the HI cash flow deficit. Moreover, the federal government should gradually raise contribution received from the beneficiaries the premiums of Medicare Part B /Part D from 25% to 35%. The method should be implemented gradually over 5 or 6 years at the 2%-point yearly.

Moreover, the federal government should combine the Part A and Part B of the Medicare into a single program to deliver the uniform health co-insurance system. Typically, the co-sharing will reduce the insurance premiums, and the method will save the federal government $114 billion of Medicare costs between 2015 and 2023.

The government should also reduce the taxpayer subsidies for the wealthy American Medicare recipients. In the United States, 5% of Medicare recipients earn an average annual income of more than $85,000. Thus, the government should lower the Medicare subsidies for recipients earning between $50,000 and $85,000. Moreover, people earning above $85,000 should be asked to pay 10% more of Medicare costs.

More importantly, the government should mandate all the hospitals under the Medicare program to implement the electronic medical prescription and EHR (Electronic Health Records) to reduce the costs of administration while enhancing the patient's safety and quality care. The Health Information Exchange and EHR have been identified as the effective tools that can be used to reduce Medicare costs because it will reduce the administrative burden. (Blum, 2011). For example, Missouri state has been able to save more than $280 million within four years by implementing electronic health solution. The EHR will also assist the healthcare providers to communicate to one another effectively as well as reducing unnecessary paperwork. The system will also assist in eliminating the inefficient manual processing. It is estimated that the government should be able to save over $10 billion within 10 years by adopting the EHR for all hospital implementing the EHR.