Medicare Cost Reform: Strategies to Control Rising Spending
This paper examines the growing financial burden of the United States Medicare program and recommends policy reforms to control escalating costs. Medicare, the federally administered health insurance program serving more than 55 million Americans aged 65 and older as well as individuals with disabilities, spent $527 billion in 2015 and is projected to reach $1.1 trillion by 2024. The paper proposes both short-term and long-term solutions, including restructuring premium contributions, combining Medicare Parts A and B into a unified program, reducing subsidies for high-income recipients, and mandating the adoption of Electronic Health Records across Medicare-participating hospitals to lower administrative costs and improve care quality.
- Introduction to Medicare and the Cost Problem: Overview of Medicare's purpose, funding, and rising costs
- Projected Medicare Spending Growth: Data and projections on Medicare spending through 2024
- Short-Term Reform Strategies: Administrative and pricing controls to reduce Medicare costs
- Restructuring Premiums and Subsidies: Raising beneficiary contributions and reducing high-income subsidies
- Electronic Health Records as a Cost-Reduction Tool: EHR adoption to cut administrative burden and save costs
- Conclusion: Summary of reform recommendations for Medicare sustainability
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What makes this paper effective
- Uses specific spending figures and projections (e.g., $527 billion in 2015 rising to $1.1 trillion in 2024) to establish a clear, data-grounded problem statement.
- Balances short-term administrative fixes with longer-term structural reforms, showing awareness of both immediate and systemic policy challenges.
- Grounds each recommendation in a cited source, lending credibility to proposals such as EHR adoption and premium restructuring.
Key academic technique demonstrated
The paper demonstrates evidence-based policy argumentation: each proposed reform is paired with projected dollar savings or a supporting citation, allowing the reader to evaluate feasibility rather than simply accept the recommendation at face value. The direct quotation from the Kaiser Family Foundation report is used effectively to introduce precise per-capita growth figures that the prose alone could not convey as precisely.
Structure breakdown
The paper opens with a descriptive introduction establishing what Medicare is and why costs are a concern, then transitions into a single extended body section that moves from problem quantification (spending projections) to a sequenced list of reform recommendations. A brief conclusion restates the core findings. The structure is straightforward and well-suited to a policy brief format, with each recommendation building on the case established by the spending data.
Introduction to Medicare and the Cost Problem
Medicare is an American health program administered by the federal government that serves as health insurance for people aged 65 years and older. It is also designed for people with disabilities and individuals diagnosed with end-stage renal disease (Davis, Cathy, & Stuart, 2013). Medicare is currently funded through premiums, payroll taxes, and surtaxes drawn from general revenue. In 2015, over 55 million Americans enrolled in Medicare services, of whom 46 million were aged 65 and above and 9 million were younger individuals with qualifying disabilities or conditions.
On average, Medicare covers half of enrollees' health costs; enrollees must cover the remaining costs through separate insurance, supplemental insurance, or out-of-pocket payments. Since the program's inception, the cost of funding Medicare has continued to rise, and those rising costs are becoming increasingly burdensome for both current and future taxpayers. In 2015, the federal government spent $527 billion on Medicare, and that figure is projected to reach $1.1 trillion by 2024. The federal government is therefore required to implement reforms that address the problem of Medicare's escalating costs (Moffit & Senger, 2013).
The objective of this paper is to recommend solutions to the ongoing increase in Medicare costs.
Projected Medicare Spending Growth
Since the inception of the Medicare program, Medicare spending has continued to grow and is projected to keep rising in the future. As shown in Figure 1, actual Medicare spending increased from $446 billion in 2010 to $505 billion in 2014 (Moffit & Senger, 2013). Net outlays are projected to reach $866 billion by 2024. The Kaiser Family Foundation (2015) reports that projected Medicare spending is expected to grow by 4.1% between 2014 and 2024, compared to only a 1% increase in the preceding period between 2010 and 2014.
As the Kaiser Family Foundation notes:
"Between 2014 and 2024, the rate of Medicare per capita spending growth is expected to be 0.7 percentage points larger than projected growth in GDP per capita, while private health insurance per capita spending is expected to grow 1.3 percentage points faster." (Kaiser Family Foundation, 2015, p. 3)
Figure 1: Actual and Projected Net Medicare Spending, 2010–2024. Source: Kaiser Family Foundation (2015).
Short-Term Reform Strategies
The federal government should implement both short-term and long-term cost-control strategies to help reduce the constant increase in Medicare expenditures. The first strategy is to implement administrative controls and pricing controls that enhance Medicare reform. Medicare Part A and Part B payment services are financed through price caps and complex formulas. Michael Porter argues that this system delivers neither economic efficiency nor value for Medicare dollars (Porter & Lee, 2013). The government should therefore implement an integrated care management system capable of lowering Medicare's high costs (Golberstein, Kayo, Yulei, et al., 2013).
In the short term, the federal government should eliminate the Hospital Insurance (HI) trust fund within the next few years and create a modest temporary Part A premium for Medicare beneficiaries. This would assist in eliminating or reducing the HI cash-flow deficit. Additionally, the federal government should gradually raise the premium contributions received from beneficiaries under Medicare Part B and Part D from 25% to 35%, implemented gradually over five or six years at a rate of two percentage points per year.
Furthermore, the federal government should combine Part A and Part B of Medicare into a single program to deliver a uniform health co-insurance system. This co-sharing arrangement would reduce insurance premiums and is estimated to save the federal government $114 billion in Medicare costs between 2015 and 2023.
Conclusion
Medicare is a federal government health insurance program for people aged 65 years and above. Since the program's inception, the cost of Medicare has continued to increase and is projected to rise over the next ten years. This paper recommends a range of solutions to control these costs, including restructuring the program's premium and subsidy framework and mandating that all Medicare-participating hospitals integrate Electronic Health Records to reduce administrative expenditures and improve care delivery.
References
Blum, J. (2011). Improving quality, lowering costs: The role of health care delivery system. Center for Medicare Management.
Davis, K., Cathy, S., & Stuart, G. (2013). Medicare essential: An option to promote better care and curb spending growth. Health Affairs, 32(5), 901–909.
Golberstein, E., Kayo, W., Yulei, H., et al. (2013). Supplemental coverage associated with more rapid spending growth for Medicare beneficiaries. Health Affairs, 32(5), 873–881.
Kaiser Family Foundation. (2015). The facts on Medicare spending and financing. Kaiser Family Foundation.
Moffit, R. E., & Senger, A. (2013). Medicare's rising costs — and the urgent need for reform. The Heritage Foundation.
Porter, M. E., & Lee, T. H. (2013). The strategy that will fix health care. Harvard Business Review.
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