Medicare is in fiscal freefall. According to the 2024 Medicare Board of Trustees’ report, the Medicare Part A (Hospital Insurance; HI) trust fund will run out of money by 2036. Spending will begin exceeding revenue by 2030, and the program will have to tap into reserves to fund benefits. Just six years later, taxpayer revenues trickling into Part A won’t be enough to fully fund benefits.
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Recent reporting shows that wasteful policies are contributing to the deluge of red ink. According to a recent investigation by The Wall Street Journal (WSJ), “Insurers pocketed $50 billion from Medicare for diseases no doctor treated.” And, Medicare continues to pay wildly different rates depending on where care is delivered. It’s time to deliver some fiscal sanity to an exorbitantly expensive (and important) entitlement program.
Taxpayers already spend $1 trillion per year on Medicare, and that figure is expected to double in ten years. Plenty of this spending is tied up in wasteful reimbursements. A July WSJ investigation of billions of Medicare records found, “Private insurers involved in the government’s Medicare Advantage program made hundreds of thousands of questionable diagnoses that triggered extra taxpayer-funded payments from 2018 to 2021…” The culprit was a system that enabled insurers to tack on diagnoses to the ones submitted by patients’ doctors. The reporters note, “Medicare gave insurers that option so they could catch conditions that doctors neglected to record. The WSJ’s analysis, however, found many diagnoses were added for which patients received no treatment, or that contradicted their doctors’ views.” Medicare wasted a total of $50 billion over the 2018-2021 period on these flimsy diagnoses.
Medicare also creates considerable waste by reimbursing different amounts of money for the same services rendered at different types of healthcare facilities. It makes little sense that taxpayers pay 141 percent more for the first hour of chemotherapy in a hospital than that same hour at a doctor’s office. Hospital outpatient departments can bill Medicare more than $1,000 for an echocardiogram, a service that costs taxpayers just $350 at a doctor’s office. In a 2022 report to Congress, the Medicare Payment Advisory Commission stated the obvious: “Medicare should base payment rates on the resources needed to treat patients in the most efficient setting. If the same service can be safely provided in different settings, a prudent purchaser should not pay more for that service in one setting than in another.”
Ignoring this common-sense idea not only wastes taxpayer dollars but encourages consolidation in the medical sector. While there’s certainly nothing wrong with efficiency-minded mergers that make market sense, pulling the levers of government to make that happen can result in disaster. Because of administrative headaches and physician burnout, it’s becoming considerably harder for patients to find independent practices catering to their needs. According to a survey by the American Medical Association, 2020 was the first year “in which less than half (49.1 percent) of patient care physicians worked in a private practice—a practice that was wholly owned by physicians. This marks a drop of…11 percentage points since 2012.” Status-quo payment policies exacerbate this trend, harming patients in the process. Patients should have access to a mix of healthcare practices dictated by cost and quality of care, not the bizarre intricacies of government reimbursement policies.
Even though successive presidential administrations have advocated for reform, change remains elusive. Unfortunately, lawmakers are determined to kill any prospect of reform due to vehement opposition by special interest groups such as the American Hospital Association.
Policymakers should reverse course and make Medicare a more sustainable and taxpayer-friendly program. This would entail giving doctors more control over the Medicare Advantage billing process and embracing a site-neutral payments system. Taxpayers cannot wait for this massive entitlement program to go broke on their dime.
David Williams is the president of the Taxpayers Protection Alliance.
