FEDERAL HEALTHCARE PROGRAMS
America already has the most expensive healthcare system in the world, yet such spending is projected to continue to rise rapidly. According to the Congressional Budget Office (CBO), spending on major healthcare programs is projected to be the largest programmatic contributor to rising debt over the next 30 years, increasing by 56 percent from 2025 to 2054.
Improving the system to provide high-quality care at lower costs is a key part of our nation’s long-term fiscal well-being. The proposals generated by participants in Solutions Initiative 2024 impact both spending and revenues for core healthcare programs.
Comparison Table
Comparison of Federal Healthcare Program Proposals
Summary: How the Proposed Healthcare Plans Compare
Medicare
AAF, AEI, and MI propose converting Medicare to a “premium support” model in which seniors receive subsidies to purchase their own insurance from competing private health plans.
AEI, PPI, and CAP propose new programs to consolidate coverage for older Americans. AEI would combine benefits under Parts A, B, and D while capping out-of-pocket costs at $8,500 and simplify cost-sharing arrangements. Under PPI’s “Medicare One” proposal, Parts A, B, and D of Medicare would also be streamlined — with one premium, annual deductible, copayment rate, and an out-of-pocket cap that covers costs for hospitals, physicians, and prescription drugs. CAP similarly proposes a “Medicare 2.0” program that would cover those parts of Medicare as well as dental, vision, hearing, and long-term services, which PPI would only cover if fully financed by increasing income-based premiums. CAP’s plan also limits out-of-pocket expenses for enrollees (at $0 for those with low incomes and $5,000 otherwise). Finally, EPI proposes to universalize access to basic health insurance.
Other proposals related to Medicare include containing costs through site-neutral payments (AEI, BPC, and PPI), leveraging competition between Medicare and Medicare Advantage (MA) to price plans (AAF, BPC, and PPI), and addressing improper MA payments (BPC, CAP, and PPI).
Medicaid, CHIP, and Health Exchanges
Three organizations (AAF, AEI, and MI) propose implementing caps on per-enrollee costs for Medicaid. AAF and AEI would set a cap on the overall rate of growth in federal Medicaid spending per enrollee based on the consumer price index (CPI-U) plus one percentage point. MI would implement different caps for different types of beneficiaries (children, adults, aged, or blind and disabled) — with growth in those limits ranging from 3.5 percent to 4.0 percent annually. BPC sought scoring of a federal Medicaid cap as an exercise to assess the effect on federal spending and to begin to understand the impact on beneficiaries, but have not officially considered such an approach. PPI would not reduce net Medicaid spending but would crack down on the use of provider taxes by states to inflate costs.
Two organizations proposed extending the expanded subsidies for purchase of healthcare in marketplaces; CAP would fully extend them and PPI would partially do so.
Healthcare Revenues
AAF, CAP, MI, and PPI propose changes to the tax that supports the Hospital Insurance (HI) Trust Fund — AAF and PPI would repeal the additional 0.9 percent Medicare surtax for people with high incomes, but PPI also would phase out the HI tax over 5 years. CAP would raise the HI surtax. MI would increase the total HI payroll tax rate by one percentage point.
EPI would institute a new 5 percent payroll tax, levied on employers, which would help cover costs for their universal health insurance program.
Three organizations (AEI, BPC, and MI) would limit the exclusion of employer-sponsored health insurance at a dollar amount equivalent to a certain percentile of premiums — AEI at the 75th percentile of premiums, BPC at the 80th percentile, and MI at the 50th percentile.
Further Reading
Strengthening Medicare: Options to Increase Revenues
Most options to increase revenues relate to the payroll tax, since that is where most funding for the trust fund stems from today.
Strengthening Medicare: Options to Reduce Costs
There are different approaches to reduce Medicare spending, and any reform option that would reduce Part A costs would help extend the longevity of the HI Trust Fund.
Budget Basics: Medicaid
This budget explainer describes what Medicaid is, how it is financed, and who benefits from it.