Senator Hatch’s 5 Ideas to Reduce Federal Health Care Spending

Senator Orrin Hatch spoke on the floor of the Senate at the end of last week about the need for health entitlement reforms to be part of a deficit reduction package. As Ranking Member of the Senate Finance Committee, which has jurisdiction over Medicare and Medicaid, Senator Hatch’s speech is an important addition to the discussion around reforming federal health spending. According to a press release, Hatch said:

“If we’re serious about addressing our nation’s debt, Medicare and Medicaid need structural reforms. Today, I want to lay out five specific reform proposals that can help to rein in entitlement spending and put our nation on a better fiscal course. These are reasonable, rational ideas that have all enjoyed bipartisan support over the years. I believe they should be included in any deficit reduction package.”

Below are the policies Senator Hatch proposed:

1. Raise the Medicare eligibility age for seniors from 65 to 67 years of age. The eligibility age would gradually increase each year by two months until it reaches the new eligibility age of 67 years within a decade.

2. Limit Medigap plans from covering initial out-of-pocket expenses. The rationale here is that lowering unnecessary utilization will reduce Medicare costs over time.

3. Reform Medicare beneficiary cost-sharing and establish a catastrophic limit. Reform Medicare cost-sharing into a single combined annual deductible for both Medicare Part A and B services, establish a uniform coinsurance rate for amounts above the deductible, and institute an annual catastrophic cap.

4. Institute Medicare competitive bidding. The federal government would continue to define a package of required benefits that would constitute comprehensive Medicare coverage. However, each year, private insurers and traditional Medicare would submit bids to provide guaranteed Medicare benefits. The government would then provide, on behalf of each senior, a risk-adjusted payment based on those competitive bids in their area of the country. Seniors who choose plans that cost less than the government payment would get the difference back through lower premiums or additional health benefits.

5. Establish per capita caps on Medicaid spending. Medicaid spending limits (per-person cap) would be set by beneficiary eligibility categories and adjusted for patient health condition.

While it seems many would agree that Medicare reform is a topic that merits discussion and attention, it is difficult to know which, if any, of Senator Hatch’s proposals translates into the actual dollars and figures needed to sustain a Medicare program that is beneficial to the country’s aging population. These proposals are not brand new ideas, and, while not as dramatic as some other proposals, they each contemplate broad changes to Medicare. Interested parties will certainly have strong opinions about the effectiveness of these proposals. It will be interesting to see which proposals garner adequate support and whether the proposals take shape during this congressional session.


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