The incoming Trump Administration has been sending mixed signals about the fate of Medicare. But if Trump advisers and GOP lawmakers are serious about slashing government spending it is hard to see how they will ignore the program, which last year cost $850 billion and accounted for about one out of every six dollars the federal government spent.
Trump’s problem: Cutting Medicare spending risks the fury of both recipients and providers. And any effort to accelerate the shift to Medicare Advantage, which has strong support among Trump advisers, could increase federal spending even as it limits the government’s role in insuring health care. And that paradox could generate deep divisions within the new administration and among congressional Republicans.
Throughout his presidential campaign, Trump mostly vowed “no cuts” to Medicare but sometimes hinted at program reductions aimed at “bad management.”
What Would Trump Cut?
But what could that mean? Medicare payments go to providers, such as doctors, hospitals, home health care companies, skilled nursing facilities, and drugmakers, as well as private insurance companies. And while there is enormous waste in the health care system, Trump will find that addressing overspending without limiting patient care will be a massive, and unpopular, challenge.
Vivek Ramaswamy and Elon Musk, who run Trump’s Department of Government Efficiency, or DOGE, appear to be targeting Medicare spending, along with Social Security and Medicaid. While their effort is not a formal government initiative of any kind, it could be highly influential.
Earlier this month, Ramaswamy said, “Right now, there are hundreds of billions of dollars flowing out the door of all of those programs ending up in the hands of people who, even under the statute, should not be receiving those payments.”
Provider Cuts
Cutting payments to doctors and other Medicare providers may have some support from Robert F. Kennedy Jr., Trump’s nominee to run the Department of Health and Human Services. But it would generate intense blowback from the medical lobby.
Another challenge: Cutting compensation to primary care doctors and geriatricians surely won’t alleviate the growing shortage of physicians in those practices. The Trump Administration could try to boost their compensation while trimming payments to others, but that would be tough to pull off. Imagine the public reaction if Trump tries to cut payments to, say, cancer docs.
Medicare Advantage
Instead, much of the debate next year could focus on Medicare Advantage managed care plans, mostly run by private insurance companies. Currently, about 33 million people, or more than half of Medicare beneficiaries, are enrolled in MA.
In theory, by fully integrating health care and sometimes providing limited personal care, MA should be a tool for both saving money and improving health outcomes.
But in reality, MA may be more costly than original Medicare while its benefits to patients are uncertain. The Medicare Payment Advisory Commission, a non-partisan group that advises Congress, estimates that Medicare pays MA plans 122 percent of what original Medicare spends on similar patients.
Vought And Oz
Still, influential Trump advisers want to accelerate the shift from original Medicare to MA. For example, Project 2025, the conservative manifesto for a second Trump term, recommended automatically enrolling all seniors in MA plans unless they choose to opt into traditional Medicare. At the same time, the blueprint called for deregulating the plans, giving them more flexibility to operate and, perhaps, boost profits.
While Trump disavowed Project 2025 during the campaign, many of its authors advised him in his first term and will play key roles in his second.
Russell Vought, a co-author of Project 2025, will return in Trump’s second term as the powerful director of the Office of Management and Budget. In Trump’s first term, Vought pushed substantial reductions in Medicare spending, mostly by cutting payments to doctors and hospitals.
Mehmet Oz, Trump’s nominee to run the Centers for Medicare and Medicaid Services (CMS) which oversees both programs, has been an enthusiastic supporter of MA plans, often promoting them on his TV shows. In a 2020 Forbes column, Oz proposed covering all Americans, except those on Medicaid, with MA-type plans funded with a new 20 percent payroll tax.
Backlash
While the costs and benefits of MA are mixed, prior authorizations for care and limited access to in-network providers have generated a strong public backlash against private health insurance of all kinds, especially managed care. While social media is not a serious indicator of public opinion, the response to the recent assassination of a top United Healthcare executive may be a warning of the political risks to those looking to further expand the use of MA.
And then there are the budgetary effects. If Republicans want to enhance incentives for people to enroll in MA, they’ll likely have to increase per capita Medicare spending on the plans. That might accelerate the shift from government coverage to private insurance, a goal many Republicans favor, but it will boost federal spending and further add to the nation’s debt.
If Trump and congressional Republicans are going to try to cut Medicare costs in some way, and it is a good bet they will, they may fall into a dangerous Medicare Advantage trap.
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