Analysis: A More Competitive Medicare Will Deliver Savings for Beneficiaries, Taxpayers

A Congressional Budget Office study has found that modernizing Medicare to include a competitive system of health plans will not only make the program more fiscally sustainable but will also reduce costs for both taxpayers and Medicare beneficiaries.  The Heritage Foundation released its analysis of the late 2013 CBO study this February.

The Heritage analysis noted that a modernized Medicare emphasizing consumer choice and private plan competition, in which the federal contribution to beneficiaries is based on the average bid of competing plans, would reduce total Medicare spending by $15 billion in 2020.  At the same time, beneficiaries’ total payments — premiums and out-of-pocket costs — would decline by about six percent.

The findings reflects CBO’s enhanced ability to project how insurers and consumers will respond to a system in which health plans compete on the basis of quality and value.

The CBO study can be found here.  The Heritage Foundation analysis can be found here.