Republican ideas to reform Medicare could rile healthcare industry

3 min
October 27, 2022
By Rachel Cohrs

Democrats are suddenly blasting Republicans on the campaign trail over a surprising new topic: their plans to reform Medicare.

Touching any kind of entitlement spending is generally unpopular with voters, particularly ahead of a midterm election. Republicans’ official campaign platform provides scant detail about the issue, beyond a vague promise to “save and strengthen” Medicare and ensure its financial solvency.

But a large caucus of House Republican lawmakers produced a policy paper earlier this year that outlined several concrete ideas to change Medicare that would upend the status quo for the entire healthcare industry, and beneficiaries as well. The proposals include raising the eligibility age for the program, encouraging more competition between traditional Medicare plans and private plans, decreasing what Medicare pays hospitals for off-site services, and slashing subsidies to insurers and hospitals.

Many of these ideas would cross powerful health insurance and hospital interests, which could make them even more difficult to enact politically.

While congressional Republicans could have more leverage over Congress’ policy agenda after the midterm elections, it’s unclear how much they could accomplish over the next two years with a Democrat in the White House. Changes to the program over the next two years would also likely require the buy-in of some Senate Democrats.

Increasing eligibility age

One of Republicans’ most controversial proposals is to increase the eligibility age for Medicare by two years to age 67, in line with the full Social Security retirement age.

That would shift 65- and 66-year-olds into other health insurance plans — either Medicaid, employer plans, or Obamacare plans. Some of those people could also end up uninsured.

Private insurers and employers would likely lose money under that arrangement, because it would add more people with relatively expensive health needs to their insurance plans, which would raise costs and premiums. But hospitals and physicians could benefit, as private insurance plans usually pay higher rates than Medicare.

Though it’s possible that the federal government could save some money by offloading seniors from the Medicare program, some would likely still receive subsidies from the Medicaid program or the Affordable Care Act exchanges.

“I think on the whole it would result in greater spending on national health expenditures,” said Cristina Boccuti, a director of health policy at the West Health Policy Center, a nonpartisan nonprofit focused on lowering healthcare costs.

Premium subsidies

Republicans envision a program where each Medicare beneficiary gets a premium subsidy from the government each year and can use it to apply to either a federal Medicare plan or a private one under the Medicare Advantage program.

One big change under the GOP approach would be that premiums for the federal government-run plan could vary across the country, said Gretchen Jacobson, the vice president of Medicare at The Commonwealth Fund.

Interestingly, the amount of premium subsidies a beneficiary would receive would depend not only on income, but also on their wealth and assets.

“I’m actually a little surprised at the assets part of it because it’s so very difficult to measure an asset that hasn’t been sold,” said Joseph Antos, a senior fellow at the American Enterprise Institute, a conservative think tank.

Site-neutral reforms

The Republican lawmakers also suggested further pursuing a Trump-era policy that would have paid physician services at the same rates whether they’re paid to an independent physician practice or one owned by a hospital.

The policy suggests expanding the so-called “site-neutral” payment policy, which hospitals oppose, throughout the Medicare program.

It’s just kind of a commonsense expansion if we’re doing it for new hospitals, that we would want to apply it to everyone else,” said Jackson Hammond, a healthcare analyst at the American Action Forum, another conservative think tank.

Cutting subsidies to insurers and providers

Insurers, accountable care organizations and teaching hospitals would also be on the chopping block under Republicans’ cost-cutting ideas.

Republicans proposed slashing federal subsidies for the debt hospitals take on when Medicare patients don’t pay their share of their medical bills. Additionally, they suggest decreasing the federal subsidies that help hospitals train student doctors by subjecting it to annual approval, assigning an oversight agency to the program, and capping its growth. One of hospitals’ top advocacy priorities year after year has been growing the program.

Insurers could see fewer quality bonus payments, as well. The document specifically mentions cutting bonuses for Medicare Advantage plans.


Cristina Boccuti
Director, Health Policy