Medicare is currently the third most expensive line-item in the federal budget, behind Social Security and national defense, but it will soon pass defense and rank second. The Congressional Budget Office (CBO) projects Medicare's costs will rise from 3.1 percent of GDP today to 5.5 percent in 2040. Medicare reform is necessary to prevent federal deficits and debt from spiraling out of control over the coming years.
Most ideas for changing Medicare seek to improve the program's operational efficiency without altering its basic design. For instance, many Republicans in Congress would like to inject more market-based incentives into Medicare to slow cost growth. Those reforms are necessary, but the savings, while potentially significant, do not measure up to the financial problem. Congress needs to consider more far-reaching changes too.
