With deficit concerns top of mind as Senate Republicans go deep into reconciliation bill-drafting mode, Medicare is increasingly coming up as a potential pay-for, particularly with several GOP senators looking to scale back the size of proposed Medicaid and food stamp cuts while expanding some tax breaks.
The Congressional Budget Office on Thursday confirmed the cost of the House-passed budget package would approach $3 trillion over a decade once added interest payments on the debt are factored in. Meanwhile concerns about shifting Medicaid costs to states haven’t abated, and at the same time, it was becoming clear the Senate Agriculture Committee was going to have to significantly reduce the cuts in their panel’s jurisdiction that came over from the House.
Senate Majority Leader John Thune, R-S.D., for the first time acknowledged that Medicare, which covers about 20 percent of the U.S. population, mainly seniors, may be looked at. “I think anything we can do that’s waste, fraud and abuse are open to discussions,” Thune said when asked about whether Medicare cuts are on the table.
While talks have focused on Medicaid, the joint federal-state health insurance program for lower-income Americans, Thune said “we’re open to suggestions that people have about other areas where there is clearly waste, fraud and abuse that can be rooted out in any government program.”
Medicare Advantage
Multiple Republican senators Thursday highlighted federal spending on Medicare Advantage, the private alternative to traditional Medicare that covers half of the Medicare population. Medicare Advantage plans have faced scrutiny from government watchdogs, regulators and budget hawks for driving up Medicare spending.
“You can’t fraud the taxpayers,” said Sen. Charles E. Grassley, R-Iowa, referring to what’s known as “upcoding” in Medicare Advantage plans. That’s a practice in which insurers participating in the program can make beneficiaries appear sicker than they are to generate higher payments from Medicare. Insurers argue they are simply better at understanding the health needs of patients than traditional government-run Medicare.
But Medicare Advantage plans have routinely outstripped traditional Medicare when it comes to federal costs in recent years: an $83 billion difference in 2024, for example, according to the Medicare Payment Advisory Commission. Part of the difference is benefits that traditional Medicare doesn’t provide, like dental and vision coverage.
But upcoding has drawn criticism from both sides of the aisle, including several GOP members of the Senate Finance Committee including Grassley, Roger Marshall of Kansas and Bill Cassidy of Louisiana, who has a bill on the topic with Sen. Jeff Merkley, D-Ore.
Marshall said Wednesday that he wanted to crack down on upcoding as part of the upcoming reconciliation bill, in part to help push the size of the overall cuts higher.
Centers for Medicare and Medicaid Services Administrator Mehmet Oz, who lunched with Senate Republicans on Wednesday, has started auditing Medicare Advantage plans for signs of questionable upcoding — part of what he calls a commitment to “crushing fraud, waste and abuse across all federal care programs.”
That auditing program is currently the subject of litigation between CMS and Humana, a major Medicare Advantage insurer. And Oz committed to reducing Medicare Advantage spending in his confirmation hearing, saying “we’re actually apparently paying more for Medicare Advantage than we’re paying for regular Medicare. So it’s upside down.”
Sen. Ron Johnson, R-Wis., said he’d be open to codifying the audits being done by CMS and that President Donald Trump, in a meeting with Finance Republicans on Wednesday, was open to looking at Medicare.
“[He] doesn’t want to cut benefits. I don’t think Republicans do either. But anything that’s really abusive, fraudulent, wasteful in Medicare” should be examined, Johnson said.
Sen. Tommy Tuberville, R-Ala., who is running for governor, is wary of costs being shifted onto his state and others through provisions targeting Medicaid and the Supplemental Nutrition Assistance Program, as the House has passed.
“States cannot do that, we can’t afford it,” Tuberville said. “We don’t have printing machines back in our state, we can’t print the money.” An alternative, he said, was to crack down on Medicare Advantage upcoding.
“Any waste and fraud, we can’t afford it,” Tuberville said. “There’s no way we can stay on this same path, Medicare, just reform it all.”
First insurers, now hospitals?
Targeting Medicare Advantage would undoubtedly spark fierce lobbying pushback from the insurance industry. If that wasn’t enough, some GOP senators would pick a fight with another influential health care lobby: hospitals.
Sen. Rick Scott, R-Fla., said lawmakers should align Medicare payments for services rendered in hospital outpatient departments with the lower reimbursements for similar services in independent physician offices.
The issue has gained attention from lawmakers in recent years trying to cut Medicare costs, with the Republican-controlled House passing legislation in 2023 to require Medicare Part B payments for drug administration be the same amount regardless of the setting it is delivered in. Other proposals have gone further, applying to a broader segment of Medicare-covered services.
“If you can get a better price with better access, with better service, what are you going to do? We ought to be doing the same thing with every government program,” said Scott.
An options paper circulated by House Republicans earlier this year listed Medicare “site neutrality” on the menu, estimated to save $146 billion over a decade by trimming hospital payments. But the House GOP shied away from Medicare cuts in their reconciliation package.
But some Senate Republicans acknowledged the political peril of making any changes to Medicare, which is not only popular among beneficiaries but has the backing of powerful special interest groups that make money from the program.
“If you never want to win another election again, sure you could do that,” said Sen. Josh Hawley, R-Mo., adding that he is a definite “no” on any cuts to Medicare, including Medicare Advantage. “After George W. Bush tried to privatize Social Security in 2004, Republicans didn’t win the popular vote for 20 years. Let that sink in.”
Democrats, meanwhile, have already used the debate within the Republican caucus to accuse them of trying to cut Medicare.
“Medicare is on the chopping block,” said Senate Minority Leader Charles E. Schumer, D-N.Y. “For Republicans to even suggest Medicare be cut to bankroll billionaire tax breaks is frightening and revolting.”
Cost-share issues
Still, the issue is percolating because of concerns about the effects of Medicaid and SNAP cuts in the House bill.
Hawley and a few others have consistently cautioned against the scope of cuts to Medicaid the House sent over. Tuberville and Sen. Lisa Murkowski, R-Alaska, on Thursday each cited the impact on their states’ budgets, while Murkowski added that removing Medicaid support would push more people into the more expensive individual market.
Murkowski has pushed her leadership to consider extending bigger subsidies for buying private insurance on the 2010 health care law’s exchanges that would otherwise expire at the end of this year. House GOP leaders didn’t include the extension in that chamber’s bill, which the CBO said could result in over 4 million people losing coverage, raising the total number of uninsured to 11 million as a result of the House bill.
Another hurdle for Senate Republicans is SNAP. The House bill contains over $150 billion in cuts to that program by shifting that burden onto the states, provisions which don’t appear to have much traction in the Senate.
“I have concerns,” Senate Agriculture Chairman John Boozman, R-Ark., said Thursday. “And more importantly, I think there are members of our conference that have concerns.”
Tax talks
Moreover, Senate Republicans are pushing to expand the bill’s tax package by making several business tax breaks permanent, which would also add to the price tag.
The House bill would revive those lapsed breaks for five years, which Trump agreed with at Wednesday’s meeting with senators, arguing the temporary nature would do more to juice business investment earlier – mainly during his four-year term.
Johnson, R-Wis., said Senate Finance Republicans had a “legitimate debate” during their Wednesday afternoon meeting with Trump about the issue.
“I thought it was an interesting argument that is kind of hard to refute. Keep it short, that will spur [growth],” Johnson said. “We’d like to get the economy as strong as possible, as quickly as possible.”
But Republicans on the tax-writing committee are still committed to making permanent the business tax credits, including full, upfront deductions of research and development investments, purchases of equipment and machinery and interest payments.
“We’re moving forward. The Senate input would be to make all of those permanent. And the president is open to that,” said Sen. Steve Daines, R-Mont.
Lia DeGroot and David Lerman contributed to this report.
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