Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



3 Ways to Cut Medicare Spending

As reported in the New York Times, Medicare spending seems to be coming under some control. Medicare spending is expected to make up 4.6% of GDP in 25 years, as opposed to the 4.9% the Congressional Budget Office (CBO) had predicted last year.

And the Kaiser Family Foundation notes that Medicare appears to be spending about $1,000 less per person this year than had been previously expected when this year's numbers were forecast in 2010.

Time to break out the champagne?

Not so fast.

The CBO notes that its staff isn't sure about why the spending slowdown has occurred or how long it'll stay.

3 ways to reduce Medicare spending
However, there are some easy ways to potentially reduce Medicare spending over the long haul -- things that we should be watching for over the long term to hopefully help bend that cost curve, control spending, and improve care outcomes.

The first is investments in Accountable Care Organizations (ACOs for short). ACOs take many different shapes and forms, but the Pioneer ACO Model, which Medicare is 'pioneering' (pun obviously intended) gives providers bonuses based on the money they save Medicare each year. A hospital might earn a bonus by systematically helping patients manage chronic diseases, potentially helping prevent a costly emergency room visit. Participating providers have to achieve certain quality targets as well to ensure that the care given doesn't sacrifice effectiveness for cost.

The second is negotiating drug prices. That's right, Medicare can't do that. Europe does. Pharmacy Benefits Managers like Express Scripts  (NASDAQ: ESRX  ) make money by doing it (Express Scripts is perhaps best known for its fight against Gilead Sciences' hepatitis c drug Sovaldi, although it's been taking a hard line on pharmaceuticals for years, perhaps most notably banning GlaxoSmithKline's Advair in favor of AstraZeneca's Symbicort). If Medicare could, there could be some serious money saved.

And thirdly, reducing Medicare Advantage outlays. According to MedPac, Medicare currently pays 6% more on average for each member on a Medicare Advantage plan than in traditional fee-for-service Medicare.

Will all three, or any of these three, actually come to fruition? Who knows. But a serious conversation about Medicare spending will likely focus on some of these huge factors.

In the video below, Motley Fool health care analysts Michael Douglass and David Williamson lay out some of the potential winners and losers if Medicare successfully uses one or more of these strategies to reduce cost. 

Another revolutionary opportunity -- with 1 clear winner
The best investors consistently reap gigantic profits by recognizing true potential earlier and more accurately than anyone else. Let me cut right to the chase. There is a product in development that will revolutionize not just how we treat a common chronic illness, but potentially the entire health industry. Analysts are already licking their chops at the sales potential. In order to outsmart Wall Street and realize multi-bagger returns you will need The Motley Fool's new free report on the dream-team responsible for this game-changing blockbuster. CLICK HERE NOW.

Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 3035640, ~/Articles/ArticleHandler.aspx, 9/4/2015 12:41:34 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Michael Douglass

As the Motley Fool's Health Care Editor/Analyst, I focus on all things health care -- although my greatest interest is in the megatrends reshaping the American health care system, including the Affordable Care Act, Accountable Care Organizations, a shifting regulatory landscape, and the new drug discoveries fundamentally changing disease management and treatment.

Today's Market

updated Moments ago Sponsored by:
DOW 16,093.29 -281.47 -1.72%
S&P 500 1,918.75 -32.38 -1.66%
NASD 4,681.29 -52.21 -1.10%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/4/2015 12:24 PM
AET $113.68 Down -1.50 -1.30%
Aetna, Inc. CAPS Rating: ****
ESRX $82.74 Down -1.12 -1.34%
Express Scripts CAPS Rating: *****
UNH $112.09 Down -1.90 -1.67%
UnitedHealth Group CAPS Rating: *****