Spending Savings

Medicaid & Malpractice

Debt Level 136.8%

In addition to Medicare savings, the plan assumes savings in the Medicaid program and through malpractice reform. Medicaid is a joint Federal-state health care program that pays for the health care services for primarily low-income people. In 2021, the Federal spending for Medicaid amounted to $521 billion. Medicaid has grown rapidly since its creation in 1965, nearly doubling in just the past decade. The Federal Government provides a match for state spending which varies by state. To enhance the size of the Federal match, states began taxing Medicaid providers and then returned those collections to the providers in form of higher Medicaid payments, which had the effect of increasing the Federal match. Congress moved to limit provider taxes in the 1990s but also included a safe harbor provision that limits provider taxes to 6% of the provider’s net patient revenues. Our proposal would eliminate that safe harbor and save a little over $400 billion over ten years.

In order to protect against medical malpractice lawsuits, medical care providers purchase malpractice insurance, which has the effect of increasing the cost of health care and can also limit the availability of health care services. We recommend a recent proposal by the CBO[4] which would cap awards for non-economic damages at $250,000 and cap punitive awards either at $500,000 or twice the amount of economic damages, whichever is greater. Adopting this change would produce a little over $60 billion in savings over ten years. In addition to reductions in federal spending, CBO estimates that the change would reduce health care costs generally by 0.5%, which would produce savings to the Federal Government, state governments, companies, and individuals.

Reduction in debt in 2052 (including debt service):

-6.8% of GDP

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