by Robert E. Moffit, Alyene Senger
The Heritage Foundation
March 22, 2013
Backgrounder
The quickly rising costs of Medicare are a burden on all Americans. The traditional program’s fee-for-service payment system, in which doctors and hospitals receive a fixed payment for each procedure and service, encourages an increase in the volume of services requested, which encourages excessive spending. The system also does not ensure quality, which contributes to unnecessary costs and higher spending as well. Medicare is a huge entitlement program, and its reform must be undertaken carefully. Congress and the Administration should undertake short-term reforms of traditional Medicare that will contain costs, while transitioning, prudently but quickly, to a more effective system that will not only control costs over the long term, but will also provide high-quality health care to a rapidly growing Medicare population.



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