Recap: The US national debt (which excludes what the government owes itself) is expected to surpass the all-time record of 106% of Gross Domestic Product (GDP) by 2029. To put that in perspective, the average over the last 50 years was about 49% of GDP.  My goal is to cut $8.1 billion from the Federal Budget to stabilize the debt at 100% of GDP by 2035. In my first attempt at budget reduction, I saved $5.33 Trillion (T) and got the Debt down to 106% of GDP in 2035. Here’s a breakdown of specific budget options*:

1. Provide a Pathway to Citizenship for Undocumented Immigrants   $180Billion (B)

2. Require States to Cover One-Quarter of the Cost of Food Stamps  $250B

3. Reduce the Cost of the Federal Workforce  $170B

4. Reduce Federal Worker Retirement Benefits  $170B

5. Increase Medicare Premiums for High-Income Beneficiaries $220B

6. Ban State Matching Gimmicks $830B

7. Use Chained CPI to Measure Inflation  $350B       

8. Raise the Payroll Tax Cap to Cover 90% of Earnings $860B

9. Raise Payroll Tax Rate by 1%  $1510B

10. Repeal and Replace Student Debt Cancellation  $320B

11. Extend the Tax Cuts and Jobs Act for Taxpayers Earning Less Than $400,000 +$3030B

12.. Institute a Cap on the Health Insurance Tax Exclusion  $710B

13.. Enact a Value-Added Tax  $2910B

Not bad for a first try, but $5.33T is still $2.77T short of the $8.1T goal. It’s going to be a long slog to get that down to nothing. I’ll start with a couple Medicare and Medicaid (M&M) reforms that will save an additional $1.22T (give or take):

  • Reduce low-value care covered by M&M by 40% $950B

  • Reduce M&M improper  payments by 50%. $265B

To explain:

The Centers for Medicare and Medicaid Services (CMS) estimates that up to 25% of health care spending in the United States pays for low-value services, defined as unnecessary or ineffective procedures, tests, scans, and medications. A recent study estimates that in 2022, 71 per 100 Medicare beneficiaries received low-value services. In 2023, M&M spending reached $1.9T. Reduce by 10% = $190B. That’s just one year of savings. I’m going to assume five times that for total savings between now and 2035 = $950B.

The Department of Health and Human Services estimated a combined total of $105.4B in improper payments in fiscal year 2023 for provider fraud and abuse in M&M programs.  Reduce that by 50% = $53B (rounded to nearest billion). That’s just one year of savings. I’m going to assume five times that for total savings between now and 2035 = $265B.

$.950T + $.265T = $1.22T (rounded)

CMS is already taking measures to combat low-value care and improper payments, including the Wasteful and Inappropriate Service Reduction model (WISeR), a pilot program beginning in six states next year. WISeR will require prior authorization from providers for 17 kinds of services that are commonly overused or historically have had a higher risk of waste, fraud, and abuse. 

Ok -I took care of $1.22T, another $1.55T to go to reach the goal of cutting $8.1 trillion from the Federal Budget to stabilize the debt at 100% of GDP by 2035.

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* For additional details, see Part I and Part II of this series.

Links:

Low Value Care https://lowninstitute.org/lown-issues/low-value-care/

National Health Expenditures Fact Sheet https://www.cms.gov/data-research/statistics-trends-and-reports/national-health-expenditure-data/nhe-fact-sheet

Additional Actions Needed to Enhance Program Integrity and Save Billions  https://www.gao.gov/assets/gao-24-107487.pdf

WISeR (Wasteful and Inappropriate Service Reduction) Model https://www.cms.gov/priorities/innovation/innovation-models/wiser

Medicare Program Integrity and Efforts to Root Out Improper Payments, Fraud, Waste and Abuse https://www.kff.org/medicare/issue-brief/medicare-program-integrity-and-efforts-to-root-out-improper-payments-fraud-waste-and-abuse/