In 25 years Medicare spending is projected to reach one-quarter of all federal expenditures, about 6 percent of gross domestic product (GDP). Several proposals to reduce the growth of Medicare expenditures have been debated in recent years. These include:
1) Mean-tested premiums for Medicare Part A Hospitalization.
2) Premium support, providing seniors a credit to purchase private plans.
3) Raising the Medicare eligibility age to 67.
Means testing Medicare Part A premiums only reduces Medicare expenditures by 2.4 percent through 2037. Increasing the age of Medicare eligibility to age 67 reduces the cost by three times that amount — 7.2 percent. The proposal with the most potential was premium support. If a tax credit was tied to the growth in the economy, the savings is equal to 5.4 percent. However, if the premiums credit was tied to the consumer price index (i.e. merely adjusting for inflation), the program would save 24 percent.
Source: Health Affairs.