Medicare provides health insurance coverage for 66 million elderly and disabled Americans but faces serious short- and long-term financial pressures. To address these pressures, policymakers need to consider options that involve raising additional revenues, finding ways to generate program savings, or likely both. To the extent program savings are required, policymakers will generally want to avoid program changes that would reduce program benefits or could have adverse effects on patient care. Two areas where current Medicare payment rates have been deemed excessive and warrant payment reductions are Medicare Advantage and post-acute care (PAC). We considered overpayment to Medicare Advantage plans in an earlier brief. Here, we consider payments to PAC providers for services to enrollees in traditional Medicare (TM). We examine the spending of four types of PAC providers, their payments in relation to cost, and proposals to reduce Medicare spending for PAC. To provide more context for weighing these proposals, we examine which TM enrollees use PAC (by age and income) and how their total program spending is allocated across payers (Medicare, out-of-pocket, Medicaid, or supplemental plan).
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