On March 10, the Congressional Budget Office (CBO) released a report examining options for reducing the federal deficit, including implementing health care spending cuts.  Through 2021, the CBO estimates that increasing states’ share of Medicaid costs would save $181 billion, while offering state block grants for Medicaid long-term care costs would save an additional $287.4 billion.  Over the same period, the authors also project that increasing Medicare Part B premiums to cover 35 percent of program costs would save $241.2, while raising the Medicare eligibility age to 67 would save $124.5 billion.  Finally, the CBO estimates that reducing Medicare and Medicaid payments in geographic areas with high health spending would save $47.6 billion through 2021.

From the report: 

The choices facing the 112th Congress come at a time when the federal government’s debt has increased dramatically in the past few years and when large annual budget deficits are projected to continue indefinitely under current laws or policies. If current laws remain unchanged, deficits will total $7 trillion over the next 10 years, the Congressional Budget Office (CBO) projects; if certain policies that are scheduled to expire under current law are extended instead, deficits may be much larger. Beyond the coming decade, the aging of the U.S. population and rising health care costs will put increasing pressure on the budget. If federal debt continues to expand faster than the economy—as it has since 2007— the growth of people’s income will slow, the share of federal spending devoted to paying interest on the debt will rise more quickly, and the risk of a fiscal crisis will increase.

This report presents 105 illustrative options that would reduce projected budget deficits. As in past reports, the options cover an array of policy areas—from defense to energy to entitlement programs to provisions of the tax code. The budgetary effects shown for most options span the 10 years from 2012 to 2021 (the period covered by CBO’s January 2011 baseline budget projections), although many options would have longer-term effects as well.

Full Report: Reducing the Deficit: Spending and Revenue Options (PDF | 2.36 MB) 

Congressional Budget Office. (2011). Reducig the deficit: spending and revenue options.