With Medicare insolvency expected in just a few years, lawmakers are zeroing in on ways to save the program money, including curbing prescription drug costs and increased oversight of privately run Medicare Advantage plans — though many of these measures face fierce industry opposition or are a nonstarter in Congress.

The trust fund backing Medicare's hospital benefit is forecasted to run dry in 2026 without government intervention. To date, Congress has not allowed the fund to become depleted, though deficit hawks and watchdogs warn the situation is becoming increasingly precarious. Lawmakers often leave action right up until the last minute, threatening financial stability for the vast majority of U.S. providers that accept Medicare.

Under current law, if the trust fund runs out, Medicare payments would be immediately slashed to levels that would be covered by incoming tax and premium revenues. Those lower payments would likely reduce care availability and quality for tens of millions of Americans, experts warn.

"Yes, it's years, but it's not that many years," Sen. Bill Cassidy, R-La., said Wednesday at a Senate finance subcommittee meeting on Medicare. "We should be addressing this in a more serious fashion than we are."

It would take an immediate reduction of $70 billion in Part A spending to put the program's financing on stable footing, testified Michael Chernew, chair of the Medicare Payment Advisory Commission. But the looming Hospital Insurance Trust Fund insolvency is only one part of Medicare's fiscal problem, Chernew said.

Witnesses said the program's flagging finances are just one symptom of overarching headwinds in the sector, including skyrocketing drug prices and rampant fraud and abuse.

For example, the program needs to identify and reduce payments to providers that are historically overpaid in fee-for-service Medicare, while curbing aspects of Medicare Advantage that insurers are taking advantage of to inflate their profits, Chernew said.

Medicare Advantage, Medicare plans administered by private insurance companies that can include extra benefits like dental or hearing, in its current form was created in 2003 with the hope the plans would expand coverage while lowering costs.

Instead, the program has cost Medicare billions of extra dollars, said Sen. Elizabeth Warren, D-Mass. Warren cited insurers "gaming the program's rules," including its risk adjustment process, how benchmarks are calculated and its quality bonus program, to obtain higher payments from the government.

"The Medicare system is hemorrhaging money on scams and frauds. It is critical that we stop the flow," Warren said.

Higher Medicare spending per MA enrollee contributed an estimated $7 billion in additional spending in 2019 alone, according to the Kaiser Family Foundation.

One problem is that the program incentivizes health insurers to code additional diagnoses for their members, categorizing them as sicker, in order to increase reimbursement.

In MA, Medicare pays insurers a fixed monthly amount per enrollee, but that sum is adjusted based on the characteristics of that enrollee, including their health diagnoses — basically, plans are paid more if their members are sicker. That gives payers a strong financial incentive to identify as many diagnoses as possible, Chernew said.

The problem compounds as the program grows, witnesses said. MA has snowballed over the past decade. In 2021, more than 26 million Medicare beneficiaries enrolled in the plans, making up 42% of the total Medicare population — and $343 billion (or 46%) of total Medicare spending.

The federal government has cracked down on such fraud in recent months. Of all fraud and false claims settlements the Department of Justice received in the 2021 fiscal year, about 90% involved healthcare companies.

A "growing number" of those matters involved MA, DOJ said in a Tuesday release. In 2021, for example, California giant Sutter Health paid $90 million to resolve allegations it was upcoding patients, resulting in inflated MA payments — the largest False Claims Act settlement against a health system for alleged MA fraud.

MA also pays more for plans that achieve higher ratings in its quality bonus program, but there's little evidence that results in better outcomes, Chernew testified.

One study published in December found the program led to no observable difference in plan quality, boosting calls from groups such as MedPAC to revise or eliminate it altogether.

"Medicare should pay them in a way that allows it to share in those efficiencies," Chernew said. The MedPAC head suggested lawmakers consider reforms to how regulators calculate benchmarks, adjusting payments to reflect diagnostic coding and restructuring the quality bonus program.

But insurers are unlikely to quietly accept any large-scale MA reforms, as many have been investing heavily in their MA plans in a bid to grow market share in the lucrative program. Humana, Cigna and CVS Health-owned Aetna all entered into new markets for 2022, facing off against program giant UnitedHealthcare along with new upstarts like Clover Health and Oscar Health to capture new members.

Witnesses at Wednesday's hearing also cited pharmaceutical costs as a key area of concern for Medicare's future. In the past year, almost 40% of people said they didn't take a medication because of the cost, testified Amy Kapczynski, a law professor and director of the Global Health Justice Partnership at Yale Law School.

Rising drug prices have consistently outpaced inflation. Total drug spending is expected to grow from 13.7% of all national health expenditures in 2018 to about 13.9% in 2028.

A common argument from drugmakers is that their prices reflect the amount they invested in a medication, but "these prices for old and new drugs do not reflect in any logical way the benefits or the costs," Kapczynski said.

And relatively small amounts of drugs have a disproportionate impact on spending. According to the Kaiser Family Foundation, the 250 top-selling drugs in Medicare Part D with no generic or biosimilar competition account for 60% of total spending in the prescription drug program, despite only making up 7% of all covered drugs.

"Seniors can't afford these costs and we're seeing people delay treatment and even die as a result," Kapczynski said.

The witness pointed to anticompetitive conduct like creating patent thickets protecting drug monopolies, paying rivals to delay launch of competing drugs and a lack of antitrust action, all allowing drugmakers to set high prices.

Additionally, Medicare by law is forbidden from negotiating prices with pharmaceutical companies. But given the program's purchasing power, allowing it to do so would be a huge help in lowering costs, Kapczynski said.

President Joe Biden's massive social spending legislation Build Back Better would allow negotiation of some high-cost brand name drugs, while also penalizing companies for raising the price of drugs above inflation. However, the legislation stalled in Congress despite its Democratic majority now appears to be dead in the water, though some Democrats hope to eventually pass some scaled-back version of the proposal.

But besides the need to combat MA gaming and rising drug prices, the government should also be focusing on aligning incentives within Medicare to get patients more involved in their care, James Capretta, a senior fellow at the American Enterprise Institute, said.

One step could be to combine Parts A, B and D into one comprehensive benefit so it's less fragmented and differences between plan benefits and premiums are easier for patients to understand, Capretta suggested. That would make it easier for beneficiaries to select the plan that's best for them, and result in stronger premium competition between available options.

After clarifying those options, another strategy would be allowing beneficiaries to save some of the premium themselves if they pick a lower-priced plan option, Capretta said.

Katherine Baicker, a professor at the University of Chicago's Harris School of Public Policy, said another way to get the patient involved in their own care would be somehow varying the co-pay a patient has to pay, based on their ability to pay.

Those ideas seemed to intrigue Cassidy, who argued on Wednesday for the importance of gain-sharing with patients.

"We've got to have this kind of just right measurement of how much cost-sharing do we have without overburdening the patient," and encouraging them to be cost-conscious, Sen. Cassidy, a physician, said. 

But whether the onus is on payers, drugmakers, legislators or patients to curb costs, witnesses and senators agreed that the U.S. no longer kick the can when it comes to saving the beleaguered program money.

"The current threat to Medicare is very real," said Susan Rogers, president of Physicians for a National Health Program.