Today's health policy agenda is shaped by two often competing forces—the health care needs of the American people and the realities of budget constraints and deficit reduction. At the federal level, these forces shape spending priorities, which, in turn, tend to drive health policy and legislative priorities. Nowhere are these competing forces more obvious than in federal Medicare policy.
Recent years have seen continuing increases in Medicare spending, with Medicare growing as a share of the federal budget. In 1980, Medicare expenditures of $35 billion accounted for 3% of federal outlays.1 A decade later in fiscal year 1990, Medicare will spend $112 billion and consume 9% of all dollars in the federal budget. The magnitude of Medicare spending means that any curb in the rate of increase has a major impact on overall federal spending. Medicare is thus a prime target for budget reductions in the annual budget reconciliation