One of the biggest questions surrounding Senate Republicans' version of the One Big Beautiful Bill Act concerns the fate of Medicare. Earlier this month, GOP lawmakers were reportedly considering reforms aimed at reducing waste, fraud and abuse in the entitlement as a way to deliver savings for taxpayers.
But as the bill has taken shape in the last few days, Senate Republicans appear to have lost their appetite for tightening the federal purse strings for Medicare.
The conventional wisdom is that any changes to the program would come at too high a political cost for Republicans. But improper payments have been rampant in Medicare for too long.
If Republicans don't take action to eliminate such costly inefficiencies, then taxpayers will continue to watch helplessly as their hard-earned dollars are wasted.
There is no shortage of waste Republicans can target.
Consider how insurers have been abusing Medicare Advantage, the component of the entitlement that allows beneficiaries to purchase federally subsidized private coverage. Over the past few years, insurers have gotten good at gaming the program's rules to extract overpayments from the federal government.
One way they do so is through a strategy known as "upcoding," wherein an insurer goes out of its way to ascribe multiple medical diagnoses to a particular patient. Since MA pays insurers more money for covering higher-risk patients, making a person look sicker than they may actually be is a direct way to increase revenues.
Another technique MA plans employ is "favorable selection" — a process designed to ensure that healthier seniors are overrepresented in MA plans compared to less healthy seniors.
Padding their rolls with healthier patients — and pretending they're sicker than they are — has proven lucrative for insurers. It has also come at a staggering cost to taxpayers.
According to an analysis from the Committee for a Responsible Federal Budget, these two techniques will lead to $1.2 trillion in overpayment to MA plans between 2025 and 2034.
A crackdown on gamesmanship by insurers isn't the only way the GOP can make Medicare more cost-effective. They could also address a glaring inefficiency in how healthcare providers are reimbursed.
At present, Medicare pays about twice as much for routine ambulatory services delivered in a hospital as it does for the same services when delivered in a doctor's office, according to research from the Paragon Health Institute.
That's not just irrational and irresponsible. It incentivizes hospitals to acquire physician practices, change the sign on the door, and start billing Medicare at higher rates. The upshot is a more consolidated, less competitive market for medical care — and higher costs for everyone.
Correcting this payment discrepancy — and transitioning to a "site-neutral" reimbursement framework — could save the federal government as much as $100 billion over the next decade. What's more, it's an approach that garners bipartisan support.
The notion that rooting out waste and abuse in Medicare would inspire a dangerous political backlash for Republicans is mistaken. The GOP needs to find ways to cut federal spending.
Eliminating overpayments to MA plans and ending perverse reimbursement schemes in Medicare are straightforward, commonsense ways to do so.
Sally C. Pipes is President, CEO, and Thomas W. Smith Fellow in Health Care Policy at the Pacific Research Institute. Her latest book is "The World's Medicine Chest: How America Achieved Pharmaceutical Supremacy — and How to Keep It" (Encounter 2025). Follow her on X @sallypipes. Read Sally Pipes' Reports — More Here.
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