The government could keep Medicare solvent for another 30 years if it changes Medicare to a system that assists seniors in purchasing private healthcare coverage, according to an estimate released last week by the National Bipartisan Commission on the Future of Medicare.
But there are some catches. For one, the commission analysis said the proposed "premium support" model won't keep the Medicare Hospital Insurance Trust Fund from being exhausted in 2008 because the savings will accrue slowly.
For another, the Congressional Budget Office, the usual arbiter of financial projections in the Capitol, was unable to provide any cost estimates because many issues need clarification, and it is difficult to project spending decades into the future.
The CBO said, however, that greater competition in Medicare, as the plan envisions, should reduce both short- and long-term costs.
Preparing for what may be a crucial meeting this week as it tries to meet a March 1 deadline for reporting, the commission released its estimate of a proposal from its chairman, Sen. John Breaux (D-La.), to change Medicare to a premium-support system from one that primarily pays hospital and physician bills.
The commission's staff estimated that the premium-support system could save between $475 billion and $850 billion a year by 2030, when compared with payment policies laid out under current law.
Previously, the commission had estimated that it would take between $625 billion and $1.3 trillion a year in savings from projected expenditures under current law to keep Medicare solvent through 2030.
The program will cost $2.2 trillion to $2.9 trillion a year in 2030, according to the commission. Medicare is projected to spend $218.5 billion in federal fiscal 1999.
HCFA actuaries also are preparing an estimate of Breaux's proposal, but it has yet to be released.
Breaux released his proposal, on which the commission analysis was based, at a commission meeting in January. In a Feb. 17 letter, however, he told the panel's 16 other members that he was revising the proposal to include extensions of cuts in provider payment updates enacted in 1997.
Although Breaux did not state explicitly which provider payment proposals he would include, the analysis of his plan contained some examples of possible extensions to the 1997 Medicare law.
Those include cutting 1.7 percentage points from a hospital inflation factor in calculating the annual update to Medicare inpatient hospital payments. This year, the 1997 law cut 1.9 percentage points from that factor to 2.4%.
Other possibilities were continuing to reduce Medicare capital payments by 2.1%, and trimming 1 percentage point from the inflation factor in calculating annual updates to skilled-nursing facilities, hospices, hospital outpatient departments and ambulance providers.
Breaux said the revised proposal would include a prescription-drug benefit for Medicare beneficiaries.
In a surprise move last week, the Pharmaceutical Research and Manufacturers of America said it supported expansion of prescription-drug coverage in a Medicare system like the one Breaux proposes.