With the deadline for final recommendations looming large, the chairman of the National Bipartisan Commission on the Future of Medicare has proposed a far-reaching plan to reform the Medicare program. The plan aims to use market forces to keep costs manageable while at the same time maintaining coverage for the nation's 39 million Medicare enrollees.
Since Sen. John Breaux, a moderate Democrat from Louisiana, presented his proposal Jan. 26, debate among the bipartisan commission's 17 members has sharply increased. The panel has until March 1 to make its final recommendations.
While it's in the best interests of both Democrats and Republicans to come up with a significant proposal, it's unclear what position the commission will adopt, says David Kendall, senior analyst for health policy at the centrist Progressive Policy Institute.
Partisanship could block any major action, Kendall says. Furthermore, final recommendations might be delayed past March 1 while the panel waits for outside entities, such as HCFA, to estimate the cost of different proposals.
The commission, created as part of the federal Balanced Budget Act of 1997, comprises members of Congress and outside experts. It has been working since March 1998 to find a way to keep Medicare from going broke. If current trends continue, Medicare's Hospital Insurance Trust Fund will be depleted by 2008, according to the commission.
Under Breaux's proposal, Medicare enrollees would receive funds from the federal government, which they would use to buy private-sector coverage. Breaux expects competition for Medicare enrollees would curb private-sector costs over time.
The plan also would gradually increase the eligibility age for Medicare to 67 from 65 and charge higher premiums for those with larger incomes.
In addition, HCFA would no longer set reimbursement rates. Rather, an outside Medicare board would take over the agency's role of overseeing private-sector health plans that treat Medicare patients. The board would negotiate premiums and benefit packages. Medicare enrollees would be free to pay the difference for higher-priced coverage.
The plan also would merge Parts A and B of Medicare, creating a single deductible, and it would eliminate subsidies for training costs of teaching hospitals, which now amount to $2.2 billion annually.
Based on Congressional Budget Office projections, the commission says, Breaux's plan would reduce Medicare's annual growth rate by one percentage point per year. That would result in a savings of $475 billion to $850 billion per year and would reduce Medicare costs by between 22% and 29% by 2030. Most of the savings would be generated by competition among private plans seeking a greater share of the Medicare pie. Raising the eligibility age for Medicare also would create savings.
In a Feb. 17 letter to commission members, Breaux said he was adding drug coverage to his plan, bowing to Democrats on the panel who said they would refuse to endorse any major restructuring effort unless it included prescription coverage and other benefits. The CBO didn't take drug coverage into account in its calculations.
Opponents say the proposal is unrealistic. Commission member Rep. Jim McDermott (D-Wash.) says the panel must consider raising the Medicare payroll tax because privatization alone won't save enough money, according to spokeswoman Jennifer Crider.
According to the commission's bylaws, final recommendations must have the support of 11 members. The panel's eight Republicans and Sen. J. Robert Kerrey (D-Neb.) back Breaux's plan, says Kendall, whose think tank is associated with the Democratic Leadership Council. Republicans support the plan because they "desperately need a centrist solution to redeem their (past) mistake" on healthcare, he says.
President Clinton also may back the plan in an attempt to establish a legacy for his administration, Kendall says. The president has made it very clear that he wants to entertain a market-based proposal "as long as it has a drug benefit component," Kendall says.
Clinton also has called for using 15% of federal budget surpluses over the next 15 years, or about $700 billion, to support Medicare.