Medicare: Fix It Now, Fix It Later (A look at the Coburn-Lieberman Reform Proposal)

National Review ^ | 07/05/2011 | The Editors

[SeekAndFind]

Sens. Tom Coburn (R., Okla.) and Joe Lieberman (I., Ct.) have produced a Medicare-reform proposal. The bill would save Medicare $600 billion over ten years and extend the program’s solvency by 30 years. It would save money by raising the eligibility age to 67 by 2025, increasing premiums and co-pays, and means-testing benefits so that wealthier beneficiaries paid more. It would also curtail “Medigap” plans — which cover the difference between what Medicare pays and the total cost of a procedure, reducing the program’s already-modest incentives for seniors to economize on care.

The proposal is a good one, and it would be even better if its means-testing provisions were modified so as not to reduce incentives to work, save, and invest. Coburn-Lieberman could gain some Democratic support, and it makes a good bargaining chip for fiscal reformers in the debt-limit debate. But nobody should be under any illusion that this legislation makes the Ryan plan’s Medicare reforms unnecessary. It is a complement rather than an alternative to the Ryan plan. It would achieve short-term cost savings while leaving the fundamental problems of Medicare untouched. Ryan’s plan has the opposite virtue and vice: It would take years to go into effect, but would truly fix the system.

The reason this bill would make Medicare solvent for 30 years, rather than for the foreseeable future, is that even deep cuts won’t change the incentives the program creates. Medicare would still operate on a “fee for service” model — which pays doctors more whenever they perform additional procedures, regardless of the expected health benefit, and also makes the program a target for fraud. The best way to fix this problem is to give seniors money to put toward premiums, and allow private insurance companies to compete for the money. This approach would reward insurance companies for designing plans that both cover important procedures and give doctors an incentive to control costs. That’s what the Ryan plan would do, albeit years down the road.

Coburn-Lieberman also eliminates one of the few remaining arguments for IPAB, Obamacare’s Medicare-rationing board. The board’s defenders point out that it would yield savings in the short term, unlike Ryan’s plan. But Coburn-Lieberman would do the same thing, only without setting up an unelected board whose only power is to cut payments to doctors and pharmacies — that is, to ration — and that can in some cases enact policies without input from elected officials.

The question we should be asking is not which of these proposals to support, the Coburn-Lieberman cuts or the Ryan reform. It is: How can we enact both?

[aimhigh]

Too bad we need $600 billion in savings this year alone.

[longtermmemmory]

coburn = useless proposal.

[TomGuy]

The best way to fix this problem is to give seniors money to put toward premiums, and allow private insurance companies to compete for the money.

How is that different from the current Medicare Advantage system -- a system which Obamacare is supposed to eliminate?

In fact, Obamacare tries to eliminate private insurance altogether.

==

These politicians need to quit passing laws they have NOT read and have no idea what is contained therein.

[kabar]

....extend the program’s solvency by 30 years.

It depends how you define solvency. People don't seem to understand that Medicare takes non-entitlement designated monies from the General Fund. By law, 75% of the costs of Medicare Parts B and D must come from the General Fund. The premiums for those costs only cover 25% of the expenditures. So Medicare may be solvent, but it assumes the 75% will be provided by the General Fund. In 2011, projected costs for Medicare Parts B and D are $295 billion with 75% of the costs coming from the General Fund. That number will continue to increase as the population ages and medical costs go up.

Medicare already spends more than it receives in dedicated taxes and premium payments. As baby boomer retirees begin to flood the system, the impact will be felt by every other federal program:

• Currently, Medicare claims about 11 percent of federal nonentitlement tax dollars.

•By 2020, Medicare deficits will claim one in every five federal tax dollars that are not already dedicated to Medicare and Social Security.

•By 2030, the deficits in Medicare will claim one in every three general revenue dollars; by 2050, they will claim one in every two.

[Opinionated Blowhard]

Too bad we need $600 billion in savings this year alone.

Agreed. $600 billion over 10 years is peanuts, especially when you consider Congress won't be bound by the cuts in future years. We're talking about Medicare consuming anywhere from 10% to 25% of the budget. You'd need to save a couple trillion over 10 years to have meaningful reform. At least they put raising the eligibility age on the table. That needs to be part of the discussion.

[RightOnTheBorder]

Getting into bed with Lieberman seems ill-advised to me. Regardless of what we get out of it, we will still have to live with what Lieberman put in.

To paraphrase Mark Steyn’s opinion of compromise with the enemy, “If you mix a quart of feces with a quart of ice cream, the mixture will taste more like the former than the latter.” I don't want republican fingerprints on a feces flavored bill.

[Uncle Miltie]