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February 17, 2012 - 3:28 PM

The American - Medicare Reform Faces Reality

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The American

Medicare Reform Faces Reality

By Joseph Antos

A proposal in Congress would create a competitive bidding process that has the potential to save the taxpayers substantial sums—without forcing seniors to pay more for their Medicare benefits.

Let’s face it. Medicare reform is a phrase that scares the daylights out of politicians. They know that Medicare is in deep financial trouble, but they also know (or think they know) that seniors and people nearing age 65 will punish them at the polls if they even hint that the program might have to change. What most politicians are unwilling to admit is that the program is changing for the worse, whether older voters like it or not. Today, Senators Richard Burr (R-North Carolina) and Tom Coburn (R-Oklahoma) leveled with the public on what it takes to save Medicare.

Their plan acts on what the experts have been telling us for a long time: Medicare is in deep financial trouble now, not just ten years from now. For the past four decades, the program has been spending more than it collects in premiums and payroll taxes.

Physicians are threatened with a 27.4 percent pay cut, which Congress is about ready to override. That doesn’t solve the problem. Next year the proposed cut will exceed 30 percent, and there’s no end in sight. One of the Medicare trust funds becomes insolvent in 2024, but seniors’ access to care will be threatened long before that.

The Coburn-Burr solution is premium support, a system based on fair and open competition that gives the health sector a reason to find more efficient ways to deliver necessary care. Medicare would move from a defined-benefit program, which promises unconstrained fee-for-service payment for covered benefits, to a defined-contribution plan, which gives consumers the resources to choose a health plan that best meets their needs.

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February 2012 Articles