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March 4, 1999

OP-ED

"MEDICARE REFORM: ITS TIME HAS COME"

By: SENATOR JOHN BREAUX, D-LA
Co-Chair, National Bipartisan Commission on the Future of Medicare

Last spring, President Clinton invited the National Bipartisan Commission on the Future of Medicare to the White House. At that meeting, the president challenged each one of us not to be the reason our Commission fails to reach an agreement on how best to reform Medicare. I took that challenge to heart.

Medicare is one of the most important social contracts our government has with the American people. Together with Social Security, since 1965, these two programs have reduced the number of Americans over 65 living in poverty from 35 to 12 percent. No commissioner, Democrat or Republican, wants to dismantle this social safety net.

But, Medicare is still a 1965 health care delivery system trying to keep pace with 21st Century medicine. Comparing health care benefits for Americans who are not on Medicare with the health plan for seniors drives home the point. For example, drugs are as important today as a hospital bed was in 1965. Yet only 65 percent of seniors have a drug benefit, and this coverage is becoming increasingly unaffordable. By contrast, virtually all other Americans with health insurance have drug coverage.

Medicare covers only 53 percent of the average senior’s total health care costs causing seniors to spend an average of $2,000 of their own money each year to cover the rest. These facts convinced me to look for a way to serve Medicare beneficiaries that more closely mirrors how other Americans get their health care.

With any restructuring approach, we must preserve Medicare’s entitlement and ensure that Medicare does not become a program just for the poor. I would like Medicare, in fact, to become a model for expanding health care coverage to all uninsured Americans. I believe a Medicare premium support system is the best way to achieve that end.

What exactly is a premium support model and what does my particular version do? Premium support means the government would literally support or pay part of the premium for a defined core package of Medicare benefits. This is not a voucher program, but an alternative to the current system. Today, Congress micro manages Medicare, and the government uses fee schedules and thousands of pages of regulations to set prices for specific services. My plan combines the best that the private sector has to offer with the government protections we need to maintain the social safety net.

I have proposed a premium support Medicare plan modeled after the health care plan serving nearly 10 million federal workers, retirees and their families. Like that plan, my reform plan would also guarantee that the government’s contribution keeps pace with health care costs.

Under my proposal, traditional Medicare and private plans would submit their estimated premiums each year to a Medicare Board that would set the ground rules for competition between traditional Medicare and private plans. This board would negotiate with plans and only allow plans that meet certain standards to participate. A strong board is particularly important to prevent plans from designing a benefits package that only attracts healthy beneficiaries.

If beneficiaries chose a low or average cost plan, their premium support or government contribution would be 88 percent of the premium. This maintains the beneficiary’s share of an average plan’s premium at 12 percent, which will be required after the Balanced Budget Act of 1997 is fully implemented. If beneficiaries choose a higher cost plan, they pay the difference.

Under my proposal, more affluent beneficiaries would also pay more for basic Medicare coverage to pay premiums for low-income beneficiaries. Some say it is not fair to require certain Americans to pay more for their Medicare. In my view it is unreasonable to place a disproportionate burden of funding Medicare on the working poor and middle class through higher payroll taxes. It is also unreasonable to allow many low-income elderly to go without adequate coverage because they cannot afford the additional out-of-pocket expenses or an additional insurance policy to cover their medical expenses not paid by Medicare.

To ensure that seniors have access to an affordable fee-for-service option, I propose giving the Health Care Finance Administration the tools to compete in a premium support environment. A viable fee-for-service option is particularly critical for rural and under-served areas where fee-for-service may be the only health care delivery system for the foreseeable future. This, coupled with meaningful low-income protections, should ensure that fee-for-service remains an affordable option for all seniors.

On a final note, the commission has been charged with addressing Medicare solvency. The model I am proposing will do that in part. The President has suggested in a period of surpluses that we commit additional general revenues to Medicare instead of raising the payroll taxes. In 1997, about 28 percent of Medicare was financed through general revenues. The President’s right. That number could probably go higher. Whatever additional funding may be needed should be equitable in terms of who bears the burden--be it health care providers, beneficiaries or taxpayers.

I am hopeful the Medicare Commission will reach a bipartisan consensus on structuring a premium support system to reform Medicare. We cannot allow the politics of Medicare to prevent us from acting now.

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