Medicare Health Article

REFORM ISSUES

Because Medicare is projected to grow substantially as the baby boom generation reaches sixty-five years of age, it is likely to become an ever larger share of the federal budget and need additional revenues. Efforts to find ways to reduce spending on Medicare have been a high priority for politicians who do not wish to raise taxes. The urgency behind various reform efforts has diminished, however, as projections of spending growth moderated at the end of the 1990s.

Nonetheless, several competing approaches to reform remain under discussion. They usually focus on reducing per capita spending and range from incremental changes to major structural reforms that would shift Medicare more under the control of private plans. Incremental approaches usually seek to modernize the existing Medicare program, largely by changing payment policies for services and for private plans. Critics of this approach worry that it focuses more on prices charged for services and less on controlling the amount of care being used.

One of the principal Medicare restructuring plans is a variant of the 1999 plan of the co-chairs of the National Bipartisan Commission on the Future of Medicare. It has since been offered in an amended form by Senators John Breaux (D-Louisiana) and Bill Frist (R-Tennessee). Termed "premium support," this approach would require that beneficiaries choose among an array of private plans (with traditional Medicare being just one choice). If the plan chosen is more expensive than the national average, the beneficiary would have to pay a higher premium. This would presumably result in greater awareness by beneficiaries of the costs of health care and a greater incentive for private plans to hold the line on costs so as to be competitive. Traditional Medicare, which is now effectively the default plan for most persons, would become much more expensive and perhaps would be eliminated over time. This and other proposals to expand competition in Medicare are controversial because they are based more on theory than on practice, and because many supporters of Medicare are skeptical of the level of savings likely to be generated and fearful of what protections for beneficiaries might be lost if private plans take over.

Other proposed reforms that are sometimes combined with changes aimed at the efficient operation of Medicare include increases in the age of eligibility and income-testing the program, either through higher premiums or eliminating eligibility entirely for persons at high income levels. All of these proposals, and any new ones, will likely continue to be debated as baby boomers move inexorably toward eligibility for Medicare and as the projected costs of Medicare continue to grow.

MARILYN MOON

(SEE ALSO: Access to Health Services; Economics of Health; Health Care Financing; Landmark Public Health Laws and Court Decisions; Managed Care; Medicaid; National Health Insurance; Retirement; Uninsurance)

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