When it comes to the super-committee’s duty to reform Medicare, you’ll likely to hear the same tired and unsuccessful methods for lowering Medicare’s soaring costs: raising taxes, manipulating payment formulas, or making even deeper payment cuts to doctors and hospitals.
The best way to reform Medicare is transform it into a premium-support program, which provides a defined contribution to seniors’ chosen health plans, which include a variety of private plans as well as traditional Medicare fee-for-service. This approach — based on injecting consumer choice and competition into Medicare — has a long history of bipartisan support, going back to the early 1980s.
Congress could adopt this approach through a two-stage, ten-year structural reform, which the Heritage Foundation outlined in its long-term deficit plan, “Saving the American Dream.” When compared with the Congressional Budget Office’s baseline, Heritage’s two-stage Medicare reform plan would result in $9.4 trillion in savings by 2035.
During the initial five-year transition period, Congress could make immediate changes to help secure the program’s fiscal solvency. Calculations from Heritage’s Center for Data Analysis show the initial reforms would result in nearly $299 billion in savings. These savings could eliminate shortfalls in the Hospital Insurance (HI) trust fund — which CBO estimates to go broke by 2020—and “fix” the Medicare physician payment formula, which threatens a 30 percent payment cut next year to doctors who see Medicare patients.
Read the rest of this column and find out what Congress could do right now at National Review Online.