The House Ways and Means Subcommittee on Health held a hearing last Friday to discuss the bipartisan effort behind competing premium support plans. These plans would restructure traditional Medicare and guarantee its fiscal stability in the future.
As Chairman Wally Herger (R–CA) said:
Unless Congress acts, the Medicare program that seniors and people with disabilities rely on will go bankrupt in just a few short years.… The premium support model holds promise to place Medicare on sound financial footing while transforming and modernizing the program to provide greater choice for beneficiaries.
In premium support, beneficiaries receive a defined contribution from the government toward a health plan of their choosing. This financing change—already the method for Medicare Part D drug coverage—would stimulate intense competition and lower costs and improve quality.
The hearing’s witness list included Joe Antos, an American Enterprise Institute scholar who stressed that Medicare needs the reforms of premium support in order to survive; Alice Rivlin, a senior fellow at the Brookings Institution and co-author of the bipartisan premium support proposal known as Domenici–Rivlin; Henry Aaron, also a senior fellow at Brookings who originally coined the term “premium support” in 1995 yet is now against the reform model; and former Senator John Breaux (D–LA).
Breaux, a Democrat, is a former member of the powerful Senate Finance Committee and an initial champion of premium support. He is the co-author of the 1999 Breaux–Frist proposal, a major bipartisan proposal for saving Medicare. He modeled it after the majority recommendation of the Clinton Administration’s Bipartisan Commission on the Future of Medicare.
Breaux pointed out that there are already existing programs within Medicare that are built on the same principles and are successful and popular: “Congress must combine the best of what government can do with the best of what the private sector can. I would submit this is exactly what we did in creating Medicare Part D.”
Heritage’s Kathryn Nix explains that Medicare Part D has the main elements of a premium support model: “Medicare covers 74.5 percent of the average weighted premium for a standard plan, determined through a bidding process that reflects the true market value of participating plans.” Part D’s market-based structure has resulted in the 10-year cost of the program being 41 percent below original projections.
Another classic example of premium support is the highly successful Federal Employees Health Benefits Program (FEHBP), which provides quality coverage and a variety of health options to approximately 8 million current and retired federal employees and their families. As Medicare reform proposals begin to replicate the best features of the popular FEHBP, Breaux, like many others in Congress who supported his premium support effort in 1999, emphasized that the dynamics of a competitive market would reproduce the level of quality and patient satisfaction that has been a hallmark of the FEHBP. That is why Breaux then and Senators Richard Burr (R–NC), Tom Coburn (R–OK), and Ron Wyden (D–OR) today often point to the success of the competitive experience of their own health coverage and see it is as a model for reform.
The success of the private sector, as seen in Medicare Part D and FEHBP, is what The Heritage Foundation has used as a model for its premium support plan. Heritage’s plan puts patients in control of their care while using the power of competition to lower costs and improve care quality. To read Heritage’s plan, click here.