The President’s National Commission on Fiscal Responsibility and Reform is not set to release its final recommendations on how best to tackle deficit spending and entitlement reform until December 1. However, several of its members have already gone public with proposals to reduce runaway spending and put Medicare and Medicaid, two of the fastest-growing entitlement programs, on the road to solvency.
The commission co-chairs, Alan Simpson and Erskine Bowles, released a report that takes several positive steps in reforming Medicare, including opting to repeal the Sustainable Growth Formula. Alice Rivlin and Representative Paul Ryan (R–WI), also members of the commission, released transformative, long-term solutions to Medicare and Medicaid that would better serve patients and reduce the tremendous upward pressure these programs place on federal spending.
The Rivlin–Ryan plan would maintain traditional Medicare for current beneficiaries and future beneficiaries over the age of 55. Beginning in 2021, the program would be transformed to provide a defined contribution rather than a defined health care benefit. Under this premium support system, seniors would be able to select health plans that they found best suited their needs in a new Medicare exchange. Contributions would vary by need: The wealthy would receive a reduced payment, while dual-eligibles for Medicare and Medicaid would receive an additional account to help with out-of-pocket expenses. Contributions would also vary by geography and by health risk. To avoid cherry-picking of healthier individuals in the Medicare exchange, participating health plans would be required to offer coverage to all participants, regardless of health status.
Changes to Medicaid would consist of moving federal contributions to the program, which is a federal–state partnership, to the states. To reduce Medicaid’s projected unfunded obligations, the allotted funds would grow at a slower rate. This is a good first step to reforming Medicaid. It also suggests giving states new flexibility in providing benefits to their low-income populations in the way that addresses the specific needs of each state. This is a step closer to the federalist system under which the United States is intended to operate. The next step should be to transfer assistance and control directly to Medicaid beneficiaries, enabling them to obtain private health insurance and reorganizing the program toward a patient-centered system. This would help control costs and improve coverage.
These Medicare and Medicaid reforms should allow beneficiaries to choose health plans that work best for them and create competition between plans to increase efficiency and drive down costs. Putting beneficiaries directly in control of their own health decisions would also create incentives to spend health dollars more wisely. The Rivlin–Ryan plan is a bipartisan solution for reducing long-term deficits that would simultaneously make huge strides in the move towards a health care system that is patient-centric and consumer-driven.
