The Patient Protection and Affordable Care Act (aka Obamacare) will impact every corner of the health care system, especially Medicare. Unfortunately, the new law speeds the program’s travel in the wrong direction by building upon existing problems and creating new ones. There’s a better way to restore Medicare, as Heritage’s Robert E. Moffit, Ph.D., and James Capretta outline in recent research.
Obamacare makes $575 billion in cuts to Medicare and increases bureaucratic micromanagement of seniors’ care. If history is any indicator, this will be a failed attempt to increase efficiency. Moreover, the legislation will not solve existing issues, such as seniors’ decreasing access to health services or geographically disparate quality of care.
Alternatively, Moffit and Capretta suggest reforming Medicare into a premium support system:
Premium support would give future Medicare patients control over the flow of Medicare dollars and decisions, guarantee personal choice of health plans, and let them secure the best value for the money. This is the kind of consumer choice model that federal workers and retirees in the Federal Employees Health Benefits Program (FEHBP) enjoy. It is a popular and successful approach because it emphasizes personal choice among plans, and government oversight ensures consumer protection and transparency.
Medicare currently faces $30.8 trillion in long-term unfunded obligations. Moffit and Capretta propose placing Medicare on a long-term budget based on the expected growth in medical costs and number of enrollees. Premium contributions would be set at a default of 90 percent of the weighted average premium in each region, but if payments were in excess of the budget, they would be nominally reduced to ensure solvency. “The combination of competitive bidding with a limit on the government’s contribution should provide powerful incentives for cost-cutting throughout the health sector,” they write. Moreover, premium support would be means-tested so that those who could afford to cover a greater portion of their premiums would do so.
Under a new Medicare, seniors would be able to choose health plans that best suit their needs, including the option to stick with the employer-sponsored plan they had pre-retirement. Finally, standards for consumer protection would imitate and possibly exceed those set by the FEHBP.
By relying on market forces, these reforms would ensure that seniors would receive stable, quality health benefits while creating savings and putting Medicare on a sustainable path. To read more about Moffit and Capretta’s transformative vision for a better Medicare, click here.
