Medicare, the great government health plan that serves 66 million older and disabled people, is at a crossroads.
There are two prominent strategies at hand when facing significant demographic and fiscal challenges right away.
One aims to enhance and modernize the system by drawing on the advantages of individual choice and market competition while utilizing the best features of Medicare’s well-known system of competing private health programs. The various focuses on strengthening the strong Medicare government and expanding its intricate system of central planning and price controls.
The Medicare directors reported last year that the current trends in the Medicare operational payment and cost controls, which govern both hospital and physician payments, now threaten seniors ‘ future access to quality care.
Americans can anticipate a lowering of investment in research and development and a decrease in the number of new medications and miracle drugs, especially tumor drugs, with the passage of President Joe Biden’s absurdly named Inflation Reduction Act, which replaces personal business dialogue with government price-fixing.
The intensity of the upcoming deficits is the only subject of discussion between Congressional Budget Office experts and private sector academics.  ,  ,
The House Republican Study Committee is able to see the intensity of this situation and “gets it.” The proof is its fiscal year 2025 budget proposal,” Fiscal Sanity to Save America” . ,  ,
The council’s budget proposal is a welcome change from the conventional wisdom in the Beltway. Its prescriptions are in line with what seniors have clearly demonstrated what they know and like, specifically the benefits of personally chosen and more versatile advantage options that can be provided through more powerful market competition.  ,
The Republican Study Committee’s plan would essentially develop on Medicare Advantage’s success in terms of selection and competitors. An estimated 52 % of Medicare beneficiaries are currently enrolled in Medicare Advantage, a strong system of competing private health plans that offers an alternative to conventional Medicare.
These personal health plans are enrolling more quickly than they ever were. For instance, the Medicare trustees estimated as recently as 2022 that private plan enrollment would n’t reach 52 % until 2030.
Under the budget proposal, traditional Medicare (aka the” Fed Plan” ) would be retained as an option for Medicare beneficiaries. However, it would be improved by consolidating Parts A, B, and D, like most Medicare Advantage plans, into one complete rewards offer.  ,
This” Fed Plan” would engage directly on a level playing field with yesterday’s Medicare Advantage plans for seniors ‘ membership.
Architecturally, today’s Medicare funding streams had been merged into a single trust account and financed, as it is today, by a combination of payroll taxes, premiums, and national subsidies from common tax revenues.
Every senior citizen would be able to pick the type of health plan they want, whether it were Medicare, a private Medicare Advantage plan, or a defined contribution ( premium support ) in a fixed amount to cover the cost of the chosen coverage, as it is done today for Medicare Advantage and Medicare drug coverage.  ,
The defined government contribution ( “premium support” ) to health plans on behalf of enrollees would be the result of market-based competitive bidding to provide the standard Parts A, B, and D benefits under the Republican Study Committee proposal.
Employers would be able to select a “premium free” health plan, as they do now with Medicare Advantage, which means they wo n’t have to pay any premiums above the monthly standard Part B premium.
The Republican Study Committee’s budget proposal does not specify the payment formula to be used to determine the government’s contribution or plan payment, but it does suggest two options. The first is that the government’s payment to health plans could be determined based on the “average bid” among the plans, which is the current formula for the popular and prosperous Federal Employees Health Benefits Program ( FEHBP), which covers more than 8 million federal employees, retirees, and their families.
A second option is to base the cost of a” second- lowest price” health plan in a given area on the bid. That’s the method used today to establish plan payment under the Affordable Care Act (ACA ) for the” Obamacare” plans in the nation’s health insurance exchanges.  ,
The Centers of Medicare and Medicaid Services is required by the House Republicans ‘ proposal to establish a” short term” demonstration to test and determine which payment formula would be best and “generates the most value in terms of health outcomes and cost effectiveness.”  ,
The proposal is a giant step in the right direction. As previous Congressional Budget Office ( CBO ) modeling of a broadly comparable “premium support” proposal has already indicated, it promises to secure both beneficiary and budget savings.
More recently, former CBO Director Douglas Holtz- Eakin, in an essay in” Modernizing Medicare: Harnessing the Power of Consumer Choice and Market Competition” ( Johns Hopkins University Press, 2023 ), updated savings estimates based on the CBO budget baselines. According to Holtz- Eakin, assuming a government payment formula based on the” second- lowest price” health plan, this comprehensive competitive system could save an estimated$ 2.2 trillion over ten years, including$ 333 billion in savings for Medicare beneficiaries.  ,  ,
The Republican Study Committee’s budget proposal also introduces other long-overdue structural changes to other parts of the Medicare program, in addition to changing the financing of the program.
Two are particularly noteworthy.
First, the proposal addresses the costly disparity between Medicare reimbursement for services rendered in a hospital and reimbursement for those same services rendered in a clinic or doctor’s office. Today, Medicare payment is higher for services delivered in a hospital.
Often called” site neutrality” payment, the proposal would pay medical providers the same, whether the services are delivered in a hospital, clinic, or even a doctor’s office.
This change, which The Heritage Foundation and others have long supported, would level the playing field for competition between hospitals and non-hospital clinics and facilities and would eliminate the incentive for hospitals to purchase independent medical practices to secure higher profits. It would also increase competition and help to save money for big programs. The Daily Signal is The Heritage Foundation’s news source.
According to the Republican Study Committee, this one change alone would save$ 202 billion over the next ten years. Because Medicare is America’s biggest health care payer, accounting for 21 % of our spending, this change would also have a positive spillover effect in the private health care markets. It could encourage more independent private medical practices ‘ growth, which is severely lacking, and promote competition.  ,
Second, the proposal would let the Medicare program cover graduate medical education costs. Today, Medicare pays the most for graduate medical education, helping to cover both the direct and indirect costs of hospital residents. The Heritage Foundation and others suggested that the committee make a new, separate trust fund to help offset these costs by removing the payment for graduate medical education from the Medicare trust funds. This committee’s recommendation would save Medicare an estimated$ 16 billion annually.
As is common with such budget proposals, the Republican Study Committee’s plan is only a broad outline of Medicare reforms. The details must still be worked out legislatively, but it is most certainly headed in the right direction.
By contrast, their Democratic colleagues have a completely different approach. Their schedule is provided in black and white text. They passed the Inflation Reduction Act, which for the first time would incorporate a government price-fixing scheme into the Medicare drug program, as noted.
Additionally, the Biden administration has already announced a payment reduction for health plans in the Medicare Advantage program rather than strengthening Medicare for seniors. Additionally, the majority of House Democrats have co-sponsored so-called Medicare for All legislation that would literally repeal and replace Medicare Advantage.
Their proposal would replace bureaucratic central planning and price controls with personal choice and market competition, abolish everyone’s right to any alternative to government coverage, and impose massive tax increases on the middle class.
In short, ordinary senior citizens, voting with their feet, are already way ahead of official Washington. Based on the mounting evidence, it’s not hard to see why. The affordable, more comprehensive set of benefits, and very well-performing on most quality metrics are included in Medicare Advantage plans, which protect against the financial devastation of catastrophic illness.
While Medicare Advantage has flaws, most of which are due to an excessively expensive formula for paying health plans, its main characteristics, such as consumer choice and competition, provide a solid foundation for comprehensive Medicare reform.
