Hope is fading that the congressional Super Committee will agree to significant deficit reduction, but there still is an opportunity for members to take steps toward tackling entitlement spending, especially in Medicare and Medicaid — the key drivers of our nation’s ballooning budget deficit.
These programs must be changed to meet their future obligations and for Congress to have any hope of controlling federal spending.
The Medicare Prescription Drug Program provides the model. Adopted in 2003, Part D provides affordable drug coverage to seniors by harnessing competition and choice. Private companies approved by Medicare offer drug coverage to seniors who shop to find the plan that best meets their needs. In the process, they force health plans to actively compete to offer the lowest prices and best benefits.
The result is an entitlement program that is actually under budget. Medicare Part D is coming in 46 percent below original estimates — saving money for taxpayers and seniors. The average Part D enrollee pays $30 a month, far below the $53 premium originally projected by this point.
House Budget Chairman Paul Ryan has a plan to extend this concept to all of Medicare. Beginning in 2022, the Ryan proposal would provide a generous payment so seniors can purchase a Medicare-approved health plan that best meets their needs. The older, the poorer, the sicker seniors are, the larger their Medicare payments would be. Everyone who qualifies for Medicare would be guaranteed coverage.
As Super Committee members honestly study the options, they can’t help but see that this is the right platform to modernize and save Medicare. A number of bi-partisan commissions have come to the same conclusion. Congress’ challenge is to make sure the payment is adequate for seniors to obtain coverage while not putting future taxpayers in the poor house.
The Super Committee can make recommendations that would compel the standing committees in Congress to get to work on reforms that will reduce the future flood of red ink driven by uncontrolled entitlement spending. The alternative is the path we are on in which the new health law would force deep cuts in payments to doctors that will drive many out of practice and lead to rationing by the unelected, unaccountable Independent Payment Advisory Board.
While it works to develop positive reform, it’s just as important for the Super Committee to avoid changes that will make problems worse. Sen. Jay Rockefeller (D-WV) and Rep. Henry Waxman (D-CA) want the group to require pharmaceutical firms to pay a rebate on prescription drugs for people who qualify for both Medicare and Medicaid. This is misguided. Studies show these rebates would ultimately shift costs back to seniors in the form of higher drug costs and premiums.
The Committee also must beware of programs masquerading as competition. The so-called “Competitive Bidding Program” is designed to save money in Medicare’s purchasing of medical equipment — everything from diabetic supplies to sophisticated home wound care equipment.
Instead of Washington setting prices, the agency that runs Medicare is supposed to get competitive bids on these medical supplies. It sounds like a good idea. But the agency’s regulations for this program actually drive out competition and violate all the rules of market-driven bidding. Companies can bid so low that they drive out legitimate suppliers, and then the winning bidder doesn’t have to supply the product!
The key to real reform is building in changes to Medicare and Medicaid that rely on consumer choice and competition, not price controls and crushing government regulations.
The Medicare drug program works because consumers are in charge of seeking the best value in their health spending, forcing providers to deliver better services at lower cost.
To ensure the future of Medicare and Medicaid — and to correct our disastrous fiscal course — the Super Committee can take the long-term view of reform with steps that move away from the failed approach of Washington micro-management and toward modern reforms that rely on consumer choice and market competition.
Published in The Auburn Sentinel, Nov. 12, 2011.