Twenty years ago today, in a huge ceremony at DAR Constitution Hall near the White House, President George W. Bush signed into law the Medicare Modernization Act, creating major new programs that put power in the hands of consumers instead of government.
The MMA created a tax break for working Americans to save for their health care expenses and gave seniors new options to get coordinated medical care and a drug benefit that allowed them to choose plans that met their individual needs for coverage.
The results:
- More than 34 million Americans now have a Health Savings Account, with an average balance of more than $3,000 and total in deposits and investment gains of $142 billion.
- More than 31 million seniors have voluntarily enrolled in a Medicare Advantage plan—more than half of eligible seniors—and they have an average of 43 plans to choose from.
- And the Medicare Prescription Drug benefit also has proved to be wildly popular, with 91% of beneficiaries satisfied with their current coverage and costs coming in vastly below projections.
All three of these programs adopted a unique strategy of giving consumers control over choices and forcing plans to compete in meeting their demands for affordable care and coverage.
The market response was far beyond expectations. For example, less than a month after the bill was signed, the first Health Savings Account was sold by Fortis. Today, millions of people now are saving billions of dollars that otherwise would have gone to health premiums or not saved at all.
With the prescription drug benefit, competition was so fierce to get seniors to sign up that one plan offered coverage with a premiums of $1.84 a month. And taxpayer spending on the drug benefit is far below expectations, saving seniors and taxpayer money by forcing private plans to compete on price and benefits.
Last night, the people who worked behind the scenes to shape the bill met over dinner to mark the anniversary and share stories about the trials and tribulations of the legislative battles they fought and won. One colleague we celebrated was Doug Badger, Galen Institute Senior Fellow par excellence, who worked tirelessly as President Bush’s top health policy advisor in brilliantly shaping the MMA.
The other side continues to try to undermine these consumer-friendly programs with distorted studies and legislative sabotage.
But our work continues unabated. A number of our colleagues are offering ideas to further expand consumer-friendly options and programs:
- The important scholarly book, Modernizing Medicare: Harnessing the power of consumer choice and market competition, offers a better way to save Medicare.
- And many of our colleagues are working on specific improvements to existing programs. Hoover scholar Lanhee Chen has joined with colleagues Tom Church and Daniel Heil to propose a new tax-advantaged savings vehicle called individual health accounts. IHAs would plan offer greater flexibility and more widespread appeal for the already popular HSA accounts.
Lanhee cites studies that show that HSAs along with other consumer-directed health plans have reduced health spending, driven by lower consumption of pharmaceuticals and outpatient services. And HSAs are especially popular with middle-income workers who see the savings advantage.
We know what works and will continue to build on this infrastructure of success!
