President Obama can break the Medicare deadlock by streamlining systems

Revising system's fragmented structure would serve beneficiaries, save resources
2013-04-09T00:00:00Z President Obama can break the Medicare deadlock by streamlining systems Arizona Daily Star
April 09, 2013 12:00 am

The following editorial appeared Friday in the Washington Post:

Reforming Medicare must be part of long-term deficit reduction. Alas, between House Budget Committee Chairman Paul Ryan's, R-Wis., plan to replace Medicare with a "premium support" and President Obama's refusal to countenance it, Washington is hopelessly deadlocked.

Or maybe not. There are ways to generate meaningful savings that don't involve either abolishing Medicare "as we know it" or perpetuating the status quo. Among the best ideas is to revise Medicare's illogical, fragmented structure, so as to present beneficiaries with a streamlined, transparent program that both protects them better and saves medical resources.

Unlike modern insurance plans, Medicare is divided: Part A pays for inpatient-hospital, skilled-nursing-facility, hospice and home-health care. Part B pays for physician and outpatient services. Each has different cost-sharing and deductibles.

The Part A deductible for each separate hospital stay in a given year is $1,184. Meanwhile, Part B has an annual deductible of $147, after which enrollees pay 20 percent of their costs.

Currently, there is no upper limit on annual out-of-pocket expenses for Part A or Part B, so most seniors buy supplemental "Medigap" insurance. Yet this has the effect of leaving seniors with no "skin in the game" regarding cost control. The upshot is a confusing system that leaves patients at risk of catastrophic hospital expenses while subtly encouraging them to use - some would say overuse - physician services.

Combining Parts A and B and applying a single set of deductibles, co-insurance and co-payments - plus an overall cap on out-of-pocket expenditures - would render Medicare more intelligible to seniors while protecting those suffering from the most serious illnesses. It would also reduce the need for Medigap insurance.

A 2011 Congressional Budget Office report suggested that such a plan could save $32.2 billion over 10 years. Adding limitations on Medigap insurance would increase the savings to $93 billion over 10 years.

Change would affect seniors in different ways, and the impact would be painful for some. But the sacrifices are modest, given the fiscal benefits to the nation as a whole. The CBO found that out-of-pocket costs for about half of Medicare beneficiaries would go up, while they would go down or stay the same for the other half.

No doubt there would be political opposition. But it's a good sign that House Majority Leader Eric Cantor, R-Va., has publicly embraced this kind of Medicare reorganization. So far, Obama has not - though he has offered other ideas, such as increasing premiums on upper-income beneficiaries, that could work in tandem with the combination of Parts A and B.

The White House view of entitlement reform in general, and Medicare reform specifically, is that it is to be traded for Republican agreement to higher taxes. No doubt the GOP has to move on that front as well. But it would be a badge of leadership for Obama to take the lead on this idea, rather than ceding it to Cantor - perhaps by including a version in his forthcoming budget plan.

If Medicare reform is in the national interest, and it is, it's up to the president to say so.

Copyright 2014 Arizona Daily Star. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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