Creating A Medicare Marketplace
The Medicare system has been a huge success. Before its enactment in 1965, one-half of the elderly were uninsured. Today, that number is virtually zero.
On the other hand, it has a big problem - soaring costs, driven by higher per-patient health care expenses and the growing number of future beneficiaries. So much so that, by 2030, Medicare payroll taxes would have to be doubled to maintain current spending levels and keep the system solvent. That alternative would be a huge tax on work, resulting in a slower rate of economic growth and making it all the more difficult to meet our obligations to the elderly and disabled.
As a good first step, the balanced budget agreement between President Clinton and the Congressional leadership extends Medicare's solvency by 10 years, reducing spending by $115 billion over five years. Some meaningful structural reforms will make lasting contributions toward reducing the federal deficit.
However, most of these cuts come from arbitrarily reducing payments to hospitals and doctors. To recoup that lost revenue, health care service providers are likely to skimp on the quality of care and perform more services (some unnecessary) for Medicare beneficiaries. To close the financial gap further, providers will probably charge higher fees to patients with private health care plans.
The next steps in Medicare reform must move beyond the left's entitlement mentality and the right's “I got mine” attitude. A “third way” can embrace promoting quality while restraining inflation through choice and competition, not government price controls. Responsibility for quality and cost control should be handled by providers and consumers, not "managed" by bureaucrats.
For all the good it has done, Medicare is a bureaucratic dinosaur burdened with command-and-control regulations that mandate benefits and restrict health care choices. The very people who should be benefiting from the system are at the mercy of the battles between the regulators and the regulated.
In its place, the Democratic Leadership Council advocates a system where older and disabled Americans are given a health purchasing account to buy private coverage. To motivate more quality at less cost from the market, the subsidy would be based on the current premiums of the highest quality, lowest-cost health programs. Unlike the other plans advocated by the right, the account would be used for catastrophic and all ordinary health expenses.
Every year, consumers would receive an account statement listing their status and a menu of options for the future. If a “Cadillac” health care plan is preferred, beneficiaries would make up the difference from their own pockets. “Hyundai” consumers would get to keep what's left.
To help them get the most from their accounts, the elderly could join consumer cooperatives established by senior citizen groups, employers, unions and other voluntary organizations. Through such a group, individuals would gain increased bargaining power in the marketplace.
Consumers and cooperatives equipped with information, not government bureaucracies, would be put in charge of monitoring health care quality. This consumer empowerment strategy represents a fresh contrast to "regulation by body part" measures such as requiring 48-hour maternity stays and banning outpatient mastectomies. Instead, it establishes a general framework for quality improvement rather than micromanaging the marketplace with rules that freeze current practices and stifle innovation.
The current health care debate bounces back and forth between different and contradictory piecemeal measures. Some attempt to enforce quality while others aim at restricting choices and reining in costs.
If we are to stop this game of public policy “ping-pong,” and truly reform Medicare and the rest of the health care system, we must address the issues of cost and quality simultaneously through market-oriented strategies.
Only then can we reach the true goal of Medicare - providing our elderly citizens the highest quality care at the lowest possible cost to taxpayers.
Jim Gibson is president of the Colorado Democratic Leadership Council, a think tank that advocates new public policy ideas and the Democratic Party's historic commitment to economic growth, personal responsibility, community, individual liberty and equal opportunity.