Joe Lieberman Tackles Medicare Reform
Jun. 15
2011 - 12:55 pm Forbes
Joe Lieberman, the retiring, formerly
Democratic Senator from Connecticut, has come up with his own plan for Medicare
reform. As he put it last week in the Washington Post,
“Democrats are right when they say the public wants to keep Medicare as a
government-run program. Republicans are right when they say that the current Medicare
benefit structure is unaffordable.” His plan doesn’t go far enough—whose does?
But it does include some serious ideas that would help curb Medicare’s runaway
growth.
1. Raise the Medicare eligibility age from 65 to 67
Lieberman proposes raising the eligibility age
from 65 to 67 on a graduated basis, concluding in 2025. This would put the
eligibility age for Medicare back on par with that of Social Security. This is
a simple and obvious reform that is actually gaining wide public acceptance.
A better reform, however, would be to index
Medicare eligibility to life expectancy. In 1965, when Medicare was passed, the
average life expectancy at birth was 70.2 years. In 2010, it was 78.4. In other
words, in 1965, Medicare was intended to provide health care for the last 5.2
years of one’s life. In 2010, it covered, on average, the last 13.4 years of
life: a 158% expansion of the average coverage period.
2.
Merge Medicare Parts A and B
One of the odd and inefficient artifacts of
Medicare is that seniors pay separately for hospitalization insurance (Medicare
Part A) and non-hospital (outpatient) physician and nursing services (Medicare
Part B). Because Part A is more generous than Part B, seniors are often incentivized to seek expensive hospital care when cheaper
outpatient care might suffice.
Medicare Advantage, a.k.a. Part C, serves a
quarter of the Medicare population through privately-administered health plans,
and Part C plans do integrate hospitalization and outpatient services. 3.
Raise premiums
Lieberman points out that, at Medicare’s
inception, retirees paid 50 percent of the program’s costs in premiums. Today,
they only pay one-quarter. He proposes raising those premiums in Part B and
Part D, the prescription drug plan, to 35 percent of program costs, beginning
in 2014. This is fine, but an even better reform would be to give seniors the
choice between plans that charge higher premiums, and those that charge lower
premiums but contain higher deductibles.
4.
Reform Medigap supplemental insurance
Medigap plans are
supplemental plans that allow seniors to pay a small premium in exchange for
wiping out the co-pays, deductibles, and other cost-sharing features that help
discourage wasteful medical spending. As Lieberman points out, “Many studies
have found that Medicare enrollees who have supplemental coverage use as much
as 25 percent more services than those with only traditional Medicare coverage.”
He doesn’t offer a specific proposal for dealing with Medigap—but
it has long been clear that a key element of Medicare reform must be to
eliminate, or severely curtail, the use of Medigap
plans.
5.
Tax the rich (i.e., the upper-middle class)
Lieberman proposes a 1
percent surtax on personal income above $250,000. Given that Medicare costs
will continue to rise at a faster rate than the economy, a more efficient idea
would be to cut benefits for those making $250,000 by the same amount as his
proposed tax increase.
Liebercare: Modest, but directionally positive
Sen. Lieberman’s plan is modest. But it’s
certainly far better than the plan proposed by Senate Democrats, which is to do nothing. “We will not allow cuts to
seniors’ benefits,” declared Sen. Chuck Schumer yesterday. Except that Schumer
was a champion of Obamacare, which included $500
billion in Medicare cuts (albeit ones that may never materialize).
The problem is, Lieberman is an
independent—most Democrats won’t listen to him. Plus, he’s retiring—so he has
more freedom to say what he thinks, with little need to steer public sentiment
in his direction.
For many left-of-center economists, the
inexorable rise of health-care spending is a head-scratching mystery. But the
story is quite simple: Medicare massively subsidizes excessive health spending
by divorcing ordinary patients from the cost of their care. The best way to
change this is to restore seniors’ incentives to stop wasting other people’s money.
Lieberman’s plan inches us toward that goal. Full Report at
http://blogs.forbes.com/aroy/2011/06/15/joe-lieberman-tackles-medicare-reform/?partner=yahootix