Medicare Reform

The affordability of Medicare reform proposals should be considered in relation to the long-term sustainability of Medicare expenditures, the fairness to providers and beneficiaries, the adequacy of resources for allowing appropriate access and cost-effective and clinically meaningful innovations for addressing beneficiaries' needs, the feasibility for implementation and monitoring, and the transparency about costs and policy tradeoffs. Current proposals would modernize Medicare's financing and organization by changing fee-for-service or Medicare+Choice options or offering premium support, such as that of the Federal Employees Health Benefits Program. Benefit options being considered include covering outpatient prescription drugs and limiting beneficiaries' cost liability. Congress should consider fiscal incentives to control costs and a targeting strategy when deliberating these options. Reform will be done best with lead time to phase in changes and with prudent decisions about how to use current and projected budget surpluses.

GAO noted that: (1) in March, the Bipartisan Commission on the Future of Medicare completed its deliberations; (2) reform options emerged from these discussions that touched on all aspects of the Medicare program, including: (a) modernization of the traditional Medicare fee-for-service program both to update the benefit package and enhance its potential for containing program costs; (b) modernization of the Medicare Choice program to ensure beneficiaries health plan choices and allow the program to more efficiently purchase plan services; and (c) adoption of a Federal Employees Health Benefits Program-like model to foster quality and price based competition among health plans and to elevate beneficiary consciousness about and responsibility for program costs; (3) given the size of Medicare's unfunded liability, it is realistic to expect that reforms intended to bring down future costs will have to proceed in an incremental fashion; (4) ideally, the unfunded promises associated with today's program should be addressed before or concurrent with proposals to make new ones, such as adding prescription drug coverage; (5) if additional benefits are added, policymakers need to consider targeting strategies and fully offsetting the related costs; (6) they may also want to design a mechanism to monitor these and aggregate program costs over time as well as establish expenditure or funding thresholds that would trigger a call for fiscal action; (7) in addition, any potential program expansion should be accompanied by meaningful reform of the Medicare program to help ensure its sustainability; (8) to qualify for meaningful reform, a proposal should make a significant down payment toward ensuring Medicare's long-range financial integrity and sustainability; (9) the 1999 annual reports of the Medicare Trustees project that program costs will continue to grow faster than the rest of the economy; (10) proposals to reform Medicare should be assessed against the following criteria: affordability, equity, adequacy, feasibility, and acceptance; (11) the particulars of payment mechanisms largely determine the extent to which a reform option can eliminate excess government spending while protecting beneficiaries' access to care; (12) revisions to newly implemented policies should be based on a thorough assessment of their effects so that they are not unduly affected by external pressures and premature conclusions or remain static when change is clearly warranted; and (13) for choice-based models to function as intended, consumers must have information that is sufficiently comparable.