Medicare Reform

The Comptroller General's statement focuses on two leading Medicare reform proposals: the President's Plan to Modernize and Strengthen Medicare for the 21st Century and S.1895, commonly known as the Breaux-Frist proposal. Both proposals recognize the need for more comprehensive reform--a position consistent with GAO's belief that the unfunded promises associated with today's program should be addressed before adding new benefits, such as prescription drug coverage. Such additions must be considered in the context of broader efforts to correct Medicare's current fiscal imbalance and sustain the long-term viability of this popular program. Also, any reform package should include a mechanism to monitor aggregate program costs over time and establish funding thresholds that would trigger a call for fiscal action. In the case of both proposals, the details will need to be worked out. And those details will determine whether the reforms will be effective and acceptable.

GAO noted that: (1) the elements of restructuring of Medicare as proposed by the President and Breaux-Frist are best understood in light of Medicare's current structure; (2) from the perspective of the program's benefit package, most beneficiaries have two broad choices: they can receive health care coverage through Medicare's traditional fee-for-service program or through its managed care component, called Medicare Choice; (3) the choice between traditional Medicare and a Medicare Choice plan typically involves certain trade-offs related to selection of providers, services covered, and out-of-pocket costs; (4) the President's plan and the Breaux-Frist proposal are similar in three key areas but contain two major differences; (5) to varying degrees, both proposals: (a) introduce a competitive premium model, similar in concept to the Federal Employees Health Benefit Program, to achieve cost efficiencies; (b) preserve the traditional fee-for-service Medicare program with enhanced opportunities to adopt prudent purchasing strategies; and (c) modernize Medicare's benefit package by making coverage available for prescription drug and catastrophic Medicare costs; (6) the proposals differ, however, in the extent to which traditional Medicare could face competitive pressure from private plans; and (7) under the President's plan, the Health Care Financing Administration would administer the program, whereas under the Breaux-Frist proposal, an independent Medicare board would perform that function.