Two House committees released on Thursday the first of several policy papers on Medicare reform, touting changes with bipartisan support that could reduce government spending while saving seniors money.
The House Energy and Commerce Committee and the Ways and Means Committee report, titled “Modernizing Medicare for the 21st Century,” outlines several problems with Medicare’s current structure and provides a bipartisan list of groups supporting structural reform to the government’s health insurance program for seniors.
“The current program relies on a 1960’s era old-fashioned and complicated benefit design,” the paper says. “Seniors deserve a modern system that is easier to understand and that will save them money.”
This paper examines Medicare’s current cost-sharing structure and problems caused by seniors’ supplemental insurance.
Medicare’s cost-sharing mechanisms are unduly burdensome and complicated, the paper argues, while the existence of comprehensive supplemental insurance creates an incentive to overuse medical services, driving up Medicare’s costs.
The paper also highlights Medicare’s “fee-for-service” structure as a large problem in the system.
The committees outline a plan that would cap the out-of-pocket expenses for senior citizens. The plan promises to cut costs by over half for a hypothetical “Ms. Smith” who has to spend 10 days in the hospital and another 100 in a skilled nursing facility.
The paper also examines a prohibition on supplemental insurance plans covering the initial costs of medical procedures, which insulates seniors from the costs of their procedures. The Congressional Budget Office estimates that such a shift would save $53.4 billion over 10 years, according to the paper.
Both of these proposals have support from liberal and conservative organizations, the paper says.
Medicare reform is essential to improving America’s entire healthcare system, said James Capretta, a healthcare expert at the Ethics and Public Policy Center.
Because Medicare is the dominant insurance provider in many areas, “hospitals and physicians organize themselves around that program,” he said. Medicare is responsible for much of the way America’s health insurance market works today, Capretta argued earlier this year in a policy paper for the American Enterprise Institute.
“You won’t be able to really move that system toward a more efficient way of delivering care unless you make Medicare, and specifically Medicare fee-for-service, operate differently,” Capretta said.
Rep. Paul Ryan (R., Wis.), chairman of the budget committee, has produced a comprehensive Medicare reform proposal that would pit traditional fee-for-service Medicare against subsidized private plans. This plan, he argues, would cut costs to the government while strengthening the system.
A committee spokeswoman would not say if the committees will adopt Ryan’s plan or another proposal as they produce more papers in the coming months.
“Strengthening Medicare is a priority for both our members and for the American people,” said an Energy and Commerce Committee spokeswoman. “We will continue to look at a number of proposals over the coming months with the hopes of achieving this important goal.”