LIKE A monster in a B-grade horror film, the Medicare reform plan that was vetoed into oblivion by President Clinton in 1995 has managed to spring back to life in 1998-99, thanks to the efforts of Sen. John Breaux (D-La.) and nine of his colleagues on the 17-member Bipartisan Commission on the Future of Medicare.
Although the Breaux proposal failed last month to get the 11 votes required for a panel recommendation, its leaders pledge to take their plan to the Congress. It seems certain to become the starting point for an inevitable debate over the future of America's health insurance program for the elderly and the disabled.
This is at once ironic, worrisome and unwarranted. It is ironic because the Breaux proposal is essentially the same as the Republicans failed 1995 plan to restructure Medicare, which itself was conceptually reminiscent of Mr. Clinton's 1993 defeated proposal for managed competition.
It is worrisome because the Breaux proposal threatens to introduce new risks and inequities into Medicare without offering sufficient assurance that the programs costs will be controlled or its benefit package expanded. And it is unwarranted because Medicare's recent experience suggests that safer and more realistic reforms are not only available but within the programs grasp.
Mr. Breaux himself has tried to distinguish his proposal from the 1995 Republican plan. His voucher system would be based on a complex "premium support" scheme that would adjust Medicare payments to reflect beneficiaries' incomes and the average cost of health plans where they live.
Nonetheless, like the Republican plan in 1995, the essence of his proposal is the expectation that costs will be reduced if patients are given a predetermined federal contribution and then allowed to choose among a variety of regulated private health plans and the traditional Medicare program.
The theory that managed competition and choice of insurance plans would effectively control Medicare costs is speculative.
Recall that in 1994 President Clinton had to include tough regulatory spending controls on top of his provisions for competitive choice just to entice the Congressional Budget Office to favorably rate his plan's ability to control spending. The CBO's conclusion then "that the impact that managed competition would have on total health spending is highly uncertain" seems even more appropriate today, when many health plans are dropping out of the Medicare program and private premiums are rapidly rising again.
What is not speculative is the fundamental transformation of Medicare that such reforms would produce. For more than three decades, Medicare has promised universal protection against the cost of a defined range of medical service, allowing beneficiaries to choose the providers.
The scope of that insurance has certainly been inadequate, but the goal remained worthy: Every elderly American should be promised medical insurance on a relatively equal basis.
The Breaux proposal, however, would create new incentives that could fragment the Medicare insurance pool and place unwarranted risks on vulnerable beneficiaries. With Medicare costs highly concentrated among the sickest patients, health plans could prosper by avoiding high-risk groups or skimping on care.
Even more alarming, the traditional Medicare program could be transformed into a troubled last refuge for the sickest and most expensive patients, just as its own bargaining power and political support were undercut by the mass exodus of healthier beneficiaries into the private market.
Beneath the complexities of the proposal is another serious threat: the possibility that the premium support scheme could be transformed into a fixed voucher or "defined contribution."
This idea would shift much of the risk of health care inflation or future fiscal shortfalls onto the elderly and disabled. And if the traditional Medicare program ended up attracting a disproportionate number of high-cost patients, the poor and chronically ill beneficiaries who remained in the program could be faced with a painful choice: exit Medicare or pay a rapidly rising health insurance premium.
These risks are lamentable not merely because they repudiate America's tradition of social insurance but also because they are avoidable. Beginning in the early 1980s, Medicare developed a payment system that has generally controlled costs better than have private health insurers.
Last year, as recent legislative changes took hold, Medicare's growth slowed to an impressive 1.5 percent. Medicare has also experimented with new reimbursement methods for private health plans, which until recently have been grossly overpaid by the program. Such experimentation should continue, along with efforts to upgrade Medicare's benefit package and tap new revenue sources.
Instead, Senator Breaux and his supporters would abandon Medicare's present structure in favor of an uncertain scheme that poses unnecessary risks. The standard we set for them and other Medicare reformers should be the same one that we ask of our doctors: First, do no harm.
Jacob S. Hacker is a fellow at the New America Foundation. Theodore R. Marmor teaches public policy at the Yale University School of Management.
Pub Date: 4/08/99