Coburn and Burr Add to Medicare Discussion

Senators Tom Coburn (R-OK) and Richard Burr (R-NC) came out with a Medicare proposal [3] today that adds to the list of plans out there to rein in the cost of the program. In a certain respect, the plan resembles the Domenici-Rivlin [4] health care plan: it combines the Fiscal Commission [4] or Lieberman-Coburn [5] approach that makes changes within the current system with the premium support approach that changes Medicare's structure.

Step one of the bill would make a number of changes to Medicare's cost-sharing structure starting in 2014. It would adopt the Fiscal Commission proposal [6]to create an annual deductible for Parts A and B, impose 20 percent coinsurance above that, have an out-of-pocket cost-sharing limit (which would be higher for high earners), and restrict Medigap's ability to cover cost-sharing. It would also increase Part B premiums from 25 percent to 35 percent of program costs and make millionaires pay their entire premium for Parts B and D. In addition, the Medicare retirement age [7] would be raised to 67, a permanent "doc fix" would be enacted to ensure that physician payments aren't cut drastically by the SGR formula, and coordinated care would be used for beneficiaries who meet certain medical criteria. One drawback is that it repeals the Independent Payment Advisory Board (IPAB), which could still remain as an important backstop for making changes to traditional Medicare, even under the new system.

Starting in 2016, Medicare would be transitioned to a premium support system. Like with Domenici-Rivlin or Ryan-Wyden [8], traditional Medicare would compete with private insurers who offer Medicare-equivalent coverage in a competitive bidding process. The initial payment to beneficiaries for the purchase of insurance would be based on the government's share of spending in the previous year of Parts A and B, adjusted for individual health risk and income. Unlike the previously-mentioned premium support plans, the growth of these payments would not be explicitly capped but rather would be determined through the bidding process. The hope is that the changes to traditional Medicare combined with competition in the new Medicare market will restrain cost growth enough that explicit limits on payment growth would not be needed.

The Coburn-Burr proposal is a welcome addition to the Medicare debate, building on many of the previous plans that have also attempted to address the program's exploding cost.

To read more on the proposal, click here [9].