[1] Centers for Medicare and Medicaid Services, 2012 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds, April 23, 2012, p. 229, Table V.E2, http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/Downloads/TR2012.pdf (accessed November 16, 2012).
[2] For a description of the Heritage Medicare reform plan, see Robert E. Moffit, “The Second Stage of Medicare Reform: Moving to a Premium Support Program,” Heritage Foundation Backgrounder No. 2626, November 28, 2011, http://report.heritage.org/bg2626. See also, Robert E. Moffit and Rea S. Hederman Jr., “Medicare Premium Support: The Best Reform Option,” Heritage Foundation WebMemo No. 3483, February 2, 2012, http://report.heritage.org/wm3483.
[3] For an overview of the performance of the government’s defined-contribution programs, including cost control, see Robert E. Moffit, “Expanding Choice Through Defined Contributions: Overcoming a Non-Participatory Health Care Economy,” Journal of Law, Medicine and Ethics (Fall 2012), pp. 558–573.
[4] For the best summary of this issue, see Walton J. Francis, Putting Medicare Patients in Charge: Lessons from the FEHBP (Washington, DC: AEI Press, 2009), pp. 111–143.
[5] Under the FEHBP formula, no plan can get a government contribution on behalf of a beneficiary that exceeds 75 percent of the plan’s total premium cost. In other words, by limiting the savings that enrollees can secure, current law undercuts the greater potential of FEHBP to achieve an even better performance in cost control.
[6] Moffit, “Expanding Choice Through Defined Contributions,” p. 565, and Congressional Research Service, The Federal Employees Health Benefits Program: Possible Strategies for Reform, May 24, 1989, p. 255.
[7] Deborah Brunswick, “Health Insurance Costs to Rise Again Next Year,” CNN Money, September 22, 2011.
[8] Jeff Lemieux, Memorandum to the Medicare Commission, The National Bipartisan Commission on the Future of Medicare, February 17, 1999, http://medicare.commission.gov/medicare/jeff.html (accessed May 15, 2013).
[9] Roger Feldman, Bryan Dowd, and Robert Coulam, “A Competitive Bidding Approach to Medicare Reform,” Preserving Medicare for Future Generations: Market-Based Approaches to Health Care Reform, The Robert Wood Johnson–American Enterprise Series (April 2013), p. 10.
[10] The Heritage Foundation was opposed to adding a universal prescription drug entitlement to Medicare, but has always favored a competitive system of private plans offering seniors drug coverage.
[11] In 2003, there were several Democratic proposals to have the government cap monthly premiums. See “Medicare Overhaul Continues in Congress,” Coalition on Human Needs, June 23, 2003, p. 3.
[12] Centers for Medicare and Medicaid Services, 2012 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds, April 23, 2012, p. 231.
[13] Sarah Kliff, “What a 76 Cent Premium Decrease Says About Medicare’s Future,” The Washington Post, August 9, 2011.
[14] News release, “Medicare Prescription Drug Premiums to Remain Steady for Third Straight Year,” U.S. Department of Health and Human Services, August 6, 2012, http://www.hhs.gov/news/press/2012pres/08/20120806b.html (accessed May 15, 2013).
[15] Jonathan D. Ketcham, Claudio Lucarelli, Eugenio J. Miravette, and M. Christopher Roebuck, “Sinking, Swimming, or Learning to Swim in Medicare Part D,” American Economic Review, Vol. 102 (October 2012), pp. 2639–2673. The researchers used data for the years 2006 and 2007.
[16] Ibid., p. 2642.
[17] Ibid.
[18] Centers for Medicare and Medicaid Services, 2004 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds, Table II.C18, http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/Downloads/tr2004.pdf (accessed May 15, 2013), and 2012 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds, Table III.D3, http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/Downloads/TR2012.pdf (accessed May 15, 2013).
[19] Marsha Gold, Gretchen Jacobson, Anthony Damico, and Tricia Neuman, “Medicare Advantage 2012 Data Spotlight: Enrollment Market Update,” The Henry J. Kaiser Family Foundation, Data Spotlight, June 2012, p. 1, http://kff.org/health-costs/report/medicare-advantage-2012-enrollment-market-update/ (accessed May 15, 2013).
[20] In fact, the average bid for all Medicare Advantage plans is 98 percent of the costs of traditional Medicare in the geographic bidding regions, and for HMOs the bids are 95 percent of those traditional Medicare costs. See James C. Capretta, “The Role of Medicare Fee-for-Service in Inefficient Health Care Delivery,” in Preserving Medicare for Future Generations: Market-Based Approaches to Reform, The Robert Wood Johnson- American Enterprise Series, (April 2013), p. 7.
[21] The law does not allow seniors to receive cash rebates for choosing plans that provide coverage below the Medicare benchmark payments.
[22] Most Medicare Advantage plans come under the Medicare payment benchmark, and are thus legally required to rebate 75 percent of the difference to enrollees in richer benefits or lower premiums. The remaining 25 percent is retained as savings to the federal government. See Medicare Payment Advisory Commission, “A Data Book: Health Care Spending and the Medicare Program,” 2012, p. 142.
[23] National Bipartisan Commission on the Future of Medicare, “Impact of the Commission Premium Support Proposal on Different Types of Beneficiaries,” p. 1., http://medicare.commission.gov/medicare/impact.htm (accessed May 20, 2013).
[24] Letter from Dan Crippen, CBO director, to Senator John Breaux (D–LA), co-chair, National Bipartisan Commission on the Future of Medicare, February 18, 1999, http://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/10xx/doc1092/breaux.pdf (accessed May 13, 2013).
[25] Douglas W. Elmendorf, “CBO’s 2011 Long-Term Budget Outlook,” testimony before the Committee on the Budget, U.S. House of Representatives, June 23, 2011, http://budget.house.gov/uploadedfiles/623elmendorftestimony.pdf (accessed May 13, 2013).
[26] A Medicare spending cap is no longer just a policy proposal; it is current law. As a policy matter, a Medicare spending cap has been embraced by the Obama Administration (a key feature of the PPACA) and congressional Republicans. In the case of centrist and conservative proponents of Medicare premium support, however, any such cap would function as a “backstop” to ensure savings that are guaranteed and thus measurable by the Congressional Budget Office. For conservatives and centrists, competition, not global Medicare budgets or price controls, is to be the mechanism to control cost and slow the growth in Medicare spending.
[27] Roger Feldman, Robert Coulam, and Bryan Dowd, “Competitive Bidding Can Help Solve Medicare’s Fiscal Crisis,” American Enterprise Institute Health Policy Outlook, February 2012, http://www.aei.org/files/2012/02/16/-competitive-bidding-can-help-solve-medicares-fiscal-crisis_081704430956.pdf (accessed May 13, 2013).
[28] Ibid.
[29] Zirui Song, David M. Cutler, and Michael E. Chernew, “Potential Effects of Reforming Medicare Into a Competitive Bidding System,” Journal of the American Medical Association, Vol. 308, No. 5 (August 1, 2012), http://jama.jamanetwork.com/article.aspx?articleid=1273025 (accessed April 15, 2013).
[30] James C. Capretta and Yuval Levin, “More Mediscare,” The Weekly Standard, August 20, 2012, http://www.weeklystandard.com/articles/more-mediscare_649725.html (accessed May 15, 2013).
[31] National Economic and Domestic Policy Councils, “The President’s Plan to Modernize and Strengthen Medicare for the 21st Century,” detailed description, July 2, 1999, p. 8, http://clinton2.nara.gov/WH/New/html/medicare.pdf (accessed April 15, 2013).
[32] For a description of the Medicare Advantage payment system and its flaws, as well as the program’s strengths in delivering high quality care, see Jeet S. Guram and Robert E. Moffit, “The Medicare Advantage Success Story—Looking Beyond the Cost Difference,” The New England Journal of Medicine, Vol. 366 (March 29, 2012), pp. 1177–1179, http://www.nejm.org/doi/full/10.1056NEJMp1114019?viewType=Print&viewClass=Print (accessed May 15, 2013).
[33] The Center for American Progress Health Policy Team, “The Senior Protection Plan,” November 2012, p. 6, http://www.americanprogress.org/wp-content/uploads/2012/11/SeniorProtectionPlan-3.pdf (accessed April 15, 2013). It is unclear whether a senior could choose a plan that bids above or below the benchmark under CAP’s proposal.
[34] Office of Management and Budget, “A New Era of Responsibility: Renewing America’s Promise,” February 2009, p. 28, http://www.gpo.gov/fdsys/pkg/BUDGET-2010-BUD/pdf/BUDGET-2010-BUD.pdf (accessed April 15, 2013).
[35] Obama for America, “Promises,” television ad, August 25, 2012, http://www.youtube.com/watch?feature=player_embedded&v=b9XkVonSIxk (accessed May 13, 2013).
[36] For a more detailed discussion of this controversy, see Rea S. Hederman Jr., “Why Medicare Premium Support Would Not Cost Future Beneficiaries $6,400 More,” Heritage Foundation Issue Brief No. 3745, September 28, 2012, http://www.heritage.org/research/reports/2012/09/why-medicare-premium-support-would-not-cost-future-beneficiaries-$6400-more.
[37] Glenn Kessler, “Health Care’s $6,400 Question—Fast Fact Check,” The Washington Post, September 4, 2012, http://www.washingtonpost.com/politics/health-cares-6400-question--fast-fact-check/2012/09/04/086b1046-f6d9-11e1-8398-0327ab83ab91_video.html (accessed October 19, 2012).
[38] Gretchen Jacobsin, Tricia Neuman, Anthony Damico, “Transforming Medicare into a Premium Support System: Implications for Beneficiary Premiums,” Kaiser Family Foundation, October 2012, http://www.kff.org/medicare/upload/8373.pdf (accessed October 23, 2012).
[39] Joseph R. Antos, “The Problem with Kaiser’s Premium Support Study? Seniors are Smarter than That—and So Are Health Plans,” AEIdeas blog, October 15, 2012, http://www.aei-ideas.org/2012/10/the-problem-with-kaisers-study-on-premium-support-seniors-are-smarter-than-that-and-so-are-health-plans/ (accessed May 15, 2013).
[40] Ketcham et al., “Sinking, Swimming, or Learning to Swim in Medicare Part D,” p. 2642.
[41] News release, “Feds Health Benefits Changes Save Taxpayers and Employees Nearly $2 billion,” U.S. Office of Personnel Management, October 17, 1983.
[42] U.S. Office of Personnel Management, Compensation Report: U.S. Civil Service Retirement System, Federal Employees Health Benefits Program, Federal Employees’ Group Life Insurance Program, Pay Programs, fiscal year 1983, p. 2, http://babel.hathitrust.org/cgi/pt?id=uiug.30112105073313#page/n2/mode/1up (accessed January 18, 2013).
[43] News release, “Feds Health Benefits Changes Save Taxpayers and Employees Nearly $2 billion.”
[44] U.S. Office of Personnel Management, Compensation Report: U.S. Civil Service Retirement System, Federal Employees Health Benefits Program, Federal Employees’ Group Life Insurance Program, Pay Programs, p. 55.
[45] Determined using a Consumer Price Index calculator: Federal Reserve Bank of Minneapolis.
[46] For a comparative description of the leading Medicare premium support proposals, see Robert E. Moffit, “Saving the American Dream: Comparing Medicare Reform Plans,” Heritage Foundation Backgrounder No. 2675, April 4, 2012, http://report.heritage.org/bg2675.
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