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Former Sen. Breaux: Move to Center Crucial to Successful Medicare Reform

By Nellie Bristol, CQ HealthBeat Associate Editor

April 27, 2012 -- Democrats should consider some form of premium support, while Republicans should be more open-minded about fee-for-service payment changes enacted by the 2010 health law in order to forge a consensus on a Medicare overhaul, former Sen. John B. Breaux said recently.

Democrats, Breaux said, need to avoid extreme characterizations of Republican proposals including "the argument of ending Medicare as we know it," he said. "We're talking about keeping Medicare, but a different delivery system." Breaux testified at a House Ways and Means health subcommittee hearing on premium support and spoke with reporters afterward.

While in the Senate, the Louisiana Democrat developed a Medicare overhaul proposal with former Majority Leader Bill Frist, R-Tenn., then a senator, that included premium support.

New payment methods in the health care law (PL 111-148, PL 111-152), such as the move to valued based purchasing and bundling of payments, should be given time to work and could lower costs and improve care, Breaux added. "In the event that we move to a premium support model where there is more price competition between [fee-for-service] and private plans, the whole system would be better off if these promising ... Medicare reforms ... work." Breaux is now senior counsel at Patton Boggs LLP.

While there is broad consensus on the need to restructure Medicare to make it more efficient and financially sustainable, Breaux said there is no chance for widespread bipartisan agreement on the issue before the November election. Nonetheless, he said, conversations should continue between the parties to set the groundwork for later compromise. "I do sense that it's a better conversation now, and better feelings among both sides that a different delivery system needs to be accomplished," he said.

In perhaps an example of that softening, Alice M. Rivlin, of the Brookings Institution and Georgetown University and an appointee under several Democratic presidents, compared a plan she developed with former Republican Sen. Pete V. Domenici of New Mexico to a premium support proposed by House Budget Committee Chairman Paul D. Ryan and Oregon Democratic Sen. Ron Wyden. Under their model, the government would contribute a set amount to beneficiaries for them to purchase insurance in the private market. Ryan, R-Wis., originally wanted to eliminate all Medicare fee-for-service but when he teamed up with Wyden they maintained traditional Medicare as an option.

Like Breaux, Rivlin made an appeal for similar bipartisan approaches. "Health care policy is far too important be driven by a single party's ideology," she said. "No matter how the 2012 election turns out, the president and the congressional leadership should strive to find common ground both on how to cover the uninsured and how to reform Medicaid and Medicare while stabilizing the debt." Ryan agreed with the assessment and much of Rivlin's reform approach. "There is really room for the two parties to talk to each other about this issue," he added. "If we can just calm down a little bit we might even save the program."

In more specific policy discussions, Breaux said that under premium support, tying growth of the government's payments to Medicare beneficiaries to health care spending rather than general economic growth is crucial to ensuring that the government's payments keep pace with health costs. "The contribution amount by the federal government would be based on the national average, weighted by plan enrollment and adjusted for risk and geography, of the premiums for the standard benefit package," he said. "Updates would be based on actual health care costs at the time—not some arbitrary growth rate like GDP.

Joseph Antos of the American Enterprise Institute pointed out that both Ryan and President Obama have tied Medicare payment increases to the GDP.

Premium Support Pioneer Bolts

Such conflicting methods for determining payment updates is one of reasons Henry Aaron of the Brookings Institution gave for no longer supporting the concept of premium support. Although Aaron is credited with pioneering the term, he said differing policy elements of current proposals mean "none of the plans now under discussion qualifies as 'premium support.' In fact, Democratic lawmakers call Ryan's plan a voucher plan, not premium support.

In Aaron's 1990's proposal, developed with then Brookings colleague Bob Reischauer, a health insurance voucher was linked to general health costs. "If competition boosted efficiency, enrollees and the taxpayer would both gain," he testified. "But if competition didn't boost efficiency, the first and overriding goal should be to protect the very vulnerable people who are enrolled in Medicare from increased financial burdens they could ill afford."

Aaron said he does not advocate premium support for Medicare under current circumstances. "I believe there are overwhelming and persuasive reasons why it should not be enacted now," he said. "I also have become less confident that premium support, even it if works for the rest of the population, would be desirable for Medicare."

In explaining his change of opinion, Aaron cited an improved financial outlook for the Medicare Part A trust fund since enactment of the health overhaul and the development of health insurance exchanges under the law. The exchanges, he said, are a work in progress and would likely be improved over time. But given that, such a structure may not be suitable for Medicare enrollees who are sicker and more disabled than the population covered under the health law. "Only after the health insurance exchanges called for by the Affordable Care Act have been set up, only after the administrative problems they will doubtless confront have been solved, and only after we have some reason to believe that they will be able to handle the much more challenging Medicare population—only then would it make sense for Congress to consider shifting Medicare enrollees to vouchers."

Aaron also said hopes that premium support would lower costs through increased competition may not materialize, citing Medicare Advantage plans as an example. "The evidence to date is not encouraging," he said.

Antos said the evolution of Republican premium support proposals to include the continuation of traditional fee-for-service Medicare were a good move, noting the original program was likely to retain a strong hold in rural areas and other markets dominated by a few providers. "The objective of premium support should not be to drive out traditional Medicare," he said. "Instead, premium support should be designated to allow consumers to decide for themselves which plan provides the best value, and give them a clear financial stake in that direction."

With premium support, he added, financial incentives would develop that would "encourage better decision making on the part of both consumers and health care providers." With that, he added, spending targets would not be necessary "except as a budget mnemonic device that reminds us that resources are limited, even for the most urgent of programs."

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