Two Former HCFA Heads Offer Views on Medicare Reform in NEJM

The assumptions made by Sen. John Breaux (D-La.) and Rep. Bill Thomas (R-Calif.), the co-chairs of the National Bipartisan Commission on the Future of Medicare, in proposing their recommendations for Medicare reform have proved "partially or totally inaccurate" and should not serve as a basis for overhauling the program, Bruce Vladeck writes in the New England Journal of Medicine. Vladeck, a former administrator of the Health Care Financing Administration (now the Centers for Medicare and Medicaid Services) and now the senior vice president for policy at the Mount Sinai School of Medicine Institute for Medicare Practice in New York, was a member of the commission, whose recommendations have been cited by many politicians, including President Bush, in calling for Medicare reform. Vladeck states that Medicare, the U.S. health care system and the federal budget have all undergone "epochal changes" since the commission was created by the 1997 Balanced Budget Act. Most notably, Vladeck writes, the economic growth of the late 1990s has pushed the projected Medicare Part A hospital trust fund insolvency date from 2008 (as of the signing of the BBA) to 2029, according to the "most recent projection." For the rest of this decade, "Medicare should continue to be in the best financial shape it has been since its inception," Vladeck writes. He says that Medicare beneficiaries' difficulties in recent years stem not from problems in the program itself, but from price increases in what Medicare does not cover, most notably prescription drugs. He concludes that if the tax cut signed by President Bush earlier this year had been "much smaller," the surplus would have been large enough to spend $500 billion over the next decade on prescription drugs and "other improvements to benefits" and to "put another $500 billion aside to meet the future needs of the Medicare trust fund, and still have had money left over" for "other priorities," including expanding coverage to the uninsured (Vladeck, New England Journal of Medicine, 8/9).

'Now' Is the Time
Writing in an accompanying article, Gail Wilensky states that "now ... is precisely the right time to make decisions about what Medicare for the baby boomers should look like and to start the process of reform." Wilensky, also a former HCFA administrator and now a senior fellow at Project HOPE, states that the Federal Employees Health Benefits Program is a "good model for Medicare's future." Until this type of "premium-support" plan -- under which the "government's contribution is the same regardless of the plan chosen by the beneficiary" -- Medicare beneficiaries each year could "choose from a wide-variety of plans," including fee-for-service plans. Wilensky states that the government "would certify plans for eligibility," with health plan certification based on such criteria as financial stability, provider availability, a "minimal benefits package" and disclosures about quality of care. A premium-support system, Wilensky says, would give beneficiaries "an incentive to choose an efficient plan." Still, she concedes that such a plan "would not be a panacea," and would likely "not provide the long-term financing that is needed" for Medicare. However, Wilensky states that Medicare, established in 1965, is based on outdated notions of health care, and should be remodeled for more than financial reasons. She concludes: "As we think ahead to the type of program that makes sense for the baby boomers as well as for the existing beneficiaries, it is important to keep in mind that the people who are now reaching 65 years of age have had very different experiences with health care from those of previous generations. ... [W]e need to think about future Medicare beneficiaries as a different generation, with different experiences, with potentially different health problems, and if we start soon, with different expectations" (Wilensky, New England Journal of Medicine, 8/9).