Committee for a Responsible Federal Budget

Senators Lieberman and Coburn Release Medicare Proposal

Jun 28, 2011

Earlier today, Sens. Joe Lieberman (I-CT) and Tom Coburn (R-OK) released a Medicare reform proposal similar to one that Sen. Lieberman proposed a few weeks ago. This proposal, however, has more cost savings than Sen. Lieberman's first Medicare reform plan and would use some of the savings to offset a three-year fix for the SGR.

Many of the policy changes contained in the bill come from recommendations in the Fiscal Commission's plan. Below is a list of the bill's recommendations:

  • Raise the Medicare retirement age to 67 by 2025
  • Restrict Medigap coverage of first-dollar cost-sharing
  • Reform Medicare cost sharing rules by establishing a combined deductible, uniform co-insurance, and catastrophic limit -- with a higher catastrophic limit for higher earners
  • Accelerate home health provider payment reductions
  • Phase out payments to hospitals for bad debts
  • Increase the base Part B premiums to cover 35% of program costs
  • Require couples making more than $300,000 per year to pay the full cost of their Part B and Part D coverage
  • Enact three-year doc fix to prevent 30% physician payment cut next year
  • Enact numerous provisions to reduce fraud and abuse

According to their release, the bill would save more than $500 billion over ten years, with a possible additional $100 billion from the program integrity provisions. The deficit reduction from each provision of the bill is outlined below.

Savings from Medicare Reform Proposal (billions)
Provision2012-2021 Savings
Raise retirement age$124
Reform cost-sharing rules (including Medigap)$130
Further increase cost sharing for high earnersunknown
Accelerate home health savings$9
Phase out payments for bad debts$23
Means test Part B and Part D premiums$15*
Increase Part B premiums$241
Enact three-year doc fix-$38
Enact anti-fraud and anti-abuse measuresunknown+
Total>$504

*Estimated at $10 to $20 billion; +Estimated by staff at up to $100 billion

This is a strong proposal from the two Senators, and deserves attention from all other lawmakers. While it would not solve the entire Medicare problem, it would make a very significant dent in Medicare cost growth. Additionally, it includes a few reforms to cost-sharing in Medicare that may serve to prevent overutilization of services and may help to reduce excess health cost growth, potentially leading to even greater savings in subsequent decades. The increase in the Medicare Age, meanwhile, could help to spur growth by encouraging work while targeting scarce resources toward those who need them most through the coverage expansion under PPACA.

Entitlement reform must be an important piece of the current budget negotiations, and will be central to ultimately getting our fiscal situation under control.

Instead of demagoguing this plan, those who don't embrace it should suggest alternatives to do at least as much to reign in federal health spending (see Appendix II for some suggestions).

Senators Coburn and Lieberman certainly don't have all the answers, but their plan would sure put us on the right path.

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