Medicare: A Possible Solution?

In a just released piece in the New England Journal of Medicine piece, American Enterprise Institute (AEI) healthcare economist and former Congressional Budget Office official Joseph Antos assesses the Wyden-Ryan Medicare reform proposal.

"The Wyden-Ryan proposal outlines a strategy for Medicare reform that harnesses market forces to control costs. It provides a real alternative to the top-down controls favored in the [Affordable Care Act]." Joseph Antos

Antos points out that:

  • The need for significant Medicare reform is increasingly urgent as 76 million baby boomers are expected to retire over the next two decades. Traditional fee-for-service Medicare will probably have about 57 million enrollees in 2022, and it could remain a dominant force in the health sector for decades if seniors continue to enroll.
  • The cost of Medicare continues to grow and it is unlikely that Congress will permit to go through the 27.4% reduction in payments to doctors allowed under the current law.
  • Given the serious fiscal problems facing this country, slowing the growth of Medicare spending is no longer optional. The only question is how to do it.   
  • The Wyden–Ryan proposal offers seniors a choice of private plans competing alongside traditional fee-for-service Medicare. (All plans, including traditional Medicare, would bid against each other, with premiums based on the plan’s cost of providing the full package of Medicare-covered services.)
  • A federal subsidy would be tied to the cost of the second-least-expensive plan in each market, which means that beneficiaries would have the option of enrolling in a less expensive plan and receiving a cash rebate. Anyone choosing a more expensive plan would pay the full additional premium out of pocket.


Antos concludes that even though the Wyden-Ryan skirts Medicare’s central problem -- a disorganized fee-for-service system and top-down limits on prices paid for services which drive the use of more, and more complicated, services -- it is more realistic than Ryan’s earlier plan, and could "define the policy parameters that could be the basis for real Medicare reform in 2013."

Joe Antos previously served in senior positions at the Congressional Budget Office (CBO) and continues to advise them. He can be reached at [email protected] or 202.862.5938.

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