The Agenda

James Capretta on the Prospects for Medicare Reform in 2013

If conservatives can’t persuade the Obama administration and Senate Democrats to embrace premium support this coming year, as seems likely, are there alternative reforms that are worth pursuing? James Capretta offers a roadmap for incremental Medicare reform at Economics 21. His basic view is that beneficiaries need to play a more active role in making decisions about their medical care, and this requires making them more cost-conscious. He also wants to guarantee that accountable care organizations (ACOs) are responsive to beneficiaries and not just administrative directives from CMS:

First, in general, Medigap plans and employer-sponsored retiree coverage should not be allowed to fill in entirely Medicare’s cost-sharing. In an FFS insurance model, that’s commonsense. In addition to regular Medigap insurance, this rule would apply to the health program for retired federal employees as well as the military health system, both of which serve as secondary insurance for millions of former government workers and military personnel.

Second, the ACO “shared savings” program should be explicitly expanded to foster competition among ACOs through beneficiary choice. Instead of the automatic enrollment system now in place, beneficiaries should be given the option to enroll in an ACO of their choosing. And, as an incentive to do so, they should be allowed to share in the savings from ACO cost-cutting. The amount of savings they would get (in the form of reduced Medicare premiums) should be directly proportional to how much ACOs can bring down overall costs below what would otherwise occur in unmanaged FFS. Thus, ACOs that are particularly effective at cutting costs would attract market share and enrollment because beneficiaries would experience reduced premiums if they signed up with them.

Third, to provide even more incentive for enrollment in cost-effective care, the reform should allow secondary insurance to provide more favorable cost-sharing for beneficiaries who get their care from an approved integrated system (that could be an ACO model or perhaps even more aggressively managed models). This would give the beneficiaries even stronger financial incentives to forgo unmanaged FFS and would create within Medicare something like an “in-network” and “out-of-network” structure, much like what many private employers have in place today.

These three reforms would dramatically change the cost dynamic in the program.

I found Capretta’s analysis very encouraging.

Reihan Salam — Reihan Salam is executive editor of National Review and a National Review Institute policy fellow.

Most Popular


Yes We Kanye

Kanye West is unpredictable and not terribly coherent and has generated his share of infamous and insufferably narcissistic behavior -- “Bush doesn’t care about black people” and “Imma let you finish” come to mind. Color me skeptical that it’s a consequential victory for the Right now that West is ... Read More

Poll Finds Nevada Voters Support School-Choice Programs

According to an April poll, a large number of Nevada voters support school-choice programs. The poll, conducted by Nevada Independent/Mellman, found that 70 percent of voters support a proposal for a special-needs Education Savings Account and 59 percent support expanding the funding for the current tax-credit ... Read More

Is Journalism School Worth It?

Clarence Darrow dropped out of law school after just a year, figuring that he would learn what he needed to know about legal practice faster if he were actually doing it than sitting in classrooms. (Today, that wouldn't be possible, thanks to licensing requirements.) The same thing is true in other fields -- ... Read More

Wednesday Links

Today is ANZAC Day, the anniversary of the Battle of Gallipoli: Here's some history, a documentary, and a Lego re-enactment. How DNA Can Lead to Wrongful Convictions: Labs today can identify people with DNA from just a handful of cells, but a handful of cells can easily migrate. The 19th-century art of ... Read More

Microscopic Dots. Let’s Look at Them.

Stuart E. Eizenstat has written a big book on the Carter presidency. (Eizenstat was Carter’s chief domestic-policy adviser. He also had a substantial hand in foreign affairs.) I have reviewed the book for the forthcoming NR. Eizenstat tells the story of a meeting between President Carter and Andrei Gromyko, the ... Read More