• The Heritage Network
    • Resize:
    • A
    • A
    • A
  • Donate
  • Two Cheers for the Coburn–Lieberman Medicare Proposal

    Senators Tom Coburn (R–OK) and Joseph Lieberman (I–CT) unveiled a major Medicare proposal. Based on preliminary estimates provided by the Congressional Budget Office (CBO), the proposal would reduce total Medicare spending by more than $600 billion in the next 10 years and cut the program’s long-term (75-year) unfunded liability by approximately $10 trillion.

    This is a serious start. Without remedial action, Medicare faces a long-term unfunded liability of almost $37 trillion. The Medicare hospitalization trust fund is running a deficit of $34.1 billion this year alone. While the program has become an engine of deficits and debt, the first step toward reform is revamping the traditional Medicare program. That is what the Coburn–Lieberman proposal would accomplish. The next step would be to move the program from a defined benefit to a defined contribution for the coming generation of retirees.

    While legislative language is not yet available, if the legislative language comports with the narrative description of the proposal, these would be welcome changes to the traditional Medicare program. These changes are consistent with long-term Medicare reform. A number of these proposals, while differing in certain details, are also broadly similar to the Medicare policy prescriptions embodied in The Heritage Foundation’s comprehensive budget, tax and entitlement reform proposal, “Saving the American Dream.” Specifically, the Coburn–Lieberman proposal would:

    • Create a catastrophic Medicare benefit and simplify Medicare cost-sharing. Senior and disabled citizens would henceforth be protected against the financial devastation of catastrophic illness under the Medicare program directly. This would reduce the seniors reliance on more expensive supplemental coverage. The Coburn–Lieberman proposal would impose a cap of $7,500 annually on a beneficiary’s total out-of-pocket spending. Meanwhile, the complex cost-sharing arrangements of Medicare would be replaced with a single deductible ($550 annually) for Medicare Parts A and B hospital and physicians services. Medi-gap (and presumably other supplemental insurance policies) would be limited to coverage of 50 percent of the Medicare coinsurance up to the catastrophic cap of $7,500 but not the initial $550 of a beneficiary’s cost-sharing.
    • Increase Part B premiums from 25 to 35 percent. The proposal would increase the standard premium for physician and drug benefits by 2 percent per year for a period of five years. This would mean an extra $15 to $20 per month for beneficiaries, but it would reduce the large taxpayer subsidy in these voluntary parts of Medicare, which are not financed by the payroll tax. Under current law, beneficiaries pay just 25 percent of their premiums, while taxpayers pick up 75 percent of the costs through general revenue transfers. While the Coburn–Lieberman proposal would increase beneficiaries’ share of the cost of their benefits, it would fall far short of the initial “Great Society” requirement that Medicare beneficiaries pay 50 percent of the costs of their Part B benefits.
    • Expand income-related cost sharing and phase out Part B and D subsidies for the very wealthy. Currently, Medicare imposes higher premium requirements for upper-income beneficiaries. For 2011, for example, while the standard monthly Part B premium is $115.40, it would be $369.10 for a person with an annual income of more than $214,000.The Coburn–Lieberman proposal would build upon this policy by raising out-of-pocket caps (and thus reducing taxpayer subsidies) for wealthy individuals and couples. For example, while the standard cap would be $7,500 for almost all beneficiaries, the new caps would increase so that wealthier enrollees would pay a greater share of their own health care costs. Under the Coburn—Lieberman proposal, the caps would be: $12,500 for married couples with annual incomes of $170,000 to $214,000; $17,500 for couples with annual incomes between $214,000 and $320,000; and $22,500 for married couples with annual incomes of $320,000 or more. Couples with annual incomes of $300,000 or more would also pay the full cost of their Part B and D premiums.
    • Raise Medicare’s age of eligibility to 67. The Coburn–Lieberman proposal would gradually raise the age of eligibility for Medicare to 67 by 2025. The eligibility age would be raised by two months every year for persons who were born in 1949.
    • Make physician payment and other program changes. The Coburn–Lieberman proposal provides for a three-year “doc fix” financed by savings from the proposal, as well as a reduction of taxpayer subsidies to hospitals for bad debts and improvements in Medicare administration to reduce the waste, fraud, and abuse that plagues the program.

    The Coburn–Lieberman proposal is a serious step toward comprehensive Medicare reform. Beyond changes in the traditional program, full-scale reform would include the creation of a premium support system of Medicare financing that would allow seniors to take their private coverage into retirement and allow choice of plans other than traditional Medicare fee for service. But the addition of a catastrophic benefit, the broader application of income-related taxpayer subsidies, a rational increase in Medicare Part B and D premiums, and an increase in the age of eligibility are all policy prescriptions advanced by The Heritage Foundation and other reformers. If America is to be rescued from ruinous debt and crushing taxation, further Medicare reform is indispensable.

    A senior fellow at Heritage’s Center for Policy Innovation, Moffitt is the co-author of Why Obamacare is Wrong for America (HarperCollins/Broadside, 2011).

    Posted in Obamacare [slideshow_deploy]

    11 Responses to Two Cheers for the Coburn–Lieberman Medicare Proposal

    1. 475Linebaugh says:

      That last part about "waste, fraud, and abuse" is more descriptive of the bullet point itself than what it might actually accomplish. I cannot believe that Joe Lieberman and Tom Coburn could possibly concoct a plan to rescue Medicare that isn't anything more than a shell game that will lend itself to infinite future modifications until it is a full-blown mess once again.

      Paul Ryan's plan puts the power back in the hands of the States. That's just about all I need to know, except how eventually the taxation would eventually go back to the States themselves as well, thus taking the Federal Government out of the equation entirely. This stands for both Medicare and Medicaid, two socialist programs, as properly noted, from LBJ's Great Society, that have accomplished one and only one thing: the destruction of the greatest health care system the world has ever known.

    2. Guy Thompto says:

      The average life expectancy in the US in 1965 – the year Medicaid passed – was 70.2. In 2010, the average US life expectancy was 77.7 years. Make the benefits for Medicare start at the average life expectancy rate less 5 years. People could opt-in at an earlier age, but the payout rate would be prorated based on age. That should go a long way towards balancing the budget and also keeping a promise made to our citizens.

    3. Albert says:

      Let's see the premium increase would be about $50 a month. The average retiree Social Security income is about $1400 a month. So that would be a 3.5% reduction in income.

      Would they be willing to ask those making over $1 million dollars a year to take a 3.5% reduction in income to match what the average senior is being asked to give up?

      If so there might be some room for a deal … if not … no thanks.

      • JeremyLee says:

        If any retiree is living solely on SS these days, then that poor planning is on them – not me who is paying for their benefits.

      • AWM- NW Indiana says:

        Why do we keep discussing how to cut Social Security, rather than deciding upon the drastic reductions of government necessary to ensure those who paid into Social Security get that which was promised? This is a bait & switch and a shell game all rolled into one! The Feds purposefully couch things so as to encourage class warfare- thus keeping our attention off of the personal fiefdoms they have created on the backs of the American citizenry
        We keep dancing to the tune those in Washinton play- allowing them to keep us right where they want us.
        Wake up people! Only by taking the power from Washington -and delivering it back back to the states and the individual- will we ever get out of this mess…..

    4. Simon P. Poynton. says:

      That the Values of Communities is what we do, valuing that Community and that Community Big Business. Entire Peoples Ensconced In Their Own Law. So we trade these communities every day in the open market, one of against the Other. This Trading of Communities includes Prisons, Hospitals, Blacks, Asians, Homosexual, Abortion. Then theirs the Native Peoples Communities, and Many More With Civil Rights Accorded. The Unborn Children Gone Communities are unique in Law, second to no other Law. Yes, This Unique Community has but to Wait For Nine Months Knowing its Execution Order Could be Done. Wonderful mix,this Community Gets Killed, that Community Gets Killed.

    5. EON59 says:

      Medicare already only pays about 35 cents on the dollar billed. cutting the payment to healthcare providers will only decrease the availability of care. increasing the age eligibility on a health care system that is mandatory is ridiculous. premiums for people over 60 at an insurance company would more than tap most of there monthly income. and for those who think these retireees should have saved more, many of the retirees are from a time before 401k's, and before it was easy to invest. some have lost their pensions do to the bankruptcy of the companies that they had pensions. how about taking social security and medicare out of the general budget and put it in trust again. half of our countries debt is to the social security and medicare system. they talk about getting the fraud and waste out, but never do. it's the government stupid. lieberman and coburn couldn't come up with an original idea if it hit them on the head. put health care back to the states.

    6. Joan says:

      How about an analysis of administrative costs which account for 33% of each consumer health care dollar spent on Medicare and private insurance ,basically due to the consequences of flawed economic paradigms such as the Hsu-RVU method the Rheinhardt/Kennedy HMO concept and the new debacle in progress of ACOs. By expanding the administrative class, medical care expenses have escalated beyond belief. Administrative work product is designed to limit care to consumers through denials either direct or due to increasing "authorization" burden. (wage and price controls) aided by FTC anti-trust directives against physicians. The solution is to eliminate the Administrative "middle man" and pay the providers a fair compensation for their considerable educational investment.

      • AU 76- Auburn, AL says:

        Amen. Cut the redundancy out. I get statements both electronically and in paper format. Medicare should offer each recipient the option of either sent by email or USPS…..there are untold savings just in paper, print costs, administration costs, etc. I certainly did not have this "paper" problem when I was privately insured.

    7. Beth says:

      Ryan plan all the way!

    8. slackware says:

      Have we in the history of the program recovered the money lost in 'waste, fraud, abuse'. NO!!!

      Proof is that not one congressman when they had the trustees in front of them asked how long the system is solvent if the feds can't borrow money after Aug 2nd.
      The reason private insurance is so high is they are cost shifting the government payments onto us, The simple fix is a no brainer. Congress and his royalness go on medicare and off their luxury unlimited coverage we pay for it plan. When they can't find a doctor, and can't get treatment things will change.

      Cut out the government red tape, If I need a perscription why do I need to pay a third party to be allowed to get well. I should be able to purchase my medicine without government interferance. Just think how cheap oxycotton would be if you just let limbough buy a truck load at a time when he needs it.

    Comments are subject to approval and moderation. We remind everyone that The Heritage Foundation promotes a civil society where ideas and debate flourish. Please be respectful of each other and the subjects of any criticism. While we may not always agree on policy, we should all agree that being appropriately informed is everyone's intention visiting this site. Profanity, lewdness, personal attacks, and other forms of incivility will not be tolerated. Please keep your thoughts brief and avoid ALL CAPS. While we respect your first amendment rights, we are obligated to our readers to maintain these standards. Thanks for joining the conversation.

    Big Government Is NOT the Answer

    Your tax dollars are being spent on programs that we really don't need.

    I Agree I Disagree ×

    Get Heritage In Your Inbox — FREE!

    Heritage Foundation e-mails keep you updated on the ongoing policy battles in Washington and around the country.