Medicare:

Program Reform and Modernization Are Needed But Entail Considerable Challenges

T-HEHS/AIMD-00-77: Published: Feb 8, 2000. Publicly Released: Feb 8, 2000.

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Pursuant to a congressional request, GAO discussed efforts to reform the administration, structure, and financing of the Medicare Program.

GAO noted that: (1) in addition to its sizable financial imbalance, Medicare is outmoded from a programmatic perspective; (2) to address the need for an updated benefit package and adequate tools to moderate program spending, proposals have been advanced that include benefit expansions and changes that make beneficiaries more cost conscious and incentives to make health care providers more efficient; (3) this hearing focused on one such proposal contained in S. 1895, entitled the Medicare Preservation and Improvement Act of 1999, which is commonly referred to as the Breaux-Frist proposal; (4) given the size of Medicare's unfunded liability, it is realistic to expect that reforms intended to bring down future costs will have to proceed incrementally; (5) the unfunded promises associated with today's program should be addressed before or concurrent with proposals to make new ones; (6) if benefits are added, policymakers need to consider targeting strategies that fully offset the related costs; (7) they may also want to design a mechanism to monitor aggregate program costs over time and to establish expenditure or funding thresholds that would trigger a call for fiscal action; (8) any potential program expansion should be accompanied by meaningful reform of the current Medicare program to help ensure its sustainability; (9) to qualify as meaningful reform, a proposal should make a significant down payment toward ensuring Medicare's long-range financial integrity and sustainability--the most critical issue facing Medicare; (10) the 1999 annual reports of the Medicare trustees project that program costs will continue to grow faster than the rest of the economy; (11) care must be taken to ensure that any potential expansion of the program is balanced with other programmatic reforms so that Medicare's existing financial imbalances do not worsen; (12) reform proposals should be assessed against the following criteria: affordability, equity, adequacy, feasibility, and acceptance; (13) people want unfettered access to health care, and some have needs that are not being met; and (14) in making important fiscal decisions for the nation, policymakers need to consider the fundamental differences between wants, needs, and what both individuals and the nation can afford.

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