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Forbes.com

 

Key AMA Committee Endorses Paul Ryan-Like 'Defined Contribution' Reforms for Medicare

October 16, 2012

By Avik Roy

At the Vice-Presidential debate last week, Joe Biden claimed that the American Medical Association sided with him, and against Paul Ryan, on the merits of the Romney-Ryan plan for Medicare reform. "Who do you believe?" exclaimed Biden. "The AMA [and] me? A guy who has fought his whole life for this? Or somebody [like Paul Ryan]?" Well, it turns out that the AMA’s key policy committee has come out in favor of premium support for Medicare, in a fashion that tracks closely with what Mitt Romney and Paul Ryan are proposing.

(DISCLOSURE: I am an outside adviser to the Romney campaign on health care issues. The opinions contained herein are mine alone, and do not necessarily correspond to those of the campaign.)

I’ve had my disagreements with the AMA, which like its cousin the AARP, generates hundreds of millions of dollars in income from our existing, wasteful health-care system, and often stands in the way of needed reforms. But this past weekend, the AMA’s key policy committee, the Council on Medical Service, voted to endorse a Medicare reform plan that shares key traits with the ones put forth by Mitt Romney and Paul Ryan.

"The [AMA] policy identifies changes that must be made to strengthen the traditional Medicare program (i.e., restructuring beneficiary cost-sharing, including modifying Medigap rules, and changing the eligibility age to match Social Security)," the Council writes, "and expresses support for giving beneficiaries a choice of plans for which the federal government would contribute a standard amount (i.e., a ’defined contribution’) toward the purchase of traditional fee-for-service Medicare or another health insurance plan approved by Medicare. The Council firmly believes that implementing a defined contribution system, with strong regulatory protections for patients, is a responsible and feasible approach to strengthening the Medicare program."

Comparing the AMA plan to Romney-Ryan

Much like the old Ryan plan, the AMA proposal would let the government provide a specified subsidy—the "defined contribution"—to retirees’ health benefits, and let them choose among a range of plans. Unlike the old Ryan plan, but like the current Romney-Ryan one, the AMA committee endorsed preserving "traditional Medicare as an option" for seniors.

The AMA Council’s report states that it came around to this view not at the behest of Republican operatives or candidates, but after speaking with Bill Clinton’s former budget chief, Alice Rivlin, who along with Paul Ryan proposed a version of this plan. "Dr. Rivlin emphasized that defined contribution amounts should be sufficient to ensure that all beneficiaries could afford to purchase health insurance coverage, and that private health insurance plans should be subject to regulations that protect patients and ensure the availability of coverage for even the sickest patients."

These principles are echoed in the Romney plan for Medicare reform, which guarantees that seniors will be 100 percent covered for the standard package of benefits that traditional, government-run Medicare provides today.

In that sense, the Romney-Ryan plan isn’t actually a "defined-contribution" approach but rather a "defined-benefit" one. The tradeoff is that defined-contribution plans have absolute fiscal certainty—you know how much the government will spend on Medicare, no matter what happens in the broader health-care world—whereas defined benefit plans guarantee that seniors will be covered for the same health-care services they are today, even if their cost goes up significantly.

The AMA plan wants Medicare premiums to keep growing

The Council’s report does a great job of explaining why premium support makes sense. "The [Federal Employee Health Benefits Plan], which covers federal employees, including members of Congress, is an example of a defined contribution system that works very effectively for plan enrollees, while also effectively managing program spending growth." The report notes the bipartisan heritage of premium support for Medicare.

One key difference between the Rivlin-Ryan plan and the AMA approach is that the Rivlin-Ryan plan sought to grow the premium-support payments at GDP + 1 percent, even if health-care costs grew at a faster rate. The AMA suggests allowing the premiums to grow in line with health-care inflation. "Annual adjustments should be based on changes in health care costs and the cost of obtaining health insurance, rather than on gross domestic product (GDP) or other indexes that are not directly tied to health care costs." This approach by the AMA echoes what Mitt Romney and the Wyden-Ryan plan recommend for Medicare, though the AMA did not specifically endorse the idea of competitive bidding.

It’s understandable why the AMA came out with a plan. If Medicare payments keep growing at a faster rate than the economy, it stands to figure that doctors would make more money too.

The AMA has been on the wrong side of many, if not most, health-care issues over the past five years. The AMA supported Obamacare, including that law’s aggressive cuts to health-care providers. The AMA is constantly willing to sacrifice the public interest in the pursuit of "doc fixes" that preserve physician compensation. In this case at least, AMA has taken the sounder approach.

Original Source: http://www.forbes.com/sites/aroy/2012/10/16/key-ama-committee-endorses-paul-ryan-like-defined-contribution-reforms-for-medicare/

 

 
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