NCPA - National Center for Policy Analysis

Breaux-Frist Medicare Reform Bill

February 4, 2000

Based on the deliberations of the National Bipartisan Commission on the Future of Medicare -- which failed to endorse any plan -- Sens. John Breaux (D-La.), Bill Frist (R-Tenn.), Bob Kerrey (D-Neb.) and Chuck Hagel (R-Neb.) have introduced a bill (S.1895) to reform Medicare and expand its benefits.

The "Medicare Preservation and Improvement Act of 1999" would give Medicare beneficiaries control over their health benefits as well as an updated benefit package, using as a model the Federal Employees Health Benefits Program (FEHBP).

  • Medicare now accounts for 12 percent of the federal budget, and will grow to 28 percent to 38 percent of the federal budget in 2030, according to the Commission.
  • The bill's sponsors believe seniors would be more price sensitive and plans would be more competitive if beneficiaries were given a contribution amount based on the national average cost -- adjusted for risk and geography -- of premiums for a standard benefits package.
  • The resulting savings could be used to provide higher benefit levels or lower taxes.

Breaux-Frist would peg the government's overall Medicare contribution to 88 percent of the national average of the standard benefit package cost -- more than the government is forecast to provide in 2015 under current law -- with beneficiaries picking up the rest of the cost through premiums and copays (as they do now).

The standard benefit package would be "all services guaranteed under the existing Medicare statute." Seniors would have a choice of plans and could pay more to get higher benefits.

Above an automatic subsidy of up to 40 percent from general revenues, Congress would have to approve any additional expenditures for Medicare.

Source: John Hoff, "On Reforming Medicare," Policy Backgrounder No. 151, February 4, 2000, National Center for Policy Analysis.

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