NCPA - National Center for Policy Analysis


December 14, 2007

Rather than prolonging the problem for yet another year, Congress should start taking serious steps to preserve access to, and improve the quality of, the health care services that all Medicare beneficiaries receive, says John S. O'Shea, a practicing physician and former health policy fellow with the Heritage Foundation.

Specifically, Congress should do the following:

  • Abandon the flawed method for updating physician payment formulas each year based on a special formula and replace it with a new system that provides for normal economic incentives that are relevant to the individual clinical situation.
  • Begin transforming the entire Medicare program into a defined-contribution system to limit taxpayers' exposure and make Medicare budgeting more manageable and predictable.
  • Maintain the viability of the Medicare Advantage (MA) program which allows patient choice for current beneficiaries and provide additional benefits beyond the traditional Medicare package.
  • Allow genuine competition and consumer choice to drive value in the system; such individual choice would create patient demand for transparency on cost and quality of services and physicians would have a compelling incentive to deliver value.  

In sum, Congress should pass reforms that introduce market forces into the decision-making of individual patients and providers, says O'Shea.  Consumer choice and competition would significantly improve both the value of services and the long-term viability of the Medicare program.

Source: John S. O'Shea, "Medicare Reform: Cleaning Up the Physician Payment Mess," WebMemo #1730, Heritage Foundation, December 11, 2007.


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