NCPA - National Center for Policy Analysis


February 8, 2008

The 2003 Medicare Modernization Act, which created a prescription drug benefit for seniors, also instituted a "soft trigger" that would activate when spending gets too high.  Specifically, if Medicare's trustees project in two successive years that general revenues will have to be tapped in the following seven years to pay at least 45 percent of Medicare costs, the president is required to submit "corrective" legislation to Congress within 15 days of the administration's next annual budget proposal.

According to John Goodman, president of the National Center for Policy, and Mark McClellan, former Medicare Administrator, the program needs structural changes that would allow individual hospitals to propose cost-saving solutions.  They recommend:

  • Paying a hospital more for a procedure if it guaranteed the outcome of a procedure; practically speaking, if a patient had to return for a second treatment, the hospital would eat the cost instead of billing Medicare.
  • Allowing people with chronic illnesses to manage their own health care dollars, building on a Medicaid program for the disabled called cash and counsel.

"What we should be doing is talking about fundamental reforms to get us off of this unsustainable path," Goodman said.  "But no one wants to have that discussion.  What you have to do to get off that path is painful.  You have to cut benefits."  Indeed, then-House Ways and Means Committee Chairman Bill Thomas (R-Calif.), added the trigger mechanism to force politicians to take note of the first stages of financial trouble in the program, and to encourage structural changes.

The easier road, politically, may be to shoot for small changes -- just enough to deactivate the trigger. The idea would be to chop minimally and hope the issue fades into the background -- at least until the Medicare trustees pull the trigger again.

Source: Marilyn Werber Serafini, "Frozen Trigger," National Journal, February 2, 2008.

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