February 2, 1999

The Honorable John B. Breaux
Chairman, Bipartisan Commission on the Future of Medicare
Adams Building, Library of Congress
101 Independence Avenue, S.E.
Washington, D.C. 20540-1998

Dear Senator Breaux:

We want to share with you some serious concerns that we have with the premium support reform proposal that you presented to the Bipartisan Commission on the Future of Medicare recently. Consumers Union believes that the keys to successful Medicare reform include preserving Medicare as a universal program that spreads risks broadly, expanding Medicare benefits so that they do a better job of meeting beneficiaries' needs, structuring any competition so that it benefits consumers, and increasing (not decreasing) the population with access to the Medicare program.

We have reservations about whether an ideally designed premium support model can meet beneficiaries' needs. But we are troubled by the fact that the proposal under consideration is very far from ideal. Henry J. Aaron and Robert D. Reischauer outlined a premium support model in "The Medicare Reform Debate: What Is the Next Step?" Health Affairs, Winter 1995. There are at least four fundamental differences between their premium support model and the proposal you circulated. They are:

• Reischauer and Aaron propose a standard benefit package, with two variations (a high cost-sharing option and a low cost-sharing option). In contrast, your proposal allows marketplace determination of benefits. Leaving benefits to the market would turn back the clock to the days of marketplace confusion that characterized the medigap market before the 1990 legislative reforms, and extend this confusion to Medicare itself. Before standard benefit packages for medigap, insurers created frivolous variations in benefits that destroyed the ability to make apples-to-apples comparisons of policies. Standard benefit packages are a necessary component of a market-based system. They are needed to assure comparisons of like benefits.
  
• The Reischauer/Aaron paper recommended a benefit package that includes modest prescription drug coverage and catastrophic protection. These are not included in your proposal. The latter, a cap on out-of-pocket costs, did not even come up for discussion at your meeting of January 26. Without these benefit changes, millions of beneficiaries will continue to be at risk of devastating out-of-pocket costs.
  
• The Reischauer/Aaron paper recommended a A good deal of regulation, from Washington, to protect vulnerable beneficiaries. In contrast, your proposal is vague about the duties of the Medicare Board and the extent to which it would be accountable to the public.
  
• The Reischauer/Aaron paper recommended increased taxes to sustain Medicare benefits -- an option that is not even on the Commission's table for discussion.
  

Attached is Consumers Union's checklist for Medicare Reform. Also attached is our assessment of how your proposal measures up against our checklist. We urge you to weigh carefully the need to have competition serve beneficiaries (not marketplace competitors); the need to guard against increasing the ranks of the uninsured (which would grow if the age of Medicare eligibility were raised to 67); and the need to improve the benefit design. Thank you for considering our views.

Sincerely,

Gail Shearer	Adrienne Hahn
Director	Legislative Counsel
Health Policy Analysis
Washington Office

cc: Members of Bipartisan Commission on the Future of Medicare