The Rivlin-Domenici Advice, and Why the Supercommittee Should Be Listening

Former Clinton Administration Budget Director Alice Rivlin and retired U.S. Senator Pete Domenici (R-NM) testified yesterday before the congressional “supercommittee” charged with identifying $1.5 trillion in federal budget savings.

The members of the Select Committee would do well to listen to the Rivlin-Domenici advice on reforming the Medicare program.

The two experts, both members of the Bipartisan Policy Center’s deficit reduction efforts told the committee members that “simply put, there can be no lasting solution to the U.S. debt crisis without structural changes in the Medicare program to slow its cost growth.”

This structural reform approach contrasts with many of the news reports circulating which suggest committee members are considering straightforward cuts in Medicare payments to providers or requiring increased rebates from pharmaceutical manufacturers to the federal government.  In either case, Medicare beneficiaries are going to pay the price either through reduced access to care or higher drug prices.

Instead, what Rivlin and Domenici have suggested is a bold yet sensible alternative to the idea of saving money from Medicare simply by taking an ax to it.  They recommend providing Medicare beneficiaries with a choice of staying in the conventional fee-for-service program or entering a Medicare Exchange in which private plans would compete on the basis of cost, quality and value.

Some outlets that advocate maintaining the Medicare status quo have already gone on the attack, calling the Rivlin-Domenici concept partial privatization that will burden beneficiaries with higher costs.

The fact is, though, that leaving conventional Medicare as an option will incentivize private plans and providers to innovate new ways to provide high-quality care at lower costs.  That incentive has been absent in traditional fee-for-service Medicare.  As the Rivlin-Domenici testimony explains:

“The new Medicare Exchange will provide strong incentives for plans to manage care delivery efficiently and to offer the public evidence that their plans achieve quality outcomes at comparatively low cost – because low-bidding plans would be rewarded with increased enrollment.”

Giving the option between harming beneficiaries with cuts that will further limit the number of physicians taking Medicare patients and a new direction that will offer beneficiaries more choices and the prospect of improved, cost-effective care delivery, it seems that the supercommittee should be giving strong consideration to Alice Rivlin’s and Pete Domenici’s recommendations.