A grand bargain on Medicare – Could it be for real?

When it comes to Medicare, could Democrats and Republicans be any further apart?

President Obama and most Democrats in Congress want to keep the current structure with tweaks to save costs. Republicans have rallied around Rep. Paul Ryan’s (R-Wisc.) proposal to radically transform Medicare into a program of subsidies for purchasing private coverage (known either as a “voucher system” or “premium support” depending on your opinion of it.) 

The stakes are huge. Medicare will drive increases in federal spending more than any other expense in coming decades. And the lives and health of tens of millions of elderly and disabled Americans are on the line.

The difference seems intractable because an ideological chasm lies at its core. Republicans tend to distrust large government safety net programs and prefer giving the private sector a bigger role. Democrats tend to see government programs as more dependable and efficient.

But hope springs eternal. A compromise could yet emerge.

The New York Times reports that Obama is open to a significant Medicare reform that has Republican support. It would change the payment structure into a unified system that covers both hospitals and physicians together. As things stand now, Medicare separates coverage into two separate plans – Part A for hospitals and Part B for physicians.

The number two Republican in the House, Rep. Eric Cantor (R – Va.) made a similar proposal in February.

What would such a change mean? To start with, beneficiaries would pay a single deductible each year, instead of separate ones for hospitals (presently $1,184) and physicians (presently $147).  The actual impact would depend on the kinds of services they use. Most (about 80%) are not hospitalized in any given year, so the new combined deductible would be higher than the amount they presently pay. But if they do need inpatient care, it would be much lower.

In return, total out-of-pocket costs would be capped. This would lessen the need to purchase private Medicare supplement policies, which can be expensive.

The change could also bring more efficiency to Medicare and open the door to payment innovations. For example, it could make it easier to experiment with global reimbursement covering all services needed for an episode of care.

The current division of Medicare into separate hospital and physician reimbursement programs is a relic of the era when the program was launched. It mimics the Blue Cross and Blue Shield plans of the time, which were divided along similar lines. That structure no longer makes sense today.

Of course, bipartisan compromise still faces a difficult, some would say nearly insurmountable, road ahead. The proposal to combine payment programs is just a bud that is a long way from blooming. As a first hurdle, Obama won’t support any Medicare restructuring plan unless Republicans agree to accept some revenue increases along with it.

However, there is reason for hope. Obama’s support for significant Medicare changes is not new, contrary to what some Republicans have charged. He proposed his first set in 2011. And many Republicans who want reform are uncomfortable with Ryan’s radical approach.

Obama will release his 2014 budget proposal on April 10 – two months late but that’s not too remarkable in the present climate. It will likely include Medicare limits of some sort but just what kind remains to be seen.

Will the buds of a Medicare compromise then start to bloom? There is certainly room for common ground, as the unified payment approach suggests. The only things standing in the way are ideological intransigence and partisan posturing. Surely, our politicians can find a way around those.