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Letter to the Honorable John B. Breaux [i] (February 1999)

handle is hein.congrec/cbo9216 and id is 1 raw text is: February 18, 1999 The Honorable John B. Breaux United States Senate Washington, D.C. 20510 Dear Senator: I am pleased to respond to your letter of February 4. We do not have specifics on many aspects of your proposal, so our response may be less precise than you or others would prefer. However, I hope that what we say is at least helpful and that we can continue to assist you as you refine your proposal. I believe that the most important piece of the analysis at this stage is to get the questions right and begin to suggest how your proposal might change the Medicare program. Summary Under current law, health plans in the Medicare program compete on the basis of covered benefits and quality of service, not on price. Your proposal would foster greater competition among plans and greater choice for beneficiaries. We believe increased competition will reduce costs. As the attached paper indicates, the details that remain to be specified would determine the ultimate effectiveness of the proposal in slowing the growth of Medicare's costs. But the general direction of the proposal is clearly promising. Reducing Medicare's costs should not be the only goal of reform. Costs could be reduced-without necessarily ensuring Medicare's long-term financial stability-by cutting payments to providers, reducing access to services, or making other changes that are likely to reduce the welfare of Medicare beneficiaries. An effective reform would introduce strong new incentives for efficiency. Other important goals of reform include ensuring an acceptable level of quality and access to services and allowing maximum flexibility for beneficiaries to choose a plan that meets their needs. Needless to say, proposals must also be feasible to implement. Designing a proposal that meets all of those goals is clearly a tall order!

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