Entitlement reform options

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President Obama has said he wants to reform entitlements eventually, someday, after Republicans raise taxes. Republicans want the President to sign on to serious reform now as part of any deal, since AARP and the left will kill anything that isn't passed immediately.

Given the political difficulty of reforming entitlements, Republicans are right to try to get Mr. Obama's fingerprints on such a deal this year. But the reforms have to be worth it. With that in mind, we thought we'd offer a clip-&-save guide to reforms that would make a difference. None of this is commensurate with the scale of the problem, but then Mr. Obama won't sign anything that is. These changes are pragmatic and politically realistic, at least if Republicans drive a hard bargain.

Medicare. ObamaCare exhausted the familiar Beltway gambit of squeezing down Medicare price controls for providers. (Also note that the White House offer of $346 billion in less Medicare spending is far smaller than its $716 billion ObamaCare raid.) Absent a larger reform, that leaves asking seniors to contribute more for benefits and take a larger role in their own care.

Higher-income seniors already receive less of a Medicare subsidy as a result of a George W. Bush policy in 2004 and then again in ObamaCare. A third expansion of means-testing is inevitable, and one useful proposal is known as comprehensive cost sharing.

Traditional Medicare is divided into three different programs that cover hospitals, doctors and drugs. This idea would consolidate the complex deductibles and copays into one modern, unified insurance system, with limits on the wraparound "Medigap" policies that seniors buy so they pay little or nothing out of pocket. Eliminating this patchwork of first-dollar coverage would be an incentive to discipline costs, and a (very) mild version is included in the 2013 White House budget.

Republicans can also continue to refine "premium support" on the Paul Ryan model, on a smaller scale. Mr. Obama campaigned as a defender of the status quo but now that the election is over some liberals are giving the concept a second look. Zeke Emanuel and others at the Center for American Progress recently endorsed competitive bidding to replace some of Medicare's administered prices. The danger is that a denuded plan would give a market gloss to a process akin to Pentagon procurement, but this is a potentially helpful intellectual concession.

Another option is raising the retirement age, which is already rising to 67 in Social Security. Longevity has increased by about 10% since 1965, and most reform plans would raise Medicare eligibility to 67 from 65 by the 2020s. This doesn't reduce the deficit now but is a credible way to reduce future liabilities.

Medicaid. Republicans may have more leverage than they think. States can opt out of ObamaCare's Medicaid expansion as a result of this year's Supreme Court ruling, and Governors are demanding more flexibility in how they manage their own programs.


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