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The most important question moderator Chris Wallace needs to ask at the debate

Donald Trump and Hillary Clinton at their first debate at Hofstra University in Hempstead, New York, Sept. 26, 2016.
Jonathan Ernst | Reuters
Donald Trump and Hillary Clinton at their first debate at Hofstra University in Hempstead, New York, Sept. 26, 2016.

At tonight's final presidential debate, moderator Chris Wallace plans to touch the third rail of American politics: entitlements.

Of primary concern is our need to reform Medicare. Decades of disregard for the health care program's financial issues have put the program on an unsustainable path. If Washington fails to act soon, current and future seniors may not receive quality, affordable care – and the peace of mind that comes with it.

We still have time to save Medicare, but our options to course-correct narrow with each passing day. The new report from the Committee for Economic Development, Modernizing Medicare, lays out the challenges along with nonpartisan solutions.

Saving Medicare requires harnessing competition to make the program more efficient, without sacrificing quality. Fortunately, Medicare Advantage, which almost a third of seniors already use, provides a perfect model. But before discussing the solutions, it is necessary to understand the policy shortfalls that affect traditional Medicare and Medicare Advantage.

Under its current structure, traditional Medicare does little to keep costs down while keeping quality up. This is because it is fee-for-service-based – the more services, the more fees. This has proven to be a recipe for artificially high, expensive health care.

Problems also afflict Medicare Advantage, which unlike traditional Medicare, provides coverage through private plans. Medicare Advantage plans compete for seniors' business; however, rules shackle the program's plans from truly competing on value – high quality at the lowest possible costs for seniors.


"Decades of disregard for Medicare's financial issues have put the program on an unsustainable path. If Washington fails to act soon, current and future seniors may not receive quality, affordable care – and the peace of mind that comes with it."

This is because, in each region, there is a "benchmark" premium price, based on the cost of inefficient, costly traditional Medicare. Even if a Medicare Advantage plan underbids the benchmark, the problem is that it can deliver only 50 percent to 70 percent of those cost savings to seniors, with the rest going into the Medicare coffers. This discourages the Medicare Advantage plans from exerting their full efforts to save money, and also discourages seniors from opting for Medicare Advantage.

Fortunately, fostering market forces are key to the solution. The Committee for Economic Development's plan would do away with the current benchmark system. Instead, Medicare Advantage providers could charge as low a premium as their efficiency allows. The federal government would provide each senior with a credit that covers the cost of the either of the two lowest-cost plans in the region.

Seniors certainly could buy more-expensive, more-elaborate plans – either private Medicare Advantage plans or public, traditional Medicare – but they would be required to pay the incremental cost. Robust competition to attract consumers would motivate all providers – for Medicare Advantage plans or traditional, fee-for-service Medicare – to achieve cost-saving improvements and innovations.

To protect lower-income seniors while keeping Medicare sustainable, we also advocate making the current Medicare enrollee premium structure more income-sensitive. Lower-income seniors would pay less out-of-pocket, but the most well-off seniors would pay more. Part of the savings would help current low-income seniors stay on traditional Medicare, if they wish, to continue their ongoing treatments for pre-existing conditions.

Our proposal would also safeguard recipients in rural areas since many might not have other realistic options for accessing care. Seniors in such areas would be allowed to enroll in traditional Medicare at no out-of-pocket cost until viable Medicare Advantage options became available.

Finally, we recommend risk-adjusting premium revenue for plans, so that plans do not face an incentive to seek out only healthy patients. Plans that serve seniors with serious health problems could rest assured that they would be compensated for the added cost of this care.

Tonight, as talk of Medicare reaches millions of debate viewers, the candidates must not duck the issue. With the right steps, a modernized Medicare system can benefit the health of our seniors and our nation's balance sheet.

Commentary by Steve Odland, CEO of the Committee for Economic Development and former CEO of Office Depot and AutoZone. He is also the co-author of "Sustaining Capitalism: Bipartisan Solutions to Restore Trust & Prosperity," which will be published in February 2017. Follow him on Twitter @CEDUpdate and @SteveOdland.

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