10.4: Catastrophic Costs
Integrate traditional Medicare into the system and add catastrophic cost protection. Other Information:
Integrating Traditional Medicare into the System and Adding Catastrophic Cost Protection. Under the Heritage plan, all senior
citizens have the option of keeping their current health plans or choosing better health plans. Five years after enactment,
traditional Medicare FFS begins to compete directly with private plans on a level playing field. Seniors can remain in Medicare
FFS if they wish. However, the previous organizational and benefit distinctions within Medicare FFS (Medicare Parts A, B,
C, and D) disappear because Medicare becomes a single, unified program with a unified trust fund that is financed by a defined
contribution. A single stated premium incorporates today's multiple Medicare FFS premiums plus the cost of a new catastrophic
benefit. Cost-sharing parameters are adjusted to ensure that the Medicare benefit package is actuarially equivalent to the
package provided under current law. In the first year of competition with private health plans, the initial value of the catastrophic
benefit will need to equal the average of such benefits currently provided in the Medicare Advantage program, but it may be
adjusted thereafter by the Secretary of Health and Human Services.
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