Medicare reform was a big part of President Barack Obama's State of the Union address Tuesday night.
The president called for "modest reforms" to Medicare, saying, "Those of us who care deeply about programs like Medicare must embrace the need for modest reforms -- otherwise, our retirement programs will crowd out the investments we need for our children, and jeopardize the promise of a secure retirement for future generations."
At the same time, he rejected anything that undermines the fundamental promise of the program. "We can't just cut our way to prosperity," he said.
Then the president outlined some reforms that he would encourage. Most of them were also included in his most recent budget proposals:
Reduce payments to drug companies. The administration's budget proposals specify making payments for prescription drugs match what drug companies are paid by the federal Medicaid poverty program.
Ask wealthier seniors to pay more. Right now, couples who have modified adjusted gross income or MAGI, plus nontaxable interest income together totaling $170,000 -- $85,000 for single taxpayers -- already pay more for Medicare, with their costs escalating as their incomes rise.
Changes to the way hospitals and doctors are paid, focusing on performance-related incentives. The president said in his speech, "We'll bring down costs by changing the way our government pays for Medicare, because our medical bills shouldn't be based on the number of tests ordered or days spent in the hospital; they should be based on the quality of care that our seniors receive."
Obama left the door open to other cost-saving proposals. "I am open to additional reforms from both parties, so long as they don't violate the guarantee of a secure retirement. Our government shouldn't make promises we cannot keep -- but we must keep the promises we've already made," he said.
It all seems a little vague, but somewhat comforting to those of us who are doing retirement planning and who must rely on this vital health care program.