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The latest congressional leadership proposal for a "demonstrationproject" to test Medicare reform continues a tiresome pattern ofbad federal health policy that undercuts the effectiveness ofmarket-based health care reforms. Serious Medicare reform means onething: creating a premium support financing system modeled on theFederal Employees Health Benefits Program.

Senator John Kerry's health care plan would expand coverage butwould fall short in transforming health insurance markets andmaking patients the key decision makers in the system. In effect,it would reinforce the status quo, with (according to one estimate)nine of every 10 dollars spent going to employers, insurancecompanies, and state governments, not to individuals.

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Instead of working on new and more complicated ways to setthousands of prices, Medicare should adopt a premium supportframework modeled after the Federal Employees Health BenefitsProgram; under premium support, the federal government can makecontributions that are limited while providing needed protectionsto beneficiaries. This is far superior to the promise of a Medicareentitlement that cannot be kept.

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