Healthcare:
Bleeding Medicare
| The idea that
private competition would hold down healthcare costs is "a total fantasy," said
a former Medicare administrator. |
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Nurse and patient in
Chester, PA. A proposed voucher system would force Medicare patients to pay even more out
of pocket for essential care. Photo İHarvey Finkle, Impact
Visuals |
Here’s a plan for taking care of the rapidly rising cost of Medicare:
Give seniors a fixed pot of money and let them go out and buy their own health insurance.
If prices get out of control, well, it’s their problem.
This proposal for turning Medicare into a voucher program is the one most
favored by Democrat John Breaux (Senator from Louisiana), who co-chairs the 17-member
National Medicare Commission. The commission, which was created by Congress as part of the
1997 Balanced Budget Act, is charged with recommending a plan for controlling spiraling
Medicare costs. That plan is supposed to be presented to Congress in March.
At press time, Breaux had almost persuaded a majority of the commission
members to go for the voucher scheme. Under the plan, the government would contract with
private insurance companies to provide a package of minimum benefits at a capped cost. The
feds would then give every senior a voucher that covers, say, 90 percent of that cost.
(Seniors would pay the rest.) Seniors would then select from a menu of private insurance
plans, or stick with Medicare. Breaux also wants to increase the age of Medicare
eligibility from 65 to 67.
Seniors Will Pay More
"This plan will control costs by making seniors pay the deficit out
of their pockets," predicts Don McCanne, a member of Physicians for a National Health
Program. "If this passes," he says, "Congress will assign a value to the
voucher and then allow cost-of-living increases. But the medical costs will go up even
faster — and seniors will be left holding the bag." He adds that Breaux wants
the value of the voucher to be even less than what Medicare currently pays. "And as
it is today, the benefits are already inadequate and the out-of-pocket expenses are
already excessive."
The voucher idea is said to be modeled after the healthcare plan that
covers federal workers, the Federal Employees Health Benefit Plan. But, as McCanne points
out, "Federal employees and Medicare recipients are two totally different
populations. Federal employees are young, healthy individuals with low medical costs and
moderate to high incomes. Medicare recipients are old and sick individuals with high
medical costs and very low incomes. They cannot afford the out-of-pocket expenses that
these private plans require."
Furthermore "choice" isn’t always what it’s cracked up
to be. Medicare trustee Marilyn Moon has pointed out that about one-third of Medicare
beneficiaries just aren’t in a position to shop around for their best healthcare
deal: they’re too physically or mentally ill. Chances are, younger, healthier seniors
will opt for plans that offer low premiums and high deductibles. The older, sicker seniors
will stick with Medicare — which would then have to cover rising expenses with higher
premiums. The end result: a two-tier system with higher costs for those who can least
afford it.
It’s not that Medicare doesn’t need help. Because of overall
healthcare inflation in our largely private patchwork system, and because of the influx of
Medicare enrollees, the payroll taxes today’s workers pay to finance the system will
eventually fall short. So far, seniors themselves have absorbed a lot of the burden of
Medicare inflation: Between 1987 and 1994, seniors’ out-of-pocket medical expenses
zoomed up by 90 percent,while their household incomes grew by only 28 percent. The
majority of Medicare recipients have incomes of less than $15,000 a year.
Breaux would like us to believe that the problem with Medicare is that
it’s a public program: If you open it up to market competition, wonderful new
efficiencies will emerge. In fact, the evidence suggests the opposite is true: Open it up
further to profit-making companies, and the costs will rise. Even one member of the
Commission has said as much. Bruce Vladeck, who ran the Medicare program from 1993 to
1997, says the idea that private competition would hold down healthcare costs is "a
total fantasy."
In reality, Medicare has generally worked better than the rest of our
healthcare system because it was public and federal, and included many people in one large
risk pool. For instance: In 1994, Medicare spent less than two percent of its outlays on
administrative expenses — overhead, salaries, equipment — compared to an average
of about 17 percent in the private sector. Medicare’s premiums, deductibles, and
co-payments have generally been lower than in the private sector.
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| Protesting Medicare cuts in New York City.
PHOTO İKirk Condyles, Impact Visuals |
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Medicare is becoming less of a good deal as it is increasingly privatized.
Much of the waste and fraud that does exist in the Medicare system can be attributed to
the private contractors that process Medicare claims not watching for fraudulent billing
claims. In 1997, Congress enacted, as part of the Balanced Budget Act, a brutal set of
reforms intended to curb Medicare costs and open up the system to privatization. The law
mandated a $112 billion cut in Medicare over five years and created a new program called
Medicare Plus Choice, under which beneficiaries can choose to enroll in managed care
plans. The transition has been disastrous: Some 43 of the private insurers withdrew from
the program and 53 reduced their service areas, complaining that reimbursement rates are
too low and administrative requirements too complex. Hundreds of thousands of seniors are
being left in the lurch. Based on this stellar success, politicians like Breaux and his
fellow commissioners hope to privatize Medicare even more.
Medicare for All Isn’t It
The already extensive privatization of Medicare makes it hard to argue, as
some people do, that the way to get to a universal healthcare system is to broaden
Medicare to cover everyone. Says Kit Costello, president of the California Nurses
Association and co-chair of the Labor Party: "Even five years ago, this strategy
might have made sense. But with Medicare HMOs and this latest privatization scheme,
Medicare has mutated so beyond its original public insurance design, it bears little
resemblance to a single-payer model anymore."
Medicare has some built-in flaws, she adds. It provides limited coverage
and makes individuals responsible for out-of-pocket costs for necessary care. This leaves
the seriously sick exposed to financial ruin.
Of course, Medicare’s biggest flaw is that it segregates the elderly
from the rest of us.
"All insurance should be a cross subsidy," Costello points out.
"The young subsidize the old and the well subsidize the sick. All participate because
everyone is at risk and everyone may need care themselves." This latest Medicare
scheme, she adds, ignores that basic rule: "Here we go again, handing public money to
commercial healthcare corporations to split everyone into separate risk pools. Those who
enroll the healthy will win."
The solution to the Medicare crisis doesn’t involve tinkering with
Medicare. It will take a universal health insurance system — like the Labor
Party’s Just Healthcare plan. Says Costello: "Just Healthcare is simple:
Everybody in, nobody out — one risk pool. Guaranteed benefits and cost controls that
don’t jeopardize healthcare. That’s the solution to our Medicare crisis." |
