The Medicare Crisis

Medicare will surely be an issue in the next national election. Major revisions to the program have been proposed, revisions that would change the character of Medicare. Legislation to this effect will be proposed, and it will be opposed. Laws might be enacted before the election, but probably will not. Whether there is a new law or not, this is one issue that the voting public will notice, and candidates will address.

The recent "Bi-Partisan Commission on the Future of Medicare" ended its series of meetings without reaching agreement sufficient to produce a bi-partisan report. Senator John B. Breaux, (D-Louisiana), the chair of the Commission, expects to translate his plan into legislation this year (1999). His proposals were supported by the eight Republicans on the body, and by one other Democrat, Sen. Bob Kerry of Nebraska.

Taking the point on this issue is guaranteed to be a risky move for any politician. Medicare has strong and consistent public support. Politicians who are perceived to threaten the Medicare program frequently do not continue their careers past the next election. Consequently, any change in the program will be presented as a "reform," as a measure to "strengthen" it, or a way to "preserve" it.

Adjustments to the Medicare budget in the past have largely been in the form of reductions in payments to health care providers. It is not a direct reduction of benefits, and so is not much resented by the general public. This type of under-funding can go only so far before it visibly reduces the access of beneficiaries to doctors and hospitals. It may have already gone too far. It certainly has gone far enough to arouse considerable resistance from doctors and hospitals.

Still, the politicians are running the country, or at least the government. If they just leave the program alone, it is guaranteed to fail. The elements of Medicare are the taxes that support it, the rules of eligibility, and the benefits that are covered. Today, the current tax rates are adequate to pay the required benefits. In the future, they will not be adequate. They have to do something with Medicare, even if it's wrong.

The beneficiaries of Medicare are 34 million people 65 and older, plus 5 million who are permanently disabled and another 284,000 whose kidneys have failed. Medicare Part A covers hospitalization and is paid for on the principle of social insurance (like Social Security). Employers and employees pay in, and current beneficiaries have their hospital expenses paid. Medicare Part B covers physicians' fees and outpatient services. It is similar to traditional fee-for-service insurance, paying 80 percent of covered services in excess of an annual deductible. Recipients of Part A are eligible to sign up for Part B, and most do, even though they pay a premium for the coverage.

In short, there are now 39 million people whose medical expenses are covered, somewhat inadequately, by the Medicare program. Thirty years from now, it is anticipated, there will be 76 million who would be eligible under current rules. Economist Victor Fuchs has estimated that the average yearly cost of health care for an elderly person, $9200 in 1995, will be $25,000 by 2020, if present trends in health care cost continue. Present trends may or may not continue for the next twenty years, but it seems reasonable to expect the real cost of medical care to be at least somewhat greater for each of the greatly increased number of elderly people.

Republicans and Democrats alike are terrified that they may have to propose raising taxes to cover their needs. They are terrified that if they are unable to afford continuing to pour public money into insurance company profits, drug company profits, for-profit hospital profits, and good salaries plus better bonuses for all the corporate executives involved, their corporate sponsors may no longer support them. And if they were to take money away from - let us say - weapons programs to support health care, it is certain that their base of support would turn on them. But they have to do something.

One key element of the Breaux/Republican plan is to raise the age of eligibility for Medicare to 67 from 65, with some as yet undefined provision allowing people 65 and 66 to buy their way into the program. This is clearly a reduction in benefits, and will not get popular support. They want to put it into law now, but have the age of eligibility creep up slowly in the distant future, along with eligibility for Social Security. This is supposed to postpone objections to this part of their strategy.

Another key element is to provide beneficiaries with vouchers instead of definite coverage. The idea is that each beneficiary should then go shopping among some variety of policies in the private insurance market, perhaps paying some out of his own pocket for benefits not offered in the basic plans. And there is more. Not everybody would even get the same amount of voucher money; the amount would be adjusted according to some formula taking individual income into account. Senator Breaux does not like the term "voucher," so he calls this approach a ‘premium support model," although it fits perfectly the definition of a voucher.

The essence of the Breaux plan is to shift the cost of medical care from one institution, the Medicare program, to other institutions and to those individuals who are sick and injured, individuals who may well not be able to afford the costs. On average, the beneficiary of the reformed Medicare is expected to pay out of pocket a higher percentage of the cost of his medical care. Currently, the typical beneficiary pays thirty percent. In the Breaux/Republican plan, he can in the future pay a higher percentage of a higher total cost.

The reality is that now, some elderly people have to choose between medicine they need to live for another year and food they need to live for another week. If they can't afford 20% of the cost of a medical service, they go without, and Medicare never has to pay that 80%. Insisting that people covered by Medicare will pay more certainly means more "going without."

In the context of budget control at any human cost, discussion of adding coverage of prescription drugs is just smoke. It serves only as a distraction from the general direction in which Breaux and his Republican friends wish to push the Medicare program. If more is spent on covering prescriptions, then even less will be spent on some other part of the program. They are not trying to evaluate the needs of the people who are supposed to be served by Medicare and then figure out what it would take to meet those needs. Their point of view is narrowly that of administrators who define success as getting their "clients" to accept the consequences of staying within a fixed budget.

The Medicare program started out with an ideal of one level of medical service for all. The Breaux plan wants to have multiple tiers of service, with the best coverage for those who can best afford it. That is how the market for health insurance works. The example of the insurance market for employer-paid health insurance shows this.

Not every insurance company is out to provide the most possible service for the least possible cost. Some - difficult as this may be to believe - just want to take in as much money as possible while denying any expensive treatment they can get away with. The example of the private market also shows this. The Breaux plan expects the portion of the population most heavily burdened with strokes, heart problems, Alzheimer's, and so on to cope with this successfully, with less coverage provided by the government.

The proper question is, are there the resources in this society to take care of the medical needs of the people? The answer, right now, is obviously yes. And will we as a society plan to take care of those needs, both now and in the future? Breaux, it is obvious, is not planning to do that. People have and will have medical needs. Those needs will be less well met by his proposals, not better.

He is only planning how to maintain an ideology that says government programs must be wasteful and bureaucratic, while competitive private businesses must be efficient. The cost of Medicare in 1997 was $ 214.6 billion. These funds were administered by the Health Care Financing Administration with a staff of approximately 4000 people. Benefit payments were 99 percent of the outlay for Part A, and more than 98 percent for Part B; administrative expenses were 1 percent and 2 percent, respectively. No private insurance company comes close to this level of efficiency. Additionally, the HCFA did not waste a cent on profits or executive bonuses. The money went for health care. The ideology of government incompetence and business efficiency is not even as good as a myth; it is just a lie.

Breaux and friends want to make Medicare just another part of the corporate medical schemes that already control health care for most of us under 65. They are doing something, and it is wrong. A lot of people are going to notice that what they are doing is wrong, and a lot of people are going to be provoked into taking political action, no matter how much they might prefer to avoid it. They will be ready for the message that corporate medicine should be eliminated, not expanded.

Medicare was first enacted by Congress in 1965. At that time, many of its supporters hoped it would be the first step toward universal health care in this country. Many of its supporters still hold onto that hope, though it has been a long wait for the second step. Whether Medicare expands to cover everybody or is replaced by a new system of universal coverage does not matter. A single-payer universal health care system would be the most effective way of controlling medical costs while providing adequate medical care to the whole population. One only has to observe the situation in every other advanced country in the world to see that.