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December 2003 issue
Medicare Reform: Not Fixing The Problem (Again) Read the past headlines. |
Medicare Reform: Not Fixing The Problem
(Again) With the signing of the Medicare "reform" bill by President Bush on December 8, the lead story in our November 2002 issue comes to mind. Called "Medicare: The Bane or the Benefactor of Health Care?," the basic theme was that as Medicare’s importance grows for providers, investors and consumers, its ability to create a certain degree of chaos increases as well. Market caps of companies have been cut in half by changes in Medicare reimbursement, intended or not, while entire companies have grown out of providing largely Medicare-funded services. And let’s not forget the tens of thousands of people who are kept employed by the health care sector just to stay on top of Medicare regulations and reimbursement protocols. As one industry analyst said, when the "camel has its nose under the tent, who knows what will happen." Well, the tent flap is open, the nostrils are flaring and everyone is now analyzing who will be the winners and losers and by how much. Unfortunately, from a public policy perspective, they may be missing the point. Although the bill signed by the president is known as a new prescription drug benefit for the elderly, that alone does not explain the estimated $400 billion price tag over the next 10 years. While no one really knows what the actual number will end up being (remember the cost estimates back in 1965 when Medicare was enacted?), doctors, hospitals, the poor elderly (and the rich), health insurers and even people who are not eligible for AARP membership yet will be impacted in one way or another, as will Republican and Democratic political candidates next year. Some Democrats gleefully imagine a reenactment (but in Crawford, Texas) of the 1988 comedy featuring then House Ways and Means Committee Chairman Dan Rostenkowski being chased down the streets of Chicago by a group of unhappy septuagenarians after Congress, patting itself on the back, passed a catastrophic health care bill for the elderly which was, to put it mildly, not too popular with the people for whom it was intended. The problem, of course, was that they had to pay for it, as there was no opt-out provision, so the bill was repealed within the year. The Bushies, however, did not make the same mistake, and there will be a long wait for the cameras to start rolling in Crawford. Health care and politics have gone hand-in-hand for quite a while in this country, or at least since 1965. And as the number of elderly has grown, together with their economic and political clout, few have dared to do anything not supported by retirees and their primary lobbying group, AARP. This caused former Senator Alan Simpson to refer to them as "greedy geezers," and, since he was a geezer himself at the time, he got away with it. Poor Dan, however, didn’t stand a chance on that Chicago night. So what is so bad about the new "drug benefit" plan? It is not so much what is in the plan, but what was left out. Although a big chunk of the health care pie, Medicare is not the only payer, even though its rules often dictate what others do. Here we have the largest new financial commitment to the Medicare system ever contemplated since 1965, and it was signed, sealed and delivered in a vacuum. Adding a drug benefit was important to the elderly, but nothing should have been done to Medicare without making appropriate changes to the Medicaid system as well. Even though he was unwilling to tackle this concept, soon to be former CMS director Tom Scully agrees that it is ludicrous to have two completely separate funding systems, one for the elderly and one for the poor, that at times look as if they haven’t talked to each other since 1965. Mr. Scully has passed the buck to the states, which do fund from 20% to 50% of their own Medicaid budgets (with the rest coming from Washington, D.C.), but that is lame, at best. He argues that it makes no sense, for example, for Medicare reimbursement for skilled nursing facilities to be set at rates that provide healthy profits purely to subsidize the losses that many operators suffer from Medicaid. But so far, no one is willing to try to fix the problem, and until that happens, the problems, and the costs, will only increase. Medicaid budgets are going to do nothing but grow, despite states’ attempts to limit coverage and tighten eligibility requirements, and now with the $400 billion increase in Medicare expenditures, on top of the already explosive growth, what’s going to happen when the baby-boomers finally start to hit retirement age in 2011? The answer is, nobody really knows. Now, one of the central pieces of the new drug benefit, and one we assume to be essential in determining the "estimated" costs, is the ability of managed care companies to keep costs under control, and their ability to lure the elderly back into the fold. Both assumptions, however, are tenuous at best. About 12% of the elderly are currently enrolled in private health plans, but the Bush Administration expects that to increase to 35% by 2007, which is interesting because the drug benefit doesn’t really kick in until 2006, so that is a large jump either way. There was enough press coverage of various insurers shutting down their Medicare programs over the past several years that most elderly who can still read will be wary of jumping back into that problem again. And the customers whom the MCOs most want—the wealthy and healthy elderly—are the ones least likely to sign up. What we do not know is what happens to the projections if the private health plan enrollment is 50% of what is anticipated. As far as controlling costs, private health plans have been unable to do much in the past three years for their commercial enrollees, as premiums have escalated by 13% to 15% annually, with the assumption that costs increased by a lesser percentage. So how are they going to do it for the elderly, especially when there will be a government-funded reserve to cover any "shortfalls" they may experience with the new plan? The other problem is that 11 million elderly already have drug coverage through their former employers, coverage they may lose if the employer opts out because of the new Medicare coverage, at a savings to the corporation of close to $1,000 annually per person. Add to this the thought that just 5% of Medicare beneficiaries account for 50% of Medicare costs, and you begin to get the sense that we have created the largest expansion of the Medicare program in 38 years to deal with something that is not a problem for half the elderly population, the 11 million with coverage and the 14 million covered by Medicaid (there’s that Medicaid and Medicare thing again). One extremely important part of the new drug plan, which is not getting much media coverage, is the establishment of Health Savings Accounts, something that should have happened on a nationwide basis years ago. Whether covered by Medicare or an employer’s health plan, most consumers have little understanding of the true cost of health care. Other than the insurance premium deducted from their paycheck (or social security check), the only cost is the $10 to $20 co-payment that we fork over at the pharmacy or doctor’s office. Most people want insurance (and not just health insurance) to cover those catastrophic events they can’t afford to pay for, not the $150 exam or lab test. To have tax deductible payments go into a Health Savings Account, to be used to cover out-of-pocket health care expenses and non-covered expenses, when and if needed, and which grow tax-free if not used, combined with a high deductible "catastrophic" insurance policy is one of the few ways to force consumers to understand the true cost of their health decisions and to enable them to benefit financially from managing their health care as well. It is also one of the few ways to rein in out-of-control medical cost, and premium, increases. You know there is a lot of pork in a bill when there are many winners, such as doctors, hospitals and even the pharmaceutical industry, which escaped the dreaded price controls and legalization of Canadian drug imports, not to mention that the government is prevented from negotiating drug prices. But the real winner is President Bush. He stole the prescription drug benefit from the Democrats, established a plan that the elderly will not truly get a taste of until well after the election (his last), and will give the elderly drug discount cards, which will probably save them 10% to 15% off retail prices, six months before the 2004 elections. And this was all before the capture of Saddam. But the real problems of health care, and how to fund it, have largely been left untouched. The next guy’s problem, right? |
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