MEDICARE REFORM?
PRIVATIZATION, PREMIUM SUPPORT AND
SINGLE PAYER
Oliver Fein, M.D.
Professor of Clinical Medicine and Public Health
Associate Dean (Affiliations)
Weill Cornell Medical College
425 East 61st Street, Suite 321
New York, New York 10065
Phone: 212-746-4030
Fax: 212-821-0809
E-M: ofein@med.Cornell.edu
Workshop
PNHP Annual Meeting
October 27, 2012
DISCLOSURES
Dr. Oliver Fein has no relevant financial
relationships with commercial interests
Dr. Oliver Fein is immediate past President of
Physicians for a National Health Program
(PNHP), a non-profit educational and advocacy
organization. He receives no financial
compensation from PNHP.
MEDICARE AND POLITICS
Medicare is an entitlement program.
It has only been amended 5 times since 1965.
1965
Passed by Congress
1973
Amended to include:
• Permanently disabled
• ESRD
1983
DRGs
1989
RBRVS
1997
Balanced Budget Act
• Reduced payment to doctors and hospitals
• Encouraged Medicare Managed Care
• Created Medicare+Choice
2003
Medicare Advantage + Part D
2006
Part D Implemented: Medicare Prescription
Drug, Improvement and Modernization Act (MMA)
WHAT IS MEDICARE?
•
Original public Medicare is a single-payer program
•
Government administered:
- formerly by: Health Care Financing Administration (HCFA)
- presently by: Center for Medicare and Medicaid Services (CMS)
•
How many beneficiaries: 49 million
•
Who is eligible?
- Elderly (40 million): Persons over 65 year old, who have paid into the Social
Security System for 40 quarters (10 years) and their spouses when they turn 65
years old.
- Permanently disabled (8 million): Persons under 65 who received Social Security
cash payments because they are disabled become eligible for Medicare after a 2year waiting period
- ESRD (1 million): Persons on dialysis at any age.
(pew.Medicare-pg1-2012)
MEDICARE’S STRUCTURE
PART A (1965)
• Inpatient care in hospitals
• Skilled nursing care after hospitalization
• Home health care
• Hospice Care
• 40% of benefit spending
PART B (1965)
• Services from doctors and other providers
• Outpatient care and durable medical equipment
• Home health care
• Some preventive services
• 27% of benefit spending
PART C (1997)
• Run by Medicare-approved private insurance companies
• Covers benefits in Part A and Part B
• Usually includes prescription drugs (Part D)
• May include extra benefits and services for an extra cost
• 21% of benefit spending
PART D (2006)
• Run by Medicare-approved private insurance companies
• Helps cover cost of prescription drugs
• 12% of benefit spending
HOW IS MEDICARE FINANCED?
Medicare Part A
(covers hospital care)
• Employees pay 1.45% of wages
• Employers pay 1.45% of salaries
• Beneficiaries Pay
-$1156 Hospital deductible for each spell of illness in 2012
-$275 per day co-insurance for 61st to 90th hospital day
-$137.50 per day for 21st to 100th day of skilled nursing care
-$ 0 – for home health care and hospice care
HOW IS MEDICARE FINANCED?
Medicare Part B
(covers physician, laboratory, x-ray, home health services)
•
Beneficiaries pay 25% of the cost of the program
-$45.50/month (2000); $93.50 (2007); $99 (2012)
-$140 annual deductible for physician services
-20% co-payment for medical outpatient visits
-45% co-payment for mental health outpatient visits
-2008: singles with incomes over $85,000 and couples with
incomes over $170,000 pay more ($139.90 to 319.70/mo)
•
General federal tax revenues pay 75% of the cost of the program
•
95% enroll
HOW IS MEDICARE FINANCED?
Medicare Part D
(covers prescription drugs)
• $39.36 average monthly premium, range $42 to $96.
• Patient pays $325 deductible in 2013 before plan
picks up any cost.
• Patient pays 25%; Plan pays 75% until combined
amount + deductible = $2,970.
• Donut hole: Patient 47.5% of plan’s cost for brand
name drugs and 79% of plan’s cost for generics
• Once patient has spent $4,750 out-of-pocket/year,
then co-payment drops to 5% and Medicare pays 95%
HOW IS MEDICARE FINANCED?
Supplemental “Medigap” Insurance
(covers deductibles, co-insurance, some long term
care; no drugs; 6/1/10 – No E,H,I or J)
• 46% of beneficiaries Medigap:Plan
A=$133.40 G=$246.56/month
• 21% of beneficiaries Medicaid pays
• 25% of beneficiaries Medicare
Advantage plans
• 8% No supplemental coverage
SOURCES OF MEDICARE
SPENDING*
• 48% Medicare program
• 26% Third party (Medi-gap insurance)
• 25% Beneficiaries
*2006 data in http://www.kff.org/medicare/upload/7731-03.pdf
MEDICARE IS VERY POPULAR
Are the benefits from
government programs
such as Social Security
and Medicare
worth the costs?
Source: CBS News / New York Times Poll,
April 14, 2010
MEDICARE’S INADEQUACIES
• Medicare is not comprehensive
-some preventive services not covered
-limited mental health coverage
-eye glasses, hearing aides, dental care not covered
-nursing home care not covered
• Beneficiaries are under-insured because
out-of-pocket costs are too high
-$6500 per beneficiary in 2012
-51% actuarial value
• Medicare growth rate above GDP, but
below private insurance
-4.3% = Medicare average/year growth rate (’97-09)
-6.5% = private HI average/year growth rate (’97-09)
Medicare Privatization
• 1997 – Part C: Medicare + Choice
• 1999 – 6.9 mill enrollees (18%)
• 2003 – 5.3 mill enrollees (13%)
• 2004 – Medicare Advantage created by
MMA =Medicare Modernization Act
or Middleman Multiplication Act
• 2011 – 11 mill enrollees (25%)
MEDICARE ADVANTAGE
• Medicare pays plans on a bidding process
• Bids are compared to a “ benchmark” for each county
• If the bid is higher than benchmark, enrollee pays the
difference
• If the bid is lower than benchmark, Medicare gives the plan a
rebate
• Aver enrollee pays $39/mo to the plan in addition to Part B
premium for drug coverage (range: $23 to $69/mo)
• 52% of plans do not charge extra for drug coverage
PREMIUM SUPPORT
A mainstay of conservative health policy, i.e.
competition will hold down costs.
1981 – Reagan included vouchers in his budget proposal
1995 – Clinton vetoed vouchers in Balanced Budget Act
2003 – Congress defeated premium support concept
2011 – In April, Ryan resurrects Premium Support
EVOLUTION OF PREMIUM SUPPORT
• Henry Aaron and Robert Reischauer,
coin the term “Premium Support” in
Health Affairs 44:1995;8-30.
• The size of the “defined contribution”
indexed to health care costs.
• Creation of an Exchange for Medicare
• Ryan indexes to the GDP + 1% in 4/2011
• Wyden adds a public option: original Medicare
• Ryan indexes to the GDP + 1/2% in 2012
OTHER FEATURES OF RYAN PLAN
• In 2023, Medicare converted from “defined benefit”
program to a “defined contribution” program.
• Age of eligibility for Medicare raised 2 months/year from
65 years to 67 years in 2034.
• In the Medicare Exchange, beneficiaries responsible for the
difference in premiums costing more than next-to-cheapest
plan.
• Private plans required to have “same actuarial value” as
original Medicare, not the same benefits.
• Beneficiary choice will be limited to providers with whom
the private health insurer had negotiated rates.
• No cost savings, since private plans cherry-pick healthier
patients.
DOCTORS AND NURSES:
PROTECT MEDICARE NOW
Medicare is under attack. We, doctors and
nurses, are united against dismantling an
efficient and popular government program
that takes care of our patients. Medicare
needs to be improved and expanded, not
voucherized, privatized, or under-funded.
It is one of the most successful
government programs in American history
because:
DOCTORS AND NURSES:
PROTECT MEDICARE NOW
1. Medicare works. For 47 years,
traditional, public Medicare has been
providing seniors and the disabled with
the assurance that medical care will be
there when they need it. They don’t face
rejections by insurance companies, they
don’t worry they’ll be “out of network,”
they don’t encounter hidden limitations or
exclusions. When patients need care,
they receive it.
DOCTORS AND NURSES:
PROTECT MEDICARE NOW
2. The public Medicare program is popular.
Beneficiaries in the public Medicare program
are more satisfied with their insurance than
those who join private, for-profit Medicare
Advantage plans. They experience fewer cost
and access problems. When they get sick,
they flee the private plans and switch to the
public Medicare program. They would be far
less secure if they were totally dependent on
private plans.
DOCTORS AND NURSES:
PROTECT MEDICARE NOW
3. Medicare is efficient. Medicare spends just 3% of its
costs on overhead, compared to the 15-20% spent by
private insurers on their profit and overhead. Private
Medicare Advantage plans cost the government 12%
more than it spends for traditional public Medicare.
Turning Medicare over to the private insurers through a
voucher program would shift costs to seniors and the
disabled while threatening the health care access they
now enjoy. Many would start delaying treatment due to
unaffordable costs, and curable conditions may become
deadly due to lack of timely treatment
DOCTORS AND NURSES:
PROTECT MEDICARE NOW
4. Medicare is better able to contain costs than
private insurers. Over the last fifteen years,
private insurance premiums have risen 50%
faster than Medicare’s costs, and the cost
containment measures promoted in the
Affordable Care Act should further slow the rise
in Medicare’s costs. Additional savings could be
achieved by allowing Medicare to negotiate
prices with drug companies, and by reducing its
overpayments to private insurers.
DOCTORS AND NURSES:
PROTECT MEDICARE NOW
5.
Medicare is solvent. The Hospital Insurance Trust
Fund, which pays for Medicare Part A, is projected to
pay for all hospital insurance coverage through 2024,
at which point, according to government projections, it
would still be able to pay 87% of its obligations. There
is plenty of time to adjust revenues and payments
without raising the eligibility age or shifting the cost to
beneficiaries, as Vice Presidential candidate Paul
Ryan and others have proposed. Parts B and D, which
cover doctor visits, lab tests, and medicines, are not at
any financial risk since they are paid for by
beneficiaries and general government funds.
DOCTORS AND NURSES:
PROTECT MEDICARE NOW
Our Position. Americans over 65 should not be
threatened with impoverishment due to medical
conditions. Medicare is popular with its
beneficiaries and provides effective coverage for
close to 50 million people. It saves money by
being efficient, and it saves lives by letting
doctors and nurses do our job of taking care of
patients. By contrast, private insurance has been
tried and failed: it costs more and imposes
barriers to the care that seniors and the disabled
need. We demand that Medicare be kept strong
for future generations.
DOCTORS AND NURSES:
PROTECT MEDICARE NOW
Next Steps. We should improve and expand
public Medicare so that all Americans can enjoy
its benefits. It provides free choice of doctor and
hospital, the choice Americans want and value.
It can hold down administrative costs and
promote efficient primary care. And it is a public,
non-profit system that can respond to what
health care providers and their patients need,
not what corporate executives and their
stockholders want.