Medicare Targeted by Cat Food Commission Recommendations

National health care costs in the U.S. amount to some $2.5 trillion a year and are increasing by about 6% per year. (Gross Domestic Product, in contrast, has been increasing recently by an average of 3% per year.) Without significant changes, by 2035 federal health spending is projected to account for almost 40% of total federal spending.

Medicare is participating in this increase, although from 1998 to 2008 per
capita costs for Medicare increased slightly less than those for the privately
insured. Medicare at present has 42 million beneficiaries (of whom 7 million
also have Medicaid coverage— “dual eligibles”). Current federal spending on
Medicare is 13-15% of the federal budget and is expected to increase as a
percentage of the federal budge and the overall economy due to rising health
costs and an aging population.

The National Commission on the Deficit recommended changes to Medicare that were intended to reduce the rising costs. Evaluation of these changes must take into consideration the nature of the Medicare beneficiary population.

Almost half of the Medicare recipients live on low incomes ¬– below $21,000 a year for an individual, and below $28,000 for a couple. In addition, this population, in comparison to the general population, is much more likely to experience chronic illness and other needs for significant long-term care. Because of these factors, Medicare beneficiaries are especially susceptible to adverse financial consequences caused by any reductions in Medicare benefits.

The Deficit Commission Report included the following proposals.

1. Limit growth in Medicare spending, generally targeted at GDP + 1%. The reports are silent on what should be done if the targets are not met. Furthermore, limiting spending on the basis of failure to attain such targets rather than on needs is short-sighted.

2. Strengthen the role of the new Independent Payment Advisory Board (IPAB).

3. Shift in Medicare from its current “defined benefit” program (Medicare specifies the health care that is covered) to a “defined contribution” system (Medicare would give beneficiaries a fixed amount of money with which to purchase health benefits).

4. Restructure Medicare benefits and cost-sharing requirements.

5. Eliminate first-dollar coverage in Medigap policies

6. Increase Medicare premiums

7. Raise the age of eligibility for Medicare beyond age 65

8. Reduce Medicare spending through changes to the Medicare drug program.

Proposals such as changing to a ”defined contribution” program, restructuring Medicare benefits with increased cost-sharing, eliminating first-dollar coverage in Medigap policies, and increasing Medicare premiums will adversely affect the financial security of a high number of Medicare beneficiaries.

A large number of seniors with significant health problems will defer seeking health care because of limited financial resources. Their medical problems not only will not disappear but will likely worsen, ultimately requiring more resources and more money. Ultimately, although Medicare itself may have reduced expenditures, the individuals themselves and society at large will of necessity be forced to pick up the increased burden, and overall health care spending in these situations may actually increase.

In short, addressing only the budget of the Medicare program does not eliminate the health care needs of seniors; it merely shifts those costs, unnecessarily increased, to society at large.

Major changes in Medicare should be contemplated only in the context of consideration of our unsustainable rate of increase in overall health care costs. It is not the Medicare program that is the primary cause of these increases. The principal causes include the increasing number and complexity of medical interventions; a dysfunctional system in which costs are seemingly unrelated to quality of care delivered; a payment system that often rewards doing more with minimal regard to outcomes.

Support for research to determine which treatments are effective and which are not, and pilot projects to change the way care is delivered and paid for, will prove much more valuable in reducing health care costs – both for Medicare and for society at large – than cost-shifting or other measures that increase the financial burden of the individual person.

Our country has a fragmented multi-payer health care system. One-third of our health care dollars are consumed by administration costs rather than by direct patient care. On a per capita basis, the amount that our country spends for health care is twice that spent by virtually all other industrialized countries. Despite this, our health outcomes are worse than most other industrialized countries.

Changing from our current health care system to an expanded and improved Medicare For All program would result in many benefits. Simplifying administration would save about 15% of total health care spending – over $400 billion per year. Placing the entire population into a single risk-pool would permit true global planning and global budgeting. Such a program would be able to negotiate effectively for fair prices for goods and services. All people would be assured of receiving a single standard of care – appropriate, comprehensive, and timely care – without fear of financial insecurity or disaster. Instead of 50+ million uninsured (one-sixth of the population) and half again as many under-insured, all would be adequately covered.

by Donald W. Mitchell, MD,President, Western Washington chapter, Physicians for a National Health Program & a PSARA member