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NATIONAL
JOBS FOR ALL COALITION
UNCOMMON
SENSE 27 February 2003
THE
REAL MEDICARE CRISIS
By Bruce
C. Vladeck, Professor of Health Policy and Geriatrics;
Senior Vice President for Policy, Mount Sinai Medical Center,
New York; Administrator [1993 to 1997], Health Care Financing
Administration*
The drumbeat about Medicare "reform"
continues. Typically, Congressional leaders refuse to consider
legislation to provide Medicare beneficiaries with insurance coverage
for prescription drugs unless accompanied by "reforms"
in the broader Medicare program. Much-needed payment increases
for physicians and other health care providers are to be held
hostage to various "reform" agendas -- most of which
involve assorted privatization schemes, despite the long track
record of abject failures by private insurers seeking to supplant
Medicare.
Such "reform" is needed, it is argued (or assumed) based
on one or both of the two pillars of Washington conventional wisdom:
first, that the aging of the baby-boom generation, which will
double the number of Americans 65 and over in the next thirty
years, will make Medicare (and Social Security) unaffordable;
second, that even before then, Medicare is so inefficient
and so poorly designed that almost any change would
be an improvement.
None of this
conventional wisdom is true. Even if the excessively
pessimistic assumptions used in the official Washington projections
of Medicare's future financial status turn out to be accurate
(and they haven't been for at least a decade), the net real, after-tax,
disposable income of non-elderly households in the US will be
significantly greater in 2030 than it is now, even if those households
absorb all the increases in Medicare costs. And if long-term productivity
and income growth in the American economy even approaches historical
norms (let alone the performance of the 1990s), the increased
costs of Medicare (and Social Security) will be simply drowned
out by increased incomes and wealth. Because both programs are
supported by taxes on wages, the economic health of both Medicare
and Social Security would be enhanced by decent-paying jobs for
all who want them.
Nor is Medicare as it is now constituted
so severely broken. Its administrative costs are a small fraction
of those of any private insurer in this country; its beneficiaries
are much more satisfied with their health insurance than are privately-insured
Americans; and the rate of cost increase per beneficiary in Medicare
(making fair comparisons by holding benefits constant) has lagged
well behind most private insurers for the last decade.
Bad ideas rarely flourish on their
own. Perpetuation of the demonstrably false tenets of the conventional
wisdom about Medicare is the result, instead, of concerted efforts,
including the expenditures of hundreds of millions of dollars,
by those who would benefit financially or ideologically from Medicare
privatization, or by those who recognize that Medicare's continuing
popularity with the general public is the single issue on which
Democrats have the greatest advantage over Republicans in public
opinion polls. An enormous enterprise is devoted to maintaining
false perceptions about Medicare.
The real Medicare
crisis. All of this would be just part of the broader
political sideshow were it not for the fact that continued harping
on the problems defined by the conventional wisdom deflect attention
from the very real crisis affecting Medicare and generating a
need for real Medicare reform. That crisis is the extent to which
needed health services are becoming increasingly unaffordable
for millions of Medicare beneficiaries.
Today, Medicare covers barely
half of the total health expenses of its beneficiaries - and even
if one removes long-term nursing home expenditures, which constitute
a health financing crisis all of their own, from the calculation,
Medicare's share of all other health expenses still does not reach
two-thirds. That almost belies conventional understanding of what
health "insurance" is supposed to mean. As is by now
widely understood, Medicare does not cover most outpatient prescription
drugs, but it also doesn't cover annual physicals, dental care,
eyeglasses, hearing aids, or long-term care. Coverage for mental
health services is extremely limited. Moreover, Medicare maintains
a structure of deductibles and copayments that mirrored the private
industry norm when the program was enacted in 1965. But that structure
is now woefully obsolete. Most notably, unlike almost any other
health insurance plan now available in the United States, Medicare
has no ceiling or "catastrophic cap" on beneficiaries'
out-of-pocket liabilities.
Thus, essentially every Medicare
beneficiary who can afford to obtain supplemental insurance does
so. But the availability of such coverage is rapidly eroding:
retirement health benefits for former employees are being abandoned
as fast as employers can get out from under their obligations;
managed care plans that used to offer supplemental benefits as
inducements to enroll are no longer doing so; and the price of
private Medicare supplemental coverage -- "Medigap"
-- is skyrocketing in many states. Including the premiums for
supplemental insurance, the average Medicare beneficiary now pays
roughly 20% of her household income for medical expenses over
and above those borne by Medicare. It is thus no surprise that
evidence is beginning to accumulate that a growing number of Medicare
beneficiaries are going without the health services they need,
because they can't afford them.
Needed: Real
Medicare Reform. Real Medicare reform is thus urgently
needed. It must include affordable coverage of prescription drugs,
but it also needs to include restructured deductibles and copayments,
caps on out-of-pocket costs, easier access to affordable supplemental
policies, and better coverage of mental health, dental, vision,
and hearing care. Conventional Washington wisdom will undoubtedly
object that such program expansions will cost a lot of money which,
in a time of budget deficits we can't afford, and that the only
benefit expansions that should be permitted are those financed
by savings elsewhere in the program -- although the benefits are
already inadequate, administrative costs are approaching the vanishing
point, and payment to most providers is more likely to be too
little than too much. Of course real Medicare reform will be expensive,
but the problem is not one of economics: whether or not we choose
to reform Medicare in this way is a matter of political decision-making.
Undoing just a fraction of the 2001 tax cuts would, for example,
provide ample financing for years to come. Pursuing full employment
at decent wages would also help the Medicare budget.
The real fact is that, although
we are far and away the wealthiest nation in human history, we
are much less generous in the provision of health services to
retirees and the disabled than is almost every other industrialized
nation. We can do much better, if we want to. We should be embarrassed
to do anything less.
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*The federal agency responsible
for Medicare and Medicaid.
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Editors: Helen Lachs Ginsburg, Economics (Emer.), Brooklyn College,
CUNY and June Zaccone, Economics (Emer.),
Hofstra University
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