Congress is debating how to manage the increasing costs of Medicare, a popular health insurance program for the elderly and disabled. Thomas O’Rourke, an emeritus professor of community health at Illinois, offers his views of the various approaches now under consideration to make Medicare sustainable. He was interviewed by News Bureau life sciences editor Diana Yates.
According to the Health Care Financing Administration, the number of Medicare beneficiaries will nearly double between 2010 and 2030 (from 46.6 to 77.2 million people served) while costs continue to go up. Is this sustainable? If not, what is an appropriate and realistic fix?
When Medicare is debated, the focus often jumps right to the issue of who should pay the bills rather than what should be the first question: Why are the bills so high? We already spend more on health care than the next 10 biggest spenders combined: Japan, Germany, France, China, the U.K., Italy, Canada, Brazil, Spain and Australia.
There are many ways Medicare costs could be reduced without significant benefit reductions. Eliminating Medicare Advantage plans (which are more expensive than traditional Medicare), giving Medicare the power to negotiate drug prices, reducing fees to the highest paid specialists and those who prescribe or use more expensive drugs or devices would cut a lot.
But the most effective approach would be simply to extend Medicare to all citizens with a single payer system that is publicly funded and privately delivered. The estimated potential savings would be enough to provide comprehensive coverage to everyone without paying any more than we already do. Costs would be controlled through negotiated fees, global budgeting and bulk purchasing.
What is your view of a proposal to raise the Medicare eligibility age from 65 to 67?
The Kaiser Family Foundation studied what would happen in 2014 if the eligibility age were increased. They found that the money saved would be more than offset by the resulting shift in costs to private employers, state governments, private insurance premiums for all Americans, increased spending on Medicaid and other programs, and out-of-pocket costs for seniors. In the final analysis the anticipated savings are more illusory than real.
Raising the eligibility age also would have a negative impact on health. We know that illness and disability increase with age. Millions of seniors have chronic conditions such as hypertension and diabetes that require care at any age. Studies have shown that many elderly find health care and private health insurance unaffordable. As a result, they forego care until they become eligible.
Some suggest we make Medicare a “means tested” program. Would this work?
Means testing is when benefit eligibility is determined by income. Those with lower incomes receive benefits while others with higher incomes pay more for those same benefits. At face value the idea makes sense. As U.S. Sen. Clair McCaskell (D-Mo.) remarked in late 2012, “Donald Trump may need medication, but he certainly doesn’t need the government to pay for it.”
Medicare has succeeded in part, however, because its benefits apply to people of all incomes. Means testing reduces support of wealthier beneficiaries annoyed by paying additional charges while receiving reduced or no benefits.
Without the support of wealthier individuals who possess much stronger political clout, Medicare will evolve from a universal social insurance program into a welfare program like Medicaid. Not surprisingly, Medicaid lacks the public support of Medicare.
It would be far better, in my view, to include everyone and prepay Medicare with taxes that go into a common risk pool.
Another proposed solution involves moving away from guaranteed benefits and instead guaranteeing a defined contribution. What is your take on this?
Changing Medicare to a defined contribution merely shifts the risks and spending away from the government and onto the individual. Social insurance programs, like Medicare, are meant to spread the risk over the population, not burden individuals. Changing Medicare to a defined contribution would defeat that principle.
Individuals have little clout in the private insurance market. Medical debt is the leading cause of personal bankruptcy and foreclosure in our nation, despite the fact that most families that declare medical bankruptcy are middle class and had medical insurance before medical costs did them in.
In light of the current political climate, what compromises do you think Medicare advocates could make for the sake of getting something through Congress to preserve the program?
In any policy debate, how an issue is framed is all-important. Success in framing the issues determines the focus of the debate, the possible options and the eventual outcome. Medicare is no exception. Rather than focusing on means testing and whether Medicare should be a defined benefit or contribution, advocates for the program should frame the debate around how Medicare can be improved and made more cost effective.
