How Not to Fix Medicare

[Guest guest]

http://www.nytimes.com/2003/07/02/opinion/02HACK.html?th

 

How Not to Fix Medicare

 

By JACOB S. HACKER

 

 

NEW HAVEN, Conn.

 

Today we remember Medicare's establishment in July 1965 as a ringing affirmation

of the ideal of social insurance. Less well remembered is how close Washington

came to creating a very different system. Not long before Medicare's passage,

the Kennedy administration seemed on the verge of a compromise with Senator

Jacob Javits, the moderate Republican from New York. Senator Javits and his

allies wanted to give private insurance a leading place in the new program so

government could play a smaller role — an idea opposed by liberal Democrats and

organized labor. The opposition won out, and the private insurance idea seemed

consigned to the dustbin of history.

 

At least it was until last week, when both the House and Senate passed bills

that would give private health plans a huge new stake in Medicare as well as

provide prescription drug benefits. With pressure from President Bush to pass

legislation, Congress stands on the threshold of the biggest overhaul of

Medicare since its inception. But unless crucial aspects of the Senate and House

measures are rethought, such an overhaul will come at the peril of America's

elderly and disabled.

 

If this warning seems apocalyptic, that's only because most Americans are under

the impression that the measures on the table are centrist compromises that

would protect everyone's interests. In reality, neither the Senate nor the House

legislation would achieve this. And while the Senate bill is indeed an attempt

at compromise, albeit a deeply flawed one, the House bill is a radical measure

directly at odds with Medicare's longstanding aims. It threatens to cripple the

program for generations to come.

 

Bluntly put, the House legislation is a ruse. The bill delivers a prescription

drug benefit, but this benefit is simply the attractive window dressing for the

legislation's ultimate aim: fundamentally revamping Medicare to create a

competitive system based on private health plans. Consider the bill's major

features. Private health insurers would be given increased government payments

so that they could sweeten their benefits to lure the elderly and the disabled

out of the traditional Medicare program. Beneficiaries choosing private plans

with lower premiums would get a rebate from the government; those choosing plans

with higher premiums would have to pay more. In 2010, the traditional program

would be forced to compete with private plans. From then on, the amount that

beneficiaries paid for Medicare would be set not by law, but by market forces.

 

This might sound like a great way to encourage consumer choice — until one

realizes that the cost of alternative insurance options would be mainly

determined by the health of those enrolled. Since the least healthy enrollees

would most likely stay in traditional Medicare rather than brave the private

market, the program's premiums would likely rise substantially. This would

encourage healthier beneficiaries to seek lower premiums in the private sector,

leaving only the sickest behind.

 

The problems don't end there, nor are they confined to the House bill. Neither

the House nor Senate legislation, for example, provides what the majority of

Americans want: a drug benefit within Medicare itself. Instead, beneficiaries

would be forced to turn first to private insurers, which would be able to set

their own premiums for drug coverage. (The Senate bill allows for a drug benefit

directly through Medicare only if a beneficiary does not have access to more

than one private drug insurance plan in his region.)

 

Because drug costs are risky and expensive to cover, few insurers seem eager to

sign up for this complex and untested idea. But even if private plans emerged,

the likely result would be chaos as insurance companies continually dropped

coverage and altered their benefits — which is precisely what has happened to

millions of Medicare beneficiaries enrolled in private H.M.O.'s over the past

five years.

 

Perhaps these risks would be tolerable if the standard drug benefit authorized

by the bills were generous. It is not. Both bills feature an upfront deductible

of $250 or more, require significant co-payments above that amount and force

beneficiaries to pay a huge amount out of pocket before catastrophic protection

kicks in. As a result, an elderly woman with $6,000 in total drug costs would

end up paying more than $4,000 of her own money under the Senate bill, and even

more under the House legislation.

 

A recent study by Consumers Union underscores the meagerness of the benefit.

According to the report, beneficiaries with average drug costs and no private

coverage will spend roughly $2,300 this year. If either the Senate or House bill

takes effect in 2007, they will pay at least $2,500. In other words, Medicare

beneficiaries would spend more, not less, on prescription drugs after Congress

came to the rescue.

 

The real solution is no secret: make the drug benefit a part of Medicare and,

yes, spend more money on it. The $400 billion over 10 years that Republicans

have pledged for drug coverage may sound like a lot, but it's just a fraction of

the nearly $2 trillion in pharmaceutical expenses that beneficiaries are

expected to incur over the next decade. Of course, a larger benefit would cost

more. But, in the end, somebody is going to pay; the question is how the burden

is distributed. The whole point of social insurance is to spread the

responsibility across rich and poor, sick and healthy, rather than letting the

burden fall on individuals and their families alone.

 

At a minimum, defenders of Medicare should insist that a prescription drug bill

truly is a prescription drug bill — and not a vehicle for tearing down the

existing system. If history is indeed any guide, Congress needs to resolve all

these issues before rushing a compromise bill to the president's desk. In 1965,

Medicare advocates thought they could wait until after the legislation was

passed to revise the measure and expand coverage for the nonelderly. Of course,

that never happened. In 2003, more than 40 million Americans remain uninsured.

If today's Medicare advocates allow themselves to be steamrollered, they will be

living with the fallout for decades.

 

Not coincidentally, perhaps, none of this will become clear until after the 2004

election. Republicans may ride a prescription drug benefit back into office. But

the bills on the table now are mainly a prescription for resentment and dashed

expectations — and, most fearful of all, for the unraveling of the social

compact that has made Medicare an integral part of American social policy for

nearly 40 years.

 

 

 

 

Jacob S. Hacker, assistant professor of political science at Yale University and

a fellow at the New America Foundation, is author of " The Divided Welfare State:

The Battle Over Public and Private Social Benefits in the United States. "

 

Copyright 2003 The New York Times Company |

 

 

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