MEDICARE REFORM? PRIVATIZATION, PREMIUM SUPPORT AND SINGLE PAYER

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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 [phone]
• Fax [phone]
• E-M ofein_at_med.Cornell.edu
• Workshop
• PNHP Annual Meeting
• October 27, 2012

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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.

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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 MedicareChoice

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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 2-year waiting
  period
• - ESRD (1 million) Persons on dialysis at any
  age.
• (pew.Medicare-pg1-2012)

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MEDICARES 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)

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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

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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

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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 plans cost for
  brand
• name drugs and 79 of plans cost for generics
• Once patient has spent 4,750 out-of-pocket/year,
  
• then co-payment drops to 5 and Medicare pays
  95

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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 MedigapPlan A133.40
  G246.56/month
• 21 of beneficiaries Medicaid pays
• 25 of beneficiaries Medicare Advantage plans
• 8 No supplemental coverage

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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

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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
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MEDICARES 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)

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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)

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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

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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

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EVOLUTION OF PREMIUM SUPPORT

• Henry Aaron and Robert Reischauer,
• coin the term Premium Support in
• Health Affairs 4419958-30.
• 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

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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.

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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

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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 dont face
  rejections by insurance companies, they dont
  worry theyll be out of network, they dont
  encounter hidden limitations or exclusions. When
  patients need care, they receive it.

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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.

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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

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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 Medicares costs, and the cost containment
  measures promoted in the Affordable Care Act
  should further slow the rise in Medicares costs.
  Additional savings could be achieved by allowing
  Medicare to negotiate prices with drug companies,
  and by reducing its overpayments to private
  insurers.

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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.

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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.

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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.