The politics and realities of Medicare

Public Interest, Summer, 2004 by Eric Cohen

Finally, the current Medicare system does not pay for long-term care. If someone suffers a stroke, for example, Medicare covers the expenses incurred in its immediate aftermath--hospital care, 21 days of skilled nursing care with no deductible, and 79 additional days of skilled nursing care for a subsidized rate of $109.50 per day. However, once the patient no longer requires skilled medical treatment but still requires constant personal care, Medicare pays nothing. This leaves individuals and families with a range of hard choices: family caretaking by a spouse or child; professional caretaking paid for out-of-pocket; or self-impoverishment until one qualifies for Medicaid, which does pay for long-term care, either by spending down one's assets or moving them in advance to one's children or siblings. The result is that a significant number of seniors who live to 65 end up on Medicaid--a welfare program--at some point before dying, including many who were self-sufficient throughout most of their lives. And looking forward, it suggests that the next Medicare entitlement debate will be about whether to add a long-term care benefit--which could prove far more expensive than paying for drugs.

The rich and the poor

In trying to make sense of the significance of MMA, it is perhaps useful to begin with the two dimensions of the bill that have won nearly universal support: extra subsidies for low-income seniors to purchase prescription drugs and additional premiums for high-income seniors who participate in Medicare Part B. During the 2002 debate about prescription drug coverage, liberal commentator Michael Kinsley told policy makers the following: "When Congress takes up a drug benefit again, it should keep things simple and concentrate on the risk, approaching a certainty, that it wishes to prevent: people doing without drugs--or without food--because of the cost. That means concentrating on poor people."

In the MMA, Congress took his advice--about helping the poor, if not keeping things simple. Beginning in June 2004, the bill created a temporary "drug discount card" that aims to give all participating seniors a 10 to 25 percent discount and low-income seniors a $600 direct subsidy. The permanent drug benefit, which includes substantial out-of-pocket "cost-sharing" for middle-income and high-income seniors, requires only minimal cost-sharing for those below 150 percent of the poverty level. This includes roughly a third of all Medicare beneficiaries.

Conservative critics of MMA have largely embraced this particular element of the bill. "Instead of displacing existing drug coverage with a universal entitlement, Congress could target federal subsidies to low-income seniors or those without drug coverage," wrote Robert E. Moffit, a health-care analyst for the Heritage Foundation, in a recent policy memo urging Congress to fix MMA before it is enacted. AEI's Joseph Antos has urged that the temporary "discount-plus-subsidy" program be made permanent and expanded.