Medicare: the end of an era? - Eye On Washington

Healthcare Financial Management, Nov, 2003 by Jeanne Schulte Scott

As this is being written, virtually every healthcare lobbyist in Washington has made his or her way to "Gucci Gulch" the hallway outside the House Ways and Means committee room, so-named because of the expensive leather shoes that are worn by the big-money lobbyists who frequent the environs.

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This is where the fate of the cherished Medicare program is being discussed. The lobbyists wander the hall, hoping to catch the flag pinned lapel of one of the conferees for a brief moment of one-on-one persuasion.

The conferees are not just debating how to add a prescription drug benefit to Medicare, as the popular media would have us believe. They are debating the future of the Medicare program itself.

At the heart of the debate about the survival of Medicare is a provision in the House bill that would require "traditional fee-for service" (FFS) Medicare to compete with newly established alternative "private" Medicare HMO and PPO plans, starting in 2010, FFS Medicare would have to offer beneficiaries their choice of providers and expanded benefits, including prescription drug benefits, while staying within the dollar caps set by Congress and whatever regulatory agency replaces CMS, which is effectively disembodied under the House and Senate: versions of the revamped Medicare (perhaps to be interred alongside the Interstate Commerce Commission, the Atomic Energy Commission, the Civil Aeronautics Board, and other former regulatory agencies).

None of the advocates for open competition among the possible Medicare plans of the future expects FFS Medicare to survive. The deck is slacked. Both the House and Senate versions offer significant premium incentives to the new plans a rid tax credits and other benefits to employers and plans to encourage them to offer expanded programs. The "old" FFS Medicare gets none of this. All the economic models predict that traditional Medicare will simply be priced out of the market to wither and die.

Just how serious is this threat to the future of Medicare? Will Congress ultimately take this step? Medicare is in dire straits. The program simply can't survive much longer in its present form without massive infusions of cash. The demographic handwriting is on the wall. Over the relatively brief lifetime of Medicare. America's formidable senior lobby has succeeded time and again in adding benefits and expanding services worth far beyond what eligible beneficiaries have contributed to the Part A trust fund. Part B premiums have been artificially suppressed so that, today, they constitute only a fraction of what the government actually pays for outpatient and physician services. Younger generations have been underwriting the older generations, but this is unlikely to continue for a variety of reasons.

The nation is facing massive deficits beyond comprehension. The present Congress may be able to find a couple of hundred billion dollars to rebuild Iraq and Afghanistan. but it is at a less as to how to add significant funds to support Medicare. And 2011 is just around the corner--the year when the first baby boomers will turn 65 and become eligible for benefits.

In early 2000, then--presidential-candidate George W. Bush backed quickly away from his suggestion that the age for Medicare eligibility might have to be raised to 67 or even 70. Current presidential-candidate Howard Dean is now back-pedaling from his own similar off-the-cuff remarks. Not that raising the age of eligibility would solve the problem. Most people ages 65 to 75, although they do use more healthcare services, are not responsible for Medicare's financial problems. People who are 85 years old and older tend to be the biggest users of costly services. But not since former Colorado governor Richard Lamm has anyone had the temerity to suggest that the real solution might be to limit benefits for the "old-old" rather than for those in their early years of eligibility.

Possible solutions include changing the way Medicare services are delivered, using lower cost alternative sources of care and rationing some benefits through a variety of new methodologies, and finding new sources of funding for Medicare. The last alternative means coming to grips with the possibility of new taxes or thinking of Medicare as a stop-gap welfare-type program for our nation's poorer seniors rather than as an entitlement program. Under such a scenario, more affluent seniors would help fund health care for their poorer neighbors. I won't hold my breath waiting for that to happen.

For now, the debate continues, and the rhetoric is getting strident. Leading Democrats, who still hold a filibuster ace in-the-hole, have put the nation's Republican leadership on notice that they will not stand for the full privatization of Medicare. They are unalterably opposed to many of the precepts that are virtually articles of faith to conservatives. And even among Republicans, There is growing division. In September, a group of very conservative Republican House members sent their leadership what amounted to an ultimatum: they would not support any Medicare legislation that did not promote full and complete competition among all Medicare health plans, new and old. In addition, they are demanding further restrictions and more tax cuts as the price for their vote. Above all, they want to place a cap on Medicare spending. That cap can lead to one of two things: the program will collapse for lack of funding in the face of growing demands, or the program will collapse because no providers will be willing to accept the limited payments the program can afford.