By Noam N. Levey
Los Angeles Times, July 15, 2011
The heated debate over the federal deficit has pumped new life into controversial proposals for requiring Americans on Medicare to pay more for their healthcare, raising the possibility that seniors’ medical bills could jump hundreds, or even thousands of dollars.
“Over the long haul, beneficiaries will have to pay more and taxpayers will have to pay more,” warned Henry Aaron, a longtime healthcare expert at the Brookings Institution. “It’s just too darn expensive.”
That could mean higher co-pays, higher deductibles or higher premiums for many seniors.
Though the elderly are much better off financially than they were when Medicare was enacted, half of seniors subsist on incomes below $22,000 a year.
“What many people may not realize is that the Medicare benefit package is not actually very generous,” said Jonathan Oberlander, a University of North Carolina health policy professor who has written extensively about the program’s history.
On top of standard premiums of more than $141 a month, enrollees must pay a $1,132 deductible for every hospital stay, and hundreds of dollars a day more for long hospital stays.
Medicare beneficiaries are also responsible for 20% of the bills for medical equipment such as wheelchairs and non-hospital procedures, such as kidney dialysis, physical therapy or outpatient surgery.
Medicare also doesn’t cover long-term care in nursing homes. And unlike many private health plans, Medicare doesn’t offer catastrophic protection by capping how much beneficiaries have to pay out of pocket every year.
That can mean substantial healthcare tabs for some seniors.
Medicare households on average spent $4,620 on healthcare in 2009, more than twice what non-Medicare households spent, according to the nonprofit Kaiser Family Foundation.
“We will do better if people are more involved in making healthcare choices,” said Gail Wilensky, a health economist who oversaw the Medicare program under President George H.W. Bush. “There are few people who are more price sensitive than seniors.”
How much more seniors can afford to pay continues to stoke intense debate, however, especially as Medicare beneficiaries are already projected to spend as much as quarter of their income on healthcare in 2020, up from around a sixth now.
“Some have the impression that seniors are quite wealthy and could afford more premiums,” said Tricia Neuman, director of the Medicare Policy Project at the Kaiser Family Foundation. “The numbers tell a different story.”
A recent Kaiser analysis showed that half of all Medicare beneficiaries have less than $33,100 in retirements account and other savings.
Neuman and others also warn that increasing co-pays and deductibles may discourage seniors from seeking medical care they need.
Brown University researchers, for example, found that seniors went to the doctor less frequently after their Medicare managed care plans raised co-pays for outpatient visits. At the same time, they ended up spending more time in the hospital.
Because hospital care is so much more expensive, that probably ended up costing Medicare more than the program saved by paying for fewer doctor visits, while also leaving seniors sicker, said Dr. Amal Trivedi, the lead author of the study.
“Policymakers should be very sensitive to adverse and unexpected consequence of increased cost-sharing,” Trivedi warned. “It can be a lose-lose proposition.”
http://www.latimes.com/health/sc-dc-0715-medicare-costs-20110715,0,2124812,full.story
And…
Press Conference by the President
The White House
July 15, 2011
President Barack Obama: So with that, let me see who’s on the list. We’re going to start with Jake Tapper.
Q: Thank you, Mr. President. You’ve said that reducing the deficit will require shared sacrifice. We know — we have an idea of the taxes that you would like to see raised on corporations and on Americans in the top two tax brackets, but we don’t yet know what you specifically are willing to do when it comes to entitlement spending. In the interest of transparency, leadership, and also showing the American people that you have been negotiating in good faith, can you tell us one structural reform that you are willing to make to one of these entitlement programs that would have a major impact on the deficit? Would you be willing to raise the retirement age? Would you be willing to means test Social Security or Medicare?
THE PRESIDENT: We’ve said that we are willing to look at all those approaches. I’ve laid out some criteria in terms of what would be acceptable. So, for example, I’ve said very clearly that we should make sure that current beneficiaries as much as possible are not affected. But we should look at what can we do in the out-years, so that over time some of these programs are more sustainable.
I’ve said that means testing on Medicare, meaning people like myself, if — I’m going to be turning 50 in a week. So I’m starting to think a little bit more about Medicare eligibility. (Laughter.) Yes, I’m going to get my AARP card soon — and the discounts.
But you can envision a situation where for somebody in my position, me having to pay a little bit more on premiums or co-pays or things like that would be appropriate. And, again, that could make a difference. So we’ve been very clear about where we’re willing to go.
What we’re not willing to do is to restructure the program in the ways that we’ve seen coming out of the House over the last several months where we would voucherize the program and you potentially have senior citizens paying $6,000 more. I view Social Security and Medicare as the most important social safety nets that we have. I think it is important for them to remain as social insurance programs that give people some certainty and reliability in their golden years.
But it turns out that making some modest modifications in those entitlements can save you trillions of dollars. And it’s not necessary to completely revamp the program. What is necessary is to say how do we make some modifications, including, by the way, on the providers’ side. I think that it’s important for us to keep in mind that drug companies, for example, are still doing very well through the Medicare program. And although we have made drugs more available at a cheaper price to seniors who are in Medicare through the Affordable Care Act, there’s more work to potentially be done there.
So if you look at a balanced package even within the entitlement programs, it turns out that you can save trillions of dollars while maintaining the core integrity of the program.
Q: And the retirement age?
THE PRESIDENT: I’m not going to get into specifics. As I said, Jake, everything that you mentioned are things that we have discussed. But what I’m not going to do is to ask for even — well, let me put it this way: If you’re a senior citizen, and a modification potentially costs you a hundred or two hundred bucks a year more, or even if it’s not affecting current beneficiaries, somebody who’s 40 today 20 years from no
w is going to end up having to pay a little bit more.
The least I can do is to say that people who are making a million dollars or more have to do something as well. And that’s the kind of tradeoff, that’s the kind of balanced approach and shared sacrifice that I think most Americans agree needs to happen.
Q: Thank you.
http://www.whitehouse.gov/the-press-office/2011/07/15/press-conference-president
Comment:
By Don McCanne, MD
The facts are clear. Medicare is an inadequate program, driving most beneficiaries to purchase supplemental coverage, or to rely on supplemental retirement benefits provided by their prior employment, or to switch to Medicare Advantage plans. Also, instead of advocating for patching the deficiencies in Medicare, our Washington politicians are supporting policies that would move more of the costs to Medicare beneficiaries themselves. With median incomes of only $22,000 and median savings and retirement accounts of only $33,100, the average Medicare population would be further burdened financially.
Let’s look at two of the policies that President Obama supported in his press conference today: 1) “we should make sure that current beneficiaries as much as possible are not affected, but we should look at what can we do in the out-years, so that over time some of these programs are more sustainable,” and 2) we should require higher income Medicare beneficiaries to pay “more on premiums or co-pays or things like that.”
Making Medicare “more sustainable” for future beneficiaries means reducing government spending on this already inadequate program. That reduction comes at the cost of forcing increased spending by the beneficiaries. We should be going in the opposite direction. We should be rolling the benefits of the supplemental plans into the traditional Medicare program. Since that would eliminate the administrative waste of these programs, it would actually reduce total spending on health care, even if more of the costs are shifted to the government program. The decrease in out-of-pocket costs would be greater than the increase in government spending.
Since health care costs are now so high, it is very reasonable to expect higher income individuals to pay more for Medicare, but how should we do that? If we start means-testing the deductibles and coinsurance, we create an administratively complex system that would test the fortitude of patients, providers, and the IRS. Instead, we should be eliminating deductibles and coinsurance. Other nations have demonstrated that reducing “moral hazard” through cost sharing is unnecessary since their costs are much lower than ours even though they have first dollar coverage.
Should premiums be means tested? Requiring wealthier individuals to pay significantly higher premiums would motivate them to look for other private options for health care. Without the political support of the wealthy, Medicare would become another underfunded welfare program. It would be like Medicaid except with skimpier benefits, greater out-of-pocket costs, and a greater lack of willing providers.
Instead of means tested Medicare premiums, we should totally eliminate the premiums and fully fund Medicare through progressive taxes. Separating the financing totally from the payment system allows us to “means test” the contribution to the program without having any negative impact on access for anyone, regardless of personal financial resources.
What is sad is that this diversion into defending Medicare as it is, with all of its deficiencies, has kept the national dialogue from moving into the conversation that we need to have – fixing Medicare and providing it for all of us. In the meantime, Washington burnishes its reputation of being the nation’s prime source of bad ideas, and we live with the consequences.