Bush proposal to modernize and defund Medicare
The White House
March 4, 2003
President to Announce Framework to Modernize and Improve Medicare
Excerpt from the Executive Summary:
Option 1-Traditional Medicare
Those who are satisfied with the current Medicare system will continue receiving their care as they do today with help for the high costs of prescription drugs. These beneficiaries will gain access to discounted drugs through a prescription drug discount card-estimated to achieve savings of 10-25% on the cost of prescription drugs-as well as coverage to protect them against high out-of-pocket prescription drug expenses. These new benefits will be provided at no additional premium.
Option 2-Enhanced Medicare
Enhanced Medicare will give seniors the same types of choices that are available to members of Congress and other federal employees. In every area of the country, Medicare beneficiaries will have multiple health plans from which to choose. These plans will offer prescription drug benefits, full coverage of preventive benefits, protection against high out-of-pocket drug costs, and cost sharing that does not penalize participants who need the most medical care. Again, the decision to choose Enhanced Medicare will be entirely up to each senior, and participants will be able to choose any doctor or any hospital they want for the treatment and care they need.
The President's framework will ensure that the benefits offered under Enhanced Medicare are sufficiently attractive to seniors, relative to traditional Medicare, to guarantee that Enhanced Medicare is a viable system.
Option 3-Medicare Advantage
Seniors will also have the option of enrolling in low-cost and high-coverage managed care plans, similar to those available today under Medicare. Medicare Advantage will include plans that offer a subsidized drug benefit, and all plans will be able to offer extra benefits, as many private plans do today.
Excerpt from the Conclusion:
To improve, Medicare must have the benefit of modern health care delivery systems and methods that have proven successful in the private sector. The President's initiative will introduce private sector innovation and competition to the Medicare system to help keep costs reasonable, ensure high quality care and begin to address Medicare's long-term financial challenges.
While Medicare must be modernized and improved to meet the needs of its current participants, the program must also be made sustainable for future generations. Given the financial challenges Medicare faces in the future, changes to the Medicare program we make today must not exceed our nation's means to deliver them tomorrow.
http://www.whitehouse.gov/news/releases/2003/03/20030304-1.html
Comment: To understand the administration's proposal, we must keep in mind what this program to "modernize" Medicare is intended to accomplish. Regardless of all of the rest of the rhetoric, the sole intent is to reduce the federal (taxpayer) contribution to the health care of the Medicare beneficiaries. Period. All of the wonderful, free-market rhetoric is designed to distract us from this precise goal. With that in mind, let's look at the three options offered (though not in order).
Option 1 - Traditional Medicare: The traditional Medicare program is inadequate. The lack of pharmaceutical coverage is a glaring example. The traditional Medicare program needs more funds, precisely what the administration is avoiding. So we will see no recommendations for an expansion of benefits in the traditional program.
But to meet campaign promises, they propose introducing a worthless discount prescription card, and they propose to provide the wealthy with protection for high drug costs by providing coverage only after spending many thousands of dollars on drugs. For very low income individuals, they'll cover up to $600 worth of drugs. It is uncertain if this paltry coverage reflects the value that they assign to the unfortunate individuals in this sector of society.
A second reason that they do not want to add more benefits to the traditional program is that want to use those benefits to lure beneficiaries out of the traditional program and into private plans.
Option 3 - Medicare Advantage: This is the current Medicare + Choice program. It was a failure. It worked only as long as the plans could limit their exposure to high costs by selectively marketing to a healthy sector. But the plans failed to provide the administrative efficiencies promised, and ended up costing the government more, on a risk adjusted analysis. The only way that it could be salvaged is to increase taxpayer funding beyond that of the traditional program, again the opposite of the administration's goal. They've decided to let this program fade away.
Option 2 - Enhanced Medicare: As promised, this is the proposal similar in design to the Federal Employees Health Benefit Plan, "the plan that the members of Congress have." This is basically the Breaux-Frist-Thomas-Jindal premium support proposal. It is a defined contribution concept, though some defenders dispute the terminology.
An important sentence in the White House release: "Beneficiaries who enroll in an average priced plan in their region would pay a premium for the medical portion of their coverage equal to the Part B premium." Clearly this confirms that individuals who desire more comprehensive benefits, or who wish to reduce their financial exposure, will have to bear the costs of that additional coverage in the form of higher premiums. So the wealthy are well cared for in this proposal.
What about those individuals who do not have the resources to purchase more comprehensive coverage? What will their program offer? A clue: "To provide an array of choices in benefit design and to encourage plan innovation, plans will be free to structure their offerings differently, provided the benefit meets a basic federal standard. "Plan innovation with flexibility in offerings" should make us worry. Spartan plans will surely become the "averaged priced" plans. And we can only speculate that an administration that doesn't have any money for anything else, certainly will not have enough money to fund more than the very lowest tier of services that is the "basic federal standard."
Then the politicians will ask why we should be spending more on traditional Medicare patients than we do on the "basic federal standard." And of course their solution will be to cut funding of the traditional program.
This scheme does not reduce the costs of health care; it merely shifts the costs from the federal government to the Medicare beneficiary. The majority will be unable to afford their portion of costs should they be faced with a major medical disorder.
Should Medicare policy be crafted to improve the utilization of resources for the benefit of patients, or should it be designed simply to reduce federal funding of the program? It looks like the Bush administration has decided that Medicare should be added to list of programs to be sent off to the guillotine for a blunt trimming.