Copyright 1999 Globe Newspaper Company
The Boston
Globe
June 13, 1999, Sunday ,City Edition
SECTION: FOCUS; Pg. E4
LENGTH: 1131 words
HEADLINE:
Medicare battle will cost casualties;
THOMAS BODENHEIMER;
Thomas
Bodenheimer practices medicine in San Francisco and was the lead author of the
1999 report "Rebuilding Medicare for the 21st Century."
BYLINE: By Thomas Bodenheimer
BODY:
The stage is set for a big
battle on Medicare.
A plan being pushed by Senator John Breaux, Democrat
of Louisiana, and Representative Bill Thomas, a Republican of California, would
radically transform Medicare from a public medical care program to a marketplace
of competing private health insurance plans.
Forty million elderly and
disabled Americans would no longer receive a red, white, and blue Medicare card
guaranteeing health care; instead, they would get a voucher to help buy a
policy.
Medicare is in need of reform, but the Breaux-Thomas premium
voucher plan fails to guarantee Medicare's fiscal solvency. Moreover, it
increases health care costs for the elderly and is wasteful of taxpayer dollars.
Under the Breaux-Thomas plan, each Medicare beneficiary would receive a voucher
whose value is based on 88 percent of the average premium for health insurance
plans offering services to Medicare beneficiaries. For example, if the average
health plan premium is $5,700, the basic voucher is worth
$5,000, with Medicare beneficiaries paying
$700.
But let's assume that a high-quality health plan
charged $6,700 for Medicare enrollees rather than the average
premium of $5,700. To choose those health plans, people on
Medicare would have to pay $1,700 out-of-pocket. Seniors with
lower incomes would likely be forced into lower-cost health plans, which might
restrict access to physicians and offer inferior quality of care.
Each
year, the premium support voucher program would face a critical decision: How
much is the voucher worth? Does a $5,000 voucher in the year
2000 become a $5,150 voucher in 2001 (3 percent increase), or
does it inflate to $5,400 (an 8 percent rise)?
Since
health insurance premiums are expected to grow by 8 percent per year, a paltry 3
percent increase in the voucher would markedly shift health care costs to the
elderly. Under this scenario, elderly Americans would pay
$2,500 out-of-pocket in the year 2005 in order to enroll in an
average-cost health insurance plan. Added to the costs of prescription drugs,
long-term care, and other expenditures not covered under Medicare, the
$2,500 would be an intolerable burden on the elderly, 79
percent of whom have incomes below $25,000 per year.
In
order to make its premium support voucher proposal acceptable to senior
organizations, Senator Breaux recommended that the value of the voucher rise at
the same rate as the increase in health plan premiums (expected to be 8 percent
per year). Under this sugar-coated voucher approach, Medicare beneficiaries are
protected but the Medicare program goes broke. Costs for the Federal Employees
Health Benefits Program, on which the Breaux-Thomas plan is modeled, increased
by 8.5 percent in 1998 and 10.2 percent in 1999. In 1998, Medicare expenditures
increased by a mere 1.5 percent and are expected to rise a small amount in 1999.
The premium support voucher plan abandons the existing Medicare program whose
rate of inflation is slowing and substitutes a private marketplace whose rate of
inflation is increasing.
What will Congress do when faced with a
proposal that worsens rather than improves Medicare's financial future? It will
probably remove Breaux's sugar coating and reduce the rate of growth of the
voucher's worth. The sugar-coated premium support voucher plan is a foot in the
door for a stingy voucher program.
Once Congress passes a voucher
program, it is easy to ratchet down the value of the voucher, forcing the
elderly and disabled to pay ever-increasing health care costs.
Let us
assume that a voucher plan passes Congress, and that Medicare beneficiaries are
forced to shoulder higher and higher costs for their health care. What is likely
to happen next? Gradually, most of the elderly and disabled will be channeled
into low-cost HMOs because they will be unable to afford better health plans.
Once most of the 40 million Medicare beneficiaries are enrolled in HMOs, the HMO
industry will develop an unquenchable thirst for federal dollars. Medicare is
likely to turn into a corporate welfare program for HMOs.
Some
$100 billion to $200 billion in Medicare
dollars - now a public program with 2 percent administrative costs - would be
paid to HMOs rather than to hospitals, physicians, and other care providers.
HMOs would keep 10 percent or more for administrative overhead and profits and
would then pay care providers. Each year, billions in taxpayers' dollars would
feed the HMO industry.
Already, many HMOs - most of which are for-profit
- have had a poor record within the Medicare program. Medicare has been paying
an average of 6 percent more for elderly persons enrolled in an HMO than for
those in public Medicare.
If HMOs do not get what they want from
Medicare, they leave. Consider that 400,000 Medicare beneficiaries were forced
to change their health care arrangements in 1998 when their HMOs exited from
Medicare.
And by billing Medicare for administrative costs associated
with non-Medicare enrollees, Medicare overpaid HMOs by over $1
billion annually.
Here's an example of how the private HMO marketplace
rewards mediocrity and punishes quality: High quality HMOs with excellent cancer
specialists will attract high-cost cancer patients and may go bankrupt. HMOs
with poor cancer care will enroll few cancer patients, will enjoy lower
expenses, and will make handsome profits. This problem could be solved by paying
HMOs more for sicker enrollees, a technique called risk
adjustment. But health care experts admit that good risk
adjustment methods have not been devised.
In short, the premium
support voucher plan places the least healthy segment of the population - the
elderly and disabled - in the hands of HMOs with an inadequate record of serving
them.
While vouchers are the wrong choice for Medicare reform, big
changes are needed in Medicare.
- To guarantee it will be fiscally
healthy when younger Americans reach retirement age, a cost-control mechanism is
needed that does not shift health care expenses onto the elderly and disabled.
Costs are most effectively controlled by placing Medicare under a budget.
- To lift the burden of health care costs from the elderly, prescription
drugs and long-term care should be added to Medicare's list of covered services.
- To solve the dual problems of 43 million uninsured Americans and
increasing costs of care, Medicare should be expanded to younger age groups and
eventually to the entire population.
The battle on Medicare will begin
soon in the halls of Congress. Elderly and disabled Medicare beneficiaries must
involve themselves in this debate, as must younger Americans who need Medicare
to be there when they reach retirement age.
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June 16, 1999 
