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Medicare commission's failure doesn't mean debate will go away
March 16, 1999 WASHINGTON (AllPolitics, March 16) -- Tuesday's failure of the National Bipartisan Commission on the Future of Medicare to agree on a plan to salvage the strapped health-insurance program doesn't mean that the debate, or the reforms the board was considering, are going away.
President Bill Clinton on Tuesday promised to offer his own set of proposals and vowed to push for an agreement by the end of the year. The program is now expected to go broke in about a decade -- just as the huge Baby Boom generation begins to almost double the number of recipients, which now stands at 39 million. Here's a look at the main areas of reform being discussed
The commission's proposals envisioned preserving the traditional fee-for-service Medicare that has been a cornerstone of Americans retirement since 1965, but also sought to expand private sector options, inviting more participation by HMOs and other managed care plans. In that way, the plan would make Medicare more like health benefits that many companies and the federal government offer to workers. Retirees would choose from a menu of health-insurance policies and get a subsidy to help cover the cost. The more expensive plans would require participants to pay more out of their own pockets. Meanwhile, the government-run system that serves most retirees now would compete with the private health plans, which would have to offer similar coverage. The resulting competition among private health plans to attract elderly customers and their new Medicare subsidies could help the program save money and adapt to rapid technology changes, supporters say. For people choosing private plans, the federal government would pay about 80 percent of the cost of a typical basic plan. The concept, based on the menu of health options available to federal workers, is known as "premium support." "Technically, a premium support is a form of a voucher," said Stuart Altman, a Brandeis University professor on the Medicare commission, "but it is a voucher that grows with the cost of the average health plan over time." In other words, if the price of insurance rises, taxpayers would directly share the burden. Currently, Medicare pays most people's medical bills directly. In contrast, if Medicare adopted premium support, insurance companies of all kinds -- not just managed care -- could compete for government contracts to provide a basic package of benefits. Medicare would negotiate with the plans to get the best possible deals, then set an annual subsidy based on a percentage of the average bid. For example, if Congress decided Medicare should pay 80 percent of people's insurance premiums and the plans' average bid was $5,000, the government subsidy would be $4,000 a year. Most retirees could end up paying significantly more or less than that $1,000, however. That's because different plans' total premium prices would vary. Plans offering extra perquisites might be more expensive, for example. Critics have said the premium support plan resembles a voucher system, and erodes the elderly's basic entitlement to health care. "Premium support is nothing but a voucher system," said Rep. Jim McDermott, a Democrat from Washington. "Unless there's a guarantee that every plan gives the same benefit package to anybody who buys it, and that you and I get it at the same price, this is going to be bad for the sick elderly." Also, lawmakers still would likely have to decide how to save more money when the number of people on Medicare almost doubles from today's 39 million as baby boomers begin retiring. "Even if we're extraordinarily successful ... at keeping the per capita costs limited, there has to be some way to finance care for that many people," John Rother of the American Association of Retired Persons said in January as the reform panel prepared to release it draft proposals. The bipartisan commission had also considered a proposal to charge more affluent patients more money for their medical care, but jettisoned that idea -- known as means testing -- two weeks ago as political untenable. Means testing would have the biggest financial effect of the strategies the commission was considering, saving nearly $100 billion by 2009. AARP, the nationŐs leading advocacy group for senior citizens, maintains that Medicare should remain a guarantee of coverage for all older and disabled Americans, regardless of income.
Clinton has promised to dedicate 15 percent of budget surpluses over the next 15 years to Medicare and has made that the centerpiece of his proposal to shore up the system. On Tuesday, he cited the failure of the bipartisan commission to back such a provision as a key reason for refusing to endorse its proposals. The administration says Clinton's plan would pump $650 billion to $700 billion into Medicare, enough to keep it from running short of cash for another 20 years. Critics view the plan as a Band-Aid that would set back the reform process by putting off needed structural reform to a time when change would be even harder. "The president's proposal could induce a sense of false complacency," Comptroller General David M. Walker, who leads the General Accounting Office, said in congressional testimony earlier this month. Walker said the White House plan would improve the "paper solvency" of Medicare "without reforms to make the underlying program more sustainable." The plan also would gradually raise the eligibility age from 65 to 67. Proponents of raising the age say that, with improvements in medicine and with improvements in lifestyles, the average 65-year-old American is healthier today than when Medicare was instituted in 1965. As a result, they say, the program could realize significant savings by raising the eligibility age without having a serious impact on the well-being of 65- and 66-year-olds. Clinton, however, rejected that option out of hand. "We cannot simply raise the age to 67 without knowing how we're going to provide for health insurance options for those who are already left out in the cold between the ages of 55 and 65. It is simply not the right thing to do," he said Tuesday.
One of the most controversial issues in the debate on Medicare reform has been prescription drug coverage, which is not part of the 34-year-old, traditional Medicare plan. The issue sets off the most sparks for a simple reason. One side argues that government health insurance has a responsibility to provide drugs that not only can improve and prolong recipients' lives but also can reduce the need for expensive hospital and nursing home stays. The other questions whether it's responsible to expand the already overburdened Medicare system with a huge new entitlement that would cost an estimated $15 billion to $309 billion a year. Currently, Medicare does cover drugs given to patients in hospitals, but does not pay for drugs that recipients use on a day-to-day basis unless they belong to an HMO. As a result, as many as one-half of Medicare recipients must pay for their prescriptions on their own at a time when the cost of medications is rising sharply. The commission's approach would require private companies to offer at least one option that includes drug coverage. The popular private plans that supplement Medicare coverage, known as Medigap, would be required to offer drugs as well. Drugs would be available through the traditional Medicare program too, but the elderly would have to pay for the extra cost. Medicare actually lost about seven cents of every dollar spent to fraud, waste and mistakes in 1998, government auditors said in a report earlier this year. While that amounts to more than $12 billion, it's only about half of what was lost by the government's health insurance program just two years ago. That improvement is the result of reforms begun in 1993, when the government launched a major crackdown on Medicare. Since then, the percentage of the program's 860 million bills a year that are reviewed by auditors has risen from 5 percent to 14 percent. Also, the Justice Department is working more closely with Medicare auditors to investigate suspicious claims and prosecute cases of suspected fraud. Clinton's budget for fiscal 2000 proposes a broader crackdown on Medicare fraud and abuse that the administration says could save $2 billion by helping the Health Care Financing Administration combat wasteful or abusive practices in the Medicare system. The plan includes eliminating markups in the prices Medicare is charged for the drugs currently covered by Medicare so the program would pay only what a drug costs the provider. An inspector general's report by the Department of Health and Human Services found that markups for 22 drugs cost Medicare hundreds of millions of dollars annually. Medicare paid more than twice the average wholesale price for certain drugs and in one instance paid roughly 10 times the wholesale price, the investigators found. Clinton's proposal would prevent care providers from billing Medicare for services that either were not given or were provided only to a few patients. That would close the door on one of the most abused benefits, group therapy. It would also require private health insurers to report which Medicare beneficiaries they insure, to prevent providers from billing Medicare for claims owed by private insurers. The administration said this would prevent contractors from withholding suspected fraud when it involves small amounts of money, cases which often add up to after the inspector general found some contractors had not reported any fraud, and nearly two-thirds reported fewer than three fraud cases. |
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