Monday, November 28, 2011

Now That Thanksgiving is Over the Attacks on Medicare Begin Again

This Time Democrats are Joining in the Fun

If you are elderly and retired you face two economic threats.  The first is loss of income, since you are unable to return to the labor force.  The second is impoverishment from catastrophic medical costs.  The first of these threats has been ameliorated by Social Security and tax incentive driven savings plans.  The second, of course has been eliminated via Medicare.

Medicare was enacted in the 1960’s and enhanced in later decades.  A key feature of Medicare is cost sharing.  The costs of providing health care for those 65 and over are borne by the recipients themselves (premiums, co-pays, and deductibles), employers and employees (payroll taxes) and general tax revenues.  This seems fair and reasonable, but not to everyone.

As the cost of providing medical care to the elderly rises, those who want to reduce taxes on the wealthy are developing programs to reform or replace Medicare with systems that will shift more of the costs to the individual recipients, and less cost sharing by government.  The mechanism for doing this, proposed by Republicans, is having private insurance provide the Medicare services, with government providing a subsidy to senior to pay the premium.  Now some Democrats are coming on board.

The idea faces opposition from many Democrats, who say it would shift costs to beneficiaries and eliminate the guarantee of affordable health insurance for older Americans. But some Democrats say that — if carefully designed, with enough protections for beneficiaries — it might work. . . . Alice M. Rivlin, who was budget director for President Bill Clinton, had urged the deficit panel to establish an insurance exchange for Medicare beneficiaries.

Now an honest argument cannot be used here, since a program to shift health care costs to Seniors is not all that winning a position.  So the argument has to be made that this is cost savings, that Medicare, like all government programs is wasteful and that the private sector can do health care insurance for the elderly at a much lower costs. 

The argument is an old one.  Competition in the private sector will reduce the cost of health care for seniors, c'mon man!  This is delusional wishful thinking.  Private insurance in the non-elderly market has premiums rising much faster than the cost of Medicare.  And adding the profit contribution and higher administrative costs from a multiple of private plans will push up costs, not lower them. 

One argument is that Medicare Advantage plans, private plans that administer Medicare health care lower costs.

 one-fourth of the 48 million Medicare beneficiaries are in private Medicare Advantage plans, offered by companies like UnitedHealth and Humana, which cover a wide range of doctors’ services and hospital care.

The new health care law is cutting payments to Medicare Advantage plans. Republican lawmakers predicted that the cuts would lead insurers to increase premiums, reduce benefits or pull out of the program. But so far the dire predictions have not been borne out.

On average, the Obama administration said recently, Medicare Advantage premiums will be 4 percent lower in 2012 than in 2011, and insurers expect their Medicare enrollment to increase by 10 percent.

Uh, yes the premium costs may be declining but the co-pays of Medicare Advantage plans are rising, as they have been all along.  So no, Medicare Advantage plans are not the huge cost savings they purport to be.

Now it may be that private insurance will evolve into a system that will cut costs.  This could happen if the trend towards insurance companies buying health care providers and getting into the business of providing health care and the trend of health care providers to provide insurance continues.  This will take a push by the government, and require intelligence in health care economics.  Neither activity is likely.

So as the Greediest generation continues its press for more and more tax cuts, everyone should know that some of that money will come from shifting health care costs to the elderly.  But that’s okay, if you cannot afford to have health care, don’t get sick.

1 comment:

  1. Economic threats two elderly and retired people are more painful.

    Medicare America