One of the most controversial parts of the new federal healthcare law is the redistribution of funding from Medicare to other programs. If Obamacare is left unchanged, it will take $500 billion from Medicare over the next 10 years.
Medicare beneficiaries will see higher premiums; doctors, nurses, hospitals and medical suppliers will get lower payments. The Medicare reductions will be used to subsidize expanded Medicaid to low-income recipients and to fund insurance for the uninsured.
For the 78 million baby boomers eligible for Medicare over the next decade, this is more than a redistribution of wealth. It is a redistribution of health and wellness. They will get less healthcare; others will get more.
Payment reductions lower seniors’ ability to access quality preventive services, early intervention and acute care treatments. Many seniors believe Obamacare threatens their health and well-being.
For Medicare beneficiaries who paid for Medicare during their working life and continue to pay premiums, the argument is not whether healthcare is a right or a privilege; it is a solemn contract with the federal government.
Obamacare ignores Medicare’s biggest financial issue: the “doctor-fix.” Beginning this month, Medicare doctors face a 20 percent reduction in fees. On Jan. 1, 2011, doctors face another 6.5 percent reduction. The price tag to make a one-time permanent correction is about $250 billion.
It will dramatically cut access to care and destroy quality of care for the elderly: Up to 40 percent of doctors are likely to reject Medicare patients.
Obamacare included $115 billion in reductions to Medicare Advantage, a private insurance option. About 11 million Medicare Advantage beneficiaries are receiving notices of coverage reductions, high premium increases or cancellations. Millions more covered by company-sponsored retirement health plans are seeing them eliminated or benefits lowered.
In November 2010, voters demanded lower spending, deficit reduction and elimination of wasteful government spending. The lame-duck and new 2011 Congress will face an early challenge: Fix the wrongs of Obamacare and stay true to voters demanding fiscal responsibility. Medicare changes cannot be funded with more debt.
Medicare beneficiaries don’t want their program slashed to subsidize others who already have government subsidized alternatives or could pay their own way.
The “economically needy” can be funded more rationally, with government-subsidized Medicaid, federally qualified clinics, community services, county health departments and free clinics. About 60 percent of the uninsured are under age 35. The fastest-growing population of the uninsured is young people earning above $50,000 per year who choose not to purchase health insurance.
Americans are generous and believe in a reasonable safety net but do not want a system that ignores personal responsibility or eliminates the cost of bad adult decisions. Most support a hand up, not a handout.
The uninsured with pre-existing conditions can be covered at a reasonable cost under a federally supported high-risk pool. Insurance reform should include restrictions on policy rescissions, improved appeal processes, coverage for dependent children, price and quality transparency, and expanded use of information technology. Many of these changes are already in state laws. These administrative changes do not require government expenditures.
There are low-cost insurance options and alternatives available. Health Savings Accounts (HSAs) cost 12-20 percent less than traditional insurance. Allowing purchase of insurance across state lines could reduce costs another 5-10 percent. Litigation and malpractice reform can lower premiums at least 5 percent. Allowing individuals the same tax advantages as group plans would lower the net cost of insurance, premium credits for maintaining health and adherence to medical treatments, even more.
Under Obamacare, federal premium subsidies are available to individuals earning up to $88,000 per year in a “Health Insurance Exchange” (HIE); that would cover 58 percent of the population. Many of those eligible for subsidies can afford to pay their own premiums. In the 10-year budget cycle, these broad-based premium subsidies will cost over $450 billion. This is far more than a safety net.
Then there is Medicare and Medicaid fraud, amounting to $30-$60 billion per year, or savings of $300-$600 billion over 10 years.
Hundreds of billions more could be saved by eliminating the 159 new Obamacare agencies, departments, work groups and commissions established to hand out grants, research projects, costly studies and produce intrusive rules and regulations controlling the delivery of healthcare.
Billions more in administrative costs could be saved if governors unite around a rejection of the Obamacare “Health Insurance Exchanges” in favor of private market “Health Information Exchanges.”
The $500 billion taken out of Medicare can be restored without adding to the deficit by eliminating the subsidies scheduled for the Health Insurance Exchanges. The $450 billion savings would cover the $250-plus billion required to solve the “doctor-fix”, keep the Medicare Advantage option and modernize Medicare.
Medicare is a 1964 plan design that should be transformed into a modern comprehensive medical plan. Restoring funds to Medicare would be enough to increase the Medicare hospitalization coverage from 150 days to 365 days (as provided by most Medicare Advantage Plans). Medicare Part A and Part B could be brought in line with pre-65 employer coverage by combining the deductibles into a single amount and implementing a limited Maximum Out-of-Pocket.
Medicare beneficiaries should be allowed to establish or maintain a tax-advantaged HSA. With Medicare rewards and incentives for following a healthy lifestyle and adherence to physician-developed medical treatments, beneficiaries could see the same 12-20 percent savings being generated by employer plans.
This would free most seniors from the need to purchase Medi-Gap coverage, with the $200-S300 per month premium savings used to fund a Medicare HSA or pay for other living needs.
Nearly everyone agrees on the need for healthcare and insurance reform, despite the differing approaches in Washington. Unfortunately, Obamacare was designed as a vehicle to “Rob Peter to pay for Paul.” Medicare should not be the Peter to the uninsured Pauls.
[Ronald E. Bachman FSA, MAAA, is president and CEO of Healthcare Visions, Inc. and a senior fellow at the Georgia Public Policy Foundation, an independent think tank that proposes practical, market-oriented approaches to public policy to improve the lives of Georgians. He is also a senior fellow at the Center for Health Transformation, the Wye River Group on Health and the National Center for Policy Analysis.]
