Medicare Is front stage…..
The Medicare issue has moved to front stage during the 2012 Presidential election campaign. The Obama-Biden ticket has said “the truth is the Romney-Ryan budget would end Medicare as we know it,” while the Romney-Ryan ticket has accused the Obama administration of enacting cuts which will weaken Medicare and put in place a bureaucratic board that one day may ration the care available through the program.
Romney’s Medicare proposal would not affect today’s seniors age 55+, and not raise taxes. But, for Medicare beneficiaries in the future, he has proposed a defined contribution or premium support stipend which allows them to choose between private plans and Traditional Medicare.
David Walker, former United States Comptroller General from 1998 to 2008, and Founder and CEO of Comeback America Initiative, believes the Federal government has over promised benefits that are unsustainable in the future.
He said the Federal government is facing a $37 trillion dollar debt of unfunded liabilities and has compared the present day United States to the Roman Empire in its decline saying the U.S. government is on a “burning platform” of unsustainable policies and practices with fiscal deficits, expensive overcommittments to government provided health care, swelling Medicare and Social Security costs, the enormous expense of a universal health care system, and overseas military commitments threatening a crisis if action is not taken soon.
Obama-Biden ticket wants the government to continue providing the insurance benefits to Medicare beneficiaries while the Romney-Ryan ticket wants to allow the free market to help solve the problem.
This is part one of a series to examine the Defined Benefit approach vs. the Defined Contribution-premium support approach of the Romney-Ryan plan, and to recap outcomes of the attempts made by the Federal government to adapt aspects of partial Privatization with subsidy support to Private insurance plans during the past 30 years.
Delivery of Benefits (Government vs. Private Approach)
Government: Since its inception in 1965 Medicare was designed to be a Defined Benefit program called (Fee For Service) where the federal government decides each year what Medicare will cover. The government pays for most of the cost while individuals are responsible for the rest.
Efforts to expand the Privatization of Medicare by the Federal government have had mixed results during the past 30 years. (1982-2012)
In 1982 Congress passed (TEFRA) to introduce Private insurance in the form of HMO’s (Health Maintenance Organizations). During 1982-92, about 1.6 million Medicare beneficiaries enrolled in private managed care HMO plans.
Then in 1997, Congress approved the Balance Budget Act and created a program called Medicare +Choice. Private Fee For Service and PPO’s (Preferred Provider Organizations were added. Medical service providers were paid by these private insurance plans and not by Medicare. By 1999, more than 7 million Medicare beneficiaries enrolled in one of 346 plans offered.
Between 1999-2000, about half of the private insurance plan sponsors pulled out of the program because they were not profitable. This left about 1.6 million beneficiaries without coverage and the majority returned to Traditional Medicare.
In 2003, Congress approved the Medicare Prescription Drug Improvement and Modernization Act, and replaced Medicare + Choice with Medicare Advantage. The insurance lobby was successful in getting Congress to offer generous subsidies to overcome the issue of profitability that caused a collapse of the program in 1999.
By 2008, the private Medicare Advantage plans tripled in size from 765,000 up to 2.3 million members who were now receiving their benefits from Private insurers and not Medicare. But during this period, there was rampant abuse in sales and marketing by some insurance agents selling the plans.
During 2009, Congress discussed legislation to restructure payments in Medicare Advantage programs to equalize payments by 2013, back to those provided in Original Medicare. Medicare Advantage beneficiaries were paid on average 9-13% more than benefits paid to Original Medicare beneficiaries.
During 2011, The Affordable Care Act (known as Obama Care) cut about $200+ billion out of the Medicare Advantage program that will go into effect during the next ten years.
2012: There are about 11.7 million Medicare beneficiaries enrolled in Medicare Advantage plans (25%), and about 36 million beneficiaries (75%) enrolled in Original Medicare.
The CBO (Congressional Budget Office) predicts enrollments in Medicare Advantage plans will level off and decline from 11.7 million in 2011 to 7.5 million in 2018, and premiums will rise again due to Federal cuts in the program.
Delivery of Benefits: (Private Approach) Romney-Ryan Plan
Private Approach: Under the proposed Romney-Ryan plan, nothing changes for senior’s age 55+. Medicare is reformed as a premium support program, meaning that existing spending is repackaged as a fixed amount benefit to each senior to purchase an insurance plan. All insurance plans must provide coverage at least comparable to what Original Medicare provides today.
If seniors choose more expensive plans, they will have to pay the difference between the support amount and the premium price. If they choose less expensive plans, they can use any leftover support to pay other medical expenses like co-pays and deductibles.
Traditional “Fee for Service” Medicare will be offered by the government as an insurance plan, meaning that seniors can purchase that form of coverage if they prefer. However, if it costs the government more to provide that service than it costs private plans to offer their versions, then the premiums charged to the government will be higher and seniors will have to pay the difference to enroll in the Traditional Medicare option.
Lower income seniors will receive more generous support to ensure that they can afford coverage. Wealthier seniors will receive less support.
It is believed, competition among plans to provide high quality service while charging low premiums will hold costs down while also improving the quality of coverage enjoyed by seniors.
Source: www.mittromney.com/issues/medicare
Summary: (Government vs. Private Insurance)
The Obama-Biden Medicare ticket wants to:
• Keep the Defined Benefit plans for Traditional Medicare and Medicare Advantage
• Limit the growth in tax payer spending through accountable care programs and an Independent Advisory Board
• Reduce health spending by negotiating costs with providers
• Pay doctors and other providers directly
• Reduce superfluous spending on expensive procedures by negotiating price with providers
The Romney-Ryan Medicare ticket wants to:
• Keep the Defined Benefit plans for Traditional Medicare as an option but compete with these plans by changing to a market based private health care delivery approach, and offer a choice between the two.
• Limit the growth of tax payer spending through competition believing that it will lower costs and offer doctors an incentive to provide quality care.
• Reduce health spending by putting decisions in the hands of individuals vs. a bureaucratic panel.
• Allow the insurance plans to pay doctors and providers directly instead of the government paying for benefits.
• Reduce superfluous spending on expensive procedures by allowing the individual to make the choice.
