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Medicare:
What's Good for Old People?
By
Arion Blas, Global Action on Aging
July
10, 2008
Overview:
Medicare works like a health insurance, except that it is publicly funded. It subsidizes fees from hospitals and medical centers using complicated formulas. Generally, the government determines a rate on which the medical institution will be paid.
The Medicare system is very complex – a system that weaves both public and private institutions. Both government and private insurance companies provide Medicare services. Private insurance companies make use of Medicare Advantage. Common to both, however, is that they make use of the government’s budget to fund, totally or partially, their services.
Basic Medicare – Public Segment:
Medicare is a health insurance program created people above the age of 65, people with disabilities and end-stage renal disease. The basic plan consists of two parts: hospital insurance (Part A) and medical insurance (Part B). Most people pay for the latter segment and obtain the former for free.
Part A covers care in hospitals, hospice care and certain health care. The coverage differs depending on the policy provided for the user. Also, most people obtain this for free, automatically, upon reaching 65 years old, as they or a spouse have paid Medicare taxes while employed. People who are ineligible for Social Security or weren’t able to pay sufficient Medicare taxes or were disabled but have returned to work have to pay a monthly premium.
Part B is optional and covers doctor visits and services not covered by Part A such as therapy visits. Most people pay $96.40 every month for this insurance. The premium may be higher depending on ones income.
Medicare Advantage Health Plans (Part C), Medigap, Medicare Prescription Drugs – Private Segment:
The US government pays for Medicare Advantage Health Plans or Part C but insurance companies run these plans. Examples include Health Maintenance Organizations (HMO) and Preferred Provider Organizations (PPO.) These plans provide wider coverage and lower co-payment rates than the Basic Medicare. However, it is mandatory to obtain Part B, and pay the additional monthly premiums. Also, Medicare Advantage plans do not work with the Medigap.
Private insurance companies provide Medigap and Medicare Prescription Drugs Plans Medigap covers for services that are not part of the Medicare Plan. Medicare Prescription Drugs is designed to cover pharmaceutical purchases. Private companies run these plans but are government regulated.
Medicare Funds
As of 2007, the government spent 16% of the country’s GDP on Health Care expenditures, which amounts to $440 billion. The Medicare program pays for four things: the Basic Medicare Plan, Insurance Companies providing the supplementary plans, Medical Graduate Schools and Medical Students in their residency. The system is fast becoming insolvent.
Major Issues
1. Insolvency of the system – A shrinking labor force and a growing number of beneficiaries places a strain on the system. The US government will collect less than what it spends in 2008. Aging has often been blamed as the key factor behind this. However, research suggests that administrative inefficiencies, high mark-ups, and the profit-taking contribute more to the price increase.
2. High Risk activity – Medicare is considered a high risk government project because of its vulnerable to fraud. In July 2008, Congressional investigators, for example, discovered that suppliers are using deceased doctor’s identification numbers to obtain payments from the government.
3. Health Care Professionals – Medicare funds many Graduate Level Medical Schools and Medical Students taking up their residency. Budget problems have resulted in a decrease in funds reaching Medical training institutions and students, resulting in a lower number of graduating doctors. This creates a supply crisis which many cite as another reason behind the increase in costs.
Current Issue in the Senate
Because of the problem of insolvency, the government has scheduled to cut fees paid to doctors who are involved in the Medicare program. The government planned to reduce their payment by 10.6 percent by July 1. The administration, however, delayed the processing of claims to allow legislators to find a compromise between the House and Senate versions of the bill. Congress ratified legislation that would stop this cut in fees by diverting funds that would have paid private insurance companies. Congress cited two important reasons. First, they feared a cut in doctor’s fees will result in doctors refusing to take in new Medicare patients, a majority of which are seniors. Second, many argue that private insurance services are costing the government more than the basic plan. Many insurance companies oppose the bill and even launched an ad campaign against it. They argue that with a decrease in government funding, those enrolled under Medicare Health Advantage programs will have to pay bigger premiums and co-payments, likewise, a majority of which are seniors. The bill was ratified Wednesday, July 9, 2008, in the Senate through the help of Senator Edward Kennedy. It is estimated that 20% of all Medicare beneficiaries are under the Medicare Health Advantage program.
What’s Good for Old People?
Based on the arguments of the two parties, seniors seem to face a “lose-lose” situation. In both cases, vying groups argue that access to healthcare is impeded. What will be “good” depends on the proportion of seniors enrolled in the privately run Medicare services. If majority of seniors are enrolled in the private insurance plans, then the bill will be detrimental to old people. However, looking at the percentage enrolled in the private sector (20 percent) and the added costs it brings, it is more likely that the reverse is true. The bill, in the short term, may be beneficial to older persons.
More Information on US Health Issues
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