Over the next 10 years, if left unchanged the Affordable Care Act (ACA) will take $500 billion from Medicare. Medicare beneficiaries will see higher premiums. Doctors, nurses, hospitals, and medical suppliers will get lower payments. Under ObamaCare Medicare reductions will be used to subsidize expanded Medicaid to low income recipients and to fund insurance for the uninsured. This redistribution of funding from old to young is the most controversial part of Health Reform.
In addition to the current beneficiaries, 78 million baby-boomers become eligible for Medicare over the next decade-and-a-half. Because of the ACA, they will get less healthcare so that others will get more. Payment reductions will lower their access to high-quality preventive services, early intervention, and acute care treatments. Is this fair?
Medicare beneficiaries paid for Medicare during their entire working life. They paid for the coverage with Medicare taxes and continue to pay with Medicare premiums. Why should they now be singled out to bear the cost of health reform?
Looming Financial Issues. On December 1, 2010 Medicare doctors face a 20% reduction in fees. On January 1, 2011 doctors face another 6.5% reduction. Neither Republicans nor Democrats want that to happen. The price tag to make a one-time permanent correction is about $250 billion. This is referred to as the “doctor-fix.” These Draconian reductions will dramatically cut access to care and will destroy quality of care for the elderly. If these reductions are allowed to go into effect, 30-40% of doctors will refuse to accept Medicare patients.
In addition, the ACA included $115 billion in reductions to Medicare Advantage, a private insurance option. 11 million Medicare Advantage beneficiaries are now getting notices of coverage reductions, high premium increases, or cancellations. Millions of others covered by company sponsored retirement health plans are seeing them eliminated or benefits lowered.
How can these problems be solved?
Budget Neutral Funding: Restoring & Modernizing Medicare. The $500 billion taken out of Medicare must be restored. Without adding to the deficit, we can restore soundness to Medicare by eliminating the subsidies scheduled for the Health Insurance Exchanges. The $450 billion savings from the elimination of these subsidies would cover the $250+ billion required to solve the “doctor-fix”, keep the Medicare Advantage option, and allow for modernization of Medicare.
Medicare is a 1964 plan design that should be transformed into a modern comprehensive medical plan. By restoring funds to Medicare there 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 coverages 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 health savings account (HSA). With Medicare rewards and incentives for following a healthy lifestyle and adherence to physician developed medical treatments, we could see the same 12-20% savings being generated by employer plans.
These changes would free most seniors from the need to purchase Medi-Gap coverages. The $200-300 per month premium savings could then be used to fund a Medicare HSA or pay for other living needs.
Yet, if these steps are taken, what can be done to solve the problems of those not in Medicare? The uninsured due to 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.
Create Affordable Options. The “economically needy” can also be funded more rationally. Insurance with health savings accounts are 12-20% lower cost than traditional insurance. Allowing the purchase of insurance across state lines could lower costs by an additional 5-10%. Litigation and malpractice reform is estimated to lower premiums at least 5%. Allowing individuals the same tax advantages provided to group plans would lower the net cost of insurance. Premium credits for maintaining health and adherence to standardized medical treatments can lower premiums even more.
Eliminate Broad-based Subsidies. Under the ACA, federal premium subsidies are available to individuals earning up to $88,000 per year for those purchasing coverage from a “Health Insurance Exchange” (HIE). 58% of the population is eligible for a subsidy. 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 goes way beyond a minimum safety net.
Other Savings. Medicare and Medicaid fraud amounts to between $30-60 billion per year. Over a 10 year period this would amount to $300-600 billion in savings. There are 159 new agencies, departments, work groups, and commissions created by the health reform act. We can eliminate funding for most of these departments that were established to hand out grants, fund research projects, pay for costly studies, and produce intrusive rules and regulations controlling the delivery of healthcare. We could save hundreds of billions over 10 years.
Billions more in administrative costs could be saved if governors united around a rejection of the ACA “Health Insurance Exchanges” in favor of private market “Health Information Exchanges.”
Repeal and Reform. A “New Health Reform” is needed to correct the problems of the ACA and to improve the overall healthcare and insurance system in the United States. Unfortunately, ObamaCare was designed as a vehicle to “Rob Peter to Pay for Paul.” Yet Medicare should not be the Peter to the uninsured Pauls. They both need access to quality care. We need to restore the wealth taken from Medicare and solve the problem of the uninsured in other ways.