Medicare Is Lousy Insurance

The House budget proposal is serving as the latest piñata for Democrats who always use the exact same cudgel — “Extremist Republicans are threatening to throw America’s elderly into the streets!”

This, after these exact same Democrats cut half-a-trillion from Medicare to subsidize ObamaCare.

How do they get away with it?

Partly because Republicans have failed to tell the truth about Medicare for decades. They have enabled the Democrats to create this sacred cow because they either: (1) don’t know enough about it to articulate a different view, (2) don’t care enough about health care in general to become better informed, or (3) are so timid that they are afraid the speaking the truth will get them in trouble with the electorate.

Now their ignorance and/or timidity has come back to haunt them. Most of the elderly hold on to Medicare for dear life because there is nothing else available and they have no basis for comparison.

But the fact is that Medicare is a lousy insurance program. It would be impossible to sell a benefit structure like this on the private market.

California Health Advocates has published a handy dandy little table laying out the premiums, deductibles and coinsurance for Parts A and B. It would be interesting to put the table in front of some of the know-it-all health policy wonks in Washington and quiz them on it after they have studied it for fifteen minutes. I’m guessing not one in five would pass such an exam.

While ObamaCare made a big deal about out-of-pocket costs in private coverage, Medicare has absolutely no limit on out-of-pocket spending. None.

As a consequence, people on Medicare pay an enormous portion of their incomes on health care. The Kaiser Family Foundation finds that the average household on Medicare spends 14.9% of its income on health care, while the average non-Medicare family spends just 4.8%. These are averages, and the lowest income Medicare families are also eligible for Medicaid. If we leave out the Medicaid portion of the population, the average Medicare household actually spends 16.6% of its income.

Because of the coverage gaps in Parts A and B of Medicare, most seniors also obtain MediGap insurance (either directly or through an employer) and even then they don’t have the drug coverage that most nonseniors have. So enter Medicare Part D — a third plan which requires yet another premium. The typical senior, then, is paying three premiums to three plans. Each one has a different premium arrangement, different deductibles and coinsurance, and different coverage limitations.

So, in addition to being massively underfunded, Medicare is also vastly complicated and enormously expensive to consumers.

It is also rife with corruption, as the Medicare bureaucracy refuses to spend the money to make sure it pays only legitimate claims to legitimate providers for legitimate services. It prefers to round up a handful of crooks every five years or so and charge them with fraud rather than perform normal due diligence when paying claims.

It is a monstrous program. Republicans should be proud to offer the nation’s seniors something better.

Comments (11)

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  1. Stephen C. says:

    Good observation. It is lousy insuurance.

  2. Devon Herrick says:

    Seniors need three different insurance policies —Medicare, Medigap and Medicare Part D— to pay for their medical care. I doubt if consumers would tolerate this type of coverage if buying coverage in the private market.

  3. Vicki says:

    Agree that it is lousy insurance. No one else is paying three premiums to three plans.

  4. Erik says:

    It was a huge mistake for the republicans to create an unfunded Part D.

  5. Ken says:

    Greg, this is why one out of evey four Medicare beneficiaries has enrolled in a Medicare Advantage plan.

  6. Jeff says:

    I agree with Erik. And I usually don’t agree with Erik.

  7. Joe Barnett says:

    Democrats (and the news media) are now saying that the Ryan plan replaces Medicare’s “guaranteed benefits” with premium subsidies that won’t keep up with inflation. But Medicare’s benefits are limited: with annual and lifetime maximums on number of rehabilitative care days, e.g., an unlimited 20% copay, and it doesn’t cover new procedures that haven’t become standard.

  8. bob hertz says:

    In the course of my employment, I have worked with both seniors and non-seniors on their personal health insurance….so the following comments are not perfect, but at least they are reality-tested:

    1. In quite a few cases, the three premiums that seniors pay are rather small. $125 a month for part B, $170 a month for a Med Supplement, and $35 a month for a drug plan –
    this adds up to $320 a month.

    Having paid all these premiums, a senior can go a long time before they see a real out of pocket bill of any large amount. My father was hospitalized five different times in his last year of life, and I think the largest cash bill he had to pay was $400.

    By contrast, I am 60 years old, and I pay $550 a month for a stingy plan with a $2,500 deductible (although the deductible for prescriptions is $400).
    I see a lot of real cash bills I have to pay.

    2. Poor senior citizens who cannot afford any of the three insurance bills described above can in many cases get wrap-around coverage from Medicaid.
    So once again they see very few bills.

    By contrast, America’s workplaces do essentially nothing for non-seniors who make too much for Medicaid. In one factory where I sold insurance, almost half the workers did not have family coverage even though the employer “offered” it. The workers had to pay cash for any coverage beyond the single-employee level.

    I have also encountered many workers who had an HSA with no money in it.
    They had catastrophic insurance, but no money to pay the inevitable deductibles.

    In general, these millions of workers would trade their lot for the problems of Medicare in about ten seconds.

    If one goes back and reads about health care legislation of 1965 under LBJ, the consensus was that Medicare would take of the aged, Medicaid would take care of the poor, and employers plus unions would take care of the workers.

    Since then there has been an explosion of part-time and nonunion workers. Public policy has not kept up, mainly because these workers do not constitute a
    vigorous pressure group. No politician can get elected by appealing to them, and no politician loses office by ignoring them. (John Goodman touched on this when he compared Obama to FDR, unfavorably.)

    Medicare and its beneficiaties will lurch along, albiet inefficiently. The greater crises are the uninsured and underinsured at younger ages.

    Bob Hertz
    Director, The Health Care Crusade

  9. Uwe Reinhardt says:

    Greg:

    You write:

    “It [Medicare] is also rife with corruption, as the Medicare bureaucracy refuses to spend the money to make sure it pays only legitimate claims to legitimate providers for legitimate services. It prefers to round up a handful of crooks every five years or so and charge them with fraud rather than perform normal due diligence when paying claims.”

    Let’s be fair to our friends at the CMS. Medicare bureaucrats don’t set their budget for administration. Congress does. I know it, because on the PPRC we tried for years to get Congress to lower Medicare’s MLR from over 98% to more like 95%, without success.

    Furthermore, at the behest of the private insurance industry, Medicare claims are administered not by bureaucrats, by by over 100 private Medicare intermediaries, typically BCBS plans. It is they who let crooks get away with too much.

    I do believe, though, that something could be gained to have a MEDICARE HALL OF SHAME website, in which every Medicare fraud would be described and the punishment listed. Of course, your friends at the AMA would object, but I think it could have a powerful effect on would be crooks. Half of ft. Lauderdale would be in shock.

    Best,

    Uwe

  10. CA Medicare says:

    CA Anthem Blue Cross just announced huge changes for their Medicare PPO Plan, Freedom Blue. If you or a loved one have been affected by the change, we’d be happy to assist you.

  11. Thibo says:

    well know name in health care, and has been aruond for over 80 years. a0 Cigna offers two different Medicare Part D drug plans in 2012.a0 The plans are simply labeled as plan one and plan two, and they differ in cost and benefits