Fixing Health Care: What Role Will Medicare Play?

As President-elect Barack Obama organizes his transition to the White House, health policy experts are busy reading the tea leaves in an effort to determine what approaches the new Democrat-controlled Congress and administration will take to reform the health care system. One key question: What part will Medicare play?

The promise of moving toward a system of universal access to health care—now a priority for a large majority of the population, according to recent surveys—raises huge challenges for lawmakers. The hurdles are not only financial but ideological. Should health care be managed comprehensively by the federal government, or built on a system of competing private plans offering a variety of benefits, or based on some mixture of the two?

“Medicare sits squarely in the middle” of that debate, said Stephen Crystal, a professor at Rutgers University’s Institute for Health, Health Care Policy and Aging Research. Introducing a panel of experts discussing Medicare policy challenges for the new administration at the Gerontological Society of America’s annual scientific meeting at the National Harbor convention center near Washington, D.C., Crystal added: “Medicare can’t be considered as a separate issue in how we organize health care.”

Judith Stein, founder and executive director of the Center for Medicare Advocacy, went further. “Medicare should be a model for a national health system,” Stein said.

Medicare has increasingly become a battlefield in the debate over alternative visions for health care. It comprises both the “traditional” program, which covers the same defined benefits, and the alternative Medicare Advantage system of private plans that offer varying costs and benefits. The question, said Crystal, is: “Which path is more [financially] sustainable?”

Although proponents of private plans maintain they are a more efficient way of delivering health care, “Medicare has done as well or better than private insurance,” in terms of keeping costs down, said Marilyn Moon, director of the health program at the American Institutes for Research.

Care for people in Medicare’s private plans, said Stein, is costing the government on average 13 percent more than for beneficiaries in the traditional program. From a taxpayer’s perspective, she said, “we’re not getting the best bang for our buck.”

Some changes in Medicare that panel members said the Obama administration might consider:

• allowing people ages 50 to 64 to buy into Medicare;

• eliminating government subsidies for the private plans in order to level the playing field with the traditional program;

• changing the payment system to physicians to encourage better primary care, with more emphasis on managing chronic medical conditions; and

• moving toward an “evidence-based” system in which the best practices in medical care are rewarded.

Medicare’s Part D prescription drug benefit also needs significant improvements, panel members said. Tricia Neuman, director of the Medicare Policy Project at the Kaiser Family Foundation, paid tribute to the program for increasing access to drug coverage for millions of people but said the program is still “highly confusing” for beneficiaries who must choose one private drug plan out of more than 50 in their area, and often too expensive.

Among options for improving Part D, panel members suggested:

• making it more user-friendly, by offering fewer drug plans with more standardized benefits;

• offering a government-run plan to compete with the private plans;

• having a one-time amnesty so that people who have delayed enrolling could do so without a late penalty;

• eliminating or raising the asset test in the Extra Help program so that more people with low incomes could qualify; and

• eliminating or reducing the coverage gap—the doughnut hole—or requiring all plans to offer some coverage in the gap.

Closing the gap—in which enrollees whose drug costs exceed a certain limit ($2,700 in 2009) must pay full price—“is not a front-burner issue” in Congress, “but is of great concern to beneficiaries,” Neuman said. One in four enrollees fell into the gap in 2007, and 15 percent of them then stopped taking their medication, according to a study the Kaiser Family Foundation issued earlier this month. However, it would cost $300 billion over 10 years to eliminate the gap entirely.

See Also:
• Why Congress May Be Ready to Reform Health Care
• Social Security: A Challenge for Obama
• Older Americans Go Back to Work–If They Can Find a Job
• What Do You Have to Give to Your Country Now?

Patricia Barry is a senior editor at AARP Bulletin Today.