Time for an Intervention on Medicare and Medicaid Costs
The Bureau of Economic Analysis recently released data showing Medicare and Medicaid costs jumped 10% in the second quarter of this year. This puts the two healthcare entitlement programs on course to reach spending levels of almost $992 billion. Yes, that is almost $1 trillion. And guess what, it is not going to stop rising unless something is done soon.
The recent debt ceiling compromise in Washington did not touch or modify the programs but it does leave them open for restructuring in future negotiations. And as much as I love and value these entitlement programs, a massive restructuring is exactly what is needed. When Medicare was first enacted in 1965, approximately 19 million Americans enrolled. By the year 2030, an estimated 80 million Americans will be enrolled. The bad economy only adds to the burden as more and more Americans wind up in the Medicaid program. Medicare and Medicaid currently pay 57.5% of all provider bills for doctors and hospitals, and pharmaceuticals. That is up from 49.3% in 2005. Life expectancy when Medicare was created was 70. Today, it is 78. People are living longer and they are using more and more healthcare services. Each day, there are new and amazing discoveries, many of which will extend our life expectancy adding even more cost to an under financed system.
It would be a wonderful blessing if our country could fund all of our healthcare expenses indefinitely. But simply put, the math just does not add up. We must fix the funding of the program now so that we all benefit from it in the future; our children and grandchildren included. I believe there is a way if only we all listen and understand the facts on the ground.
1. Raise the Medicare eligibility age from 65 to 67 starting in 2014 when the broad protections of healthcare reform kick in (yes, Obamacare!). This will effectively put those who would become eligible at 65 into the private insurance markets. Remember, private insurance companies will no longer be able to discriminate and deny enrollment based on preexisting conditions or age. Those who cannot afford the insurance premiums for their private healthcare coverage will receive the same government subsidies and assistance as everyone else. While this may slightly increase the costs of the healthcare reform law, it will significantly reduce the Medicare obligation by a much greater amount. Right now, Medicare (and Medicaid) is the least expensive and most heavily subsidized insurance around. There is no doubt this idea, which has been discussed by many bipartisan commissions looking at our explosive healthcare costs, is controversial. I totally understand it too. I would never be in favor of such a radical restructuring if I did not believe the very foundation of the current program is about to collapse. The broad protections included in the healthcare reform law will ensure everyone in this country has healthcare insurance. Further, it will essentially ask those who can afford it to pay more. In these very troubled times, we all have to sacrifice. Myself included.
2. Transform Medicare into a program run more like private healthcare insurance (and I do not mean privatize Medicare). Well, the good parts of private insurance. Right now, if you are enrolled in “traditional” Medicare (as opposed to Medicare Advantage Plans), there are no utilization controls on the healthcare services provided. Let me explain. I carry United Healthcare insurance through my employer. If my doctor orders a nuclear stress test on me, I must have that test “authorized” before I can get it done or it will not be reimbursed. There is a good reason behind the need for the authorization. In some cases, but certainly not most, the best test may be something less invasive (and less expensive); like a regular stress echocardiogram that may actually be just as effective in diagnosing the problem. I am not a doctor, nor would I think to ask him about a different test if I did not know it was an option. But sometimes a test is ordered that is not clinically justified or necessary. The private insurance companies are far more effective in controlling the utilization of healthcare services than Medicare. I by no means want anyone to think I support bad behavior or the unjustified denial of care by the private insurance companies. I am merely suggesting we learn from them when they have something to teach us that may actually be good for the patient and save money along the way.
There are many more ways to reduce our government’s financial burden of providing healthcare to so many Americans. Raising the eligibility age and introducing utilization controls is very reasonable and fair place to start. If we simply rule them out, for whatever reason, we should not be surprised in 20 years from now when either the country is insolvent or Medicare ceases to exist. Start thinking rationally and be open to new ideas. It is easy to attack those who present a less than desirable but necessary change. It’s harder to acknowledge or accept they may be right.