Enacted together in 1965, Medicare is the U.S. federal government-managed health insurance program for citizens 65 and over, while Medicaid is the de facto welfare program for low-income adults, children, pregnant women, and people with disabilities.
Doctors, nurses, and hospitals, meanwhile, are annually being squeezed at the margins, their payments for services rendered more often than not being reimbursed to them at a breaking even or worse rate.
This is why an ever-growing number of the most talented and hardest-working health care providers are simply opting out of Medicare, setting up “concierge” agreements for cash-only patients. Add onto that the burdens imposed in 2013 by Obamacare, federally micro-managing doctors and nurses’ protocols while rationing parts of Medicare (insurance) redistributed to Medicaid (welfare), and the beast grows annually beastier. Something’s got to give.
Waiting for today’s elected leaders in Washington, DC, to fix it on their own is a fool’s errand. The last president to attempt to raise the subject of Medicare reform in 2005 was George W. Bush. His top aides went to Capitol Hill in pursuit of a bipartisan legislative solution and were promptly electrocuted, politically speaking.
Bush and the Republicans lost their legislative majorities in the 2006 congressional elections. Most Democrats denied there was a problem, while most Republicans failed to make their case that Medicare could be saved by reforming it without anybody losing their Medicare coverage. And ever since, Medicare has kept growing ever worse.
That’s why this seminal book, “Modernizing Medicare: Harnessing the Power of Consumer Choice and Market Competition,” is a work of genius. Robert Moffit has assembled a rare combination of America’s 12 leading health care public policy experts and fiscal magicians, outlining the specific ways in which Medicare can be saved and improved.
Moffit, who is the Heritage Foundation’s leading scholar in this field, shares a varied career as a former top-level deputy secretary in the U.S. Department of Health and Human Services (HHS). He’s also the former chairman of the Health Care Commission for the state of Maryland.
There are three major policy proposals in the book that are particularly striking.
First, for new Medicare beneficiaries, Gail Wilensky, a former Medicare administrator, proposes changing their automatic enrollment in traditional Medicare to enrollment in Medicare’s robust system of competing private health plans. Wilensky and Dr. Brian Miller of Johns Hopkins University detail exactly how this would work, outlining patients’ rights to switch to traditional Medicare, if they wish, while guaranteeing health plan quality standards and various consumer protections.
For new Medicare patients, such a change would automatically guarantee them a broader set of benefits and a hard cap on their out-of-pocket expenses (catastrophic protection), a crucial protection that they don’t get today when they’re automatically enrolled in traditional Medicare.
Second, several authors proposed improvements in the way the government pays health plans on behalf of Medicare beneficiaries. They would base the government contribution to private plans on straight market-based bidding among plans to provide the standard Medicare benefits disentangled from the Medicare bureaucracy’s price fixing.
The government contribution could be based, for example, on the average bid among competing plans, and if a beneficiary selected a health plan that was more expensive than the government contribution, they would pay the difference in a higher premium. If the beneficiary selected a plan that was less expensive (as most already are), they would keep the difference as a cash rebate.
This would intensify price competition, especially in a transparent environment of price and provider performance. Edmund Haislmaier, a senior fellow at the Heritage Foundation, also recommends technical changes to existing rules that adjust government payments based on patients’ health risks. These changes would prevent health insurers from “gaming” the system at taxpayers’ expense.
Finally, traditional Medicare itself should be upgraded, improved, and forced to compete directly with private health plans. Joseph Antos, a senior fellow at the American Enterprise Institute, argues that the traditional program’s complex structure should be streamlined: the hospitalization and physicians’ benefits should be combined into one comprehensive insurance plan, with a simplified system of cost-sharing and a hard cap on Medicare patients’ out-of-pocket costs.
Such a change could set the stage for comprehensive competition. Reorganized as a real health plan instead of a disjointed set of benefits, traditional Medicare would and should compete with private health plans. Such intense choice and competition would drive innovation in care delivery, improve the quality of patient care, and wring inefficacies out of the system. Douglas Holtz-Eakin, a former director of the CBO, estimates that such a competitive change would yield a total saving of $2.2 trillion for beneficiaries and taxpayers over 10 years.
‘Modernizing Medicare: Harnessing the Power of Consumer Choice and Market Competition’ Edited by Robert Emmet Moffit and Marie Fishpaw Johns Hopkins University Press, Baltimore 232 pages