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| Medicare Reform and Prescription Drugs: Ten Principles | |
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The elderly could have better health care coverage - including a prescription drug benefit - if they were allowed to combine their Medicare funds with the money they currently spend on private insurance and pay one premium into a comprehensive private plan. Add the amount that Medicare will spend on the average beneficiary each year to the amount seniors are already paying for the most popular medigap policy, and the combined sum should be enough to buy the same kinds of health insurance coverage the nonelderly now have, including prescription drug coverage (assuming the private plans can pay the same rates Medicare currently pays). That is the conclusion of a study prepared for the National Center for Policy Analysis by Milliman & Robertson, the nation's leading actuarial firm on health benefits.23 Medicare+Choice. Congress thought it was allowing seniors to use their Medicare money to join private health plans when it passed Medicare+Choice in 1997. The program was supposed to give the elderly the full range of health insurance options currently available to nonseniors: HMOs, MSAs, fee-for-service plans, doctor-run plans, etc. However, the Centers for Medicare & Medicaid Services (CMS), which regulates Medicare, has behaved as if it is hostile to private insurance, hostile to competition and hostile to choice. As a consequence, the program is saddled with so many rules, regulations and constraints that seniors have few of the options originally promised.24 The program was an initial success, with private sector HMOs attracting 6.3 million Medicare beneficiaries (about 16 percent) and federal officials predicting that number would double by 2005. However, the program has virtually collapsed as low reimbursements and red tape have driven out insurers. With the latest withdrawals, 2.4 million elderly and disabled enrollees have lost their private plan coverage since 1998.25 Premium Support. One reason why so many HMOs are leaving the Medicare+Choice program is the claim that their level of reimbursement is too low. These plans are generally free to charge enrollees an out-of-pocket premium on top of what Medicare pays, however. And if the plan supplants medigap, seniors should be able to pay the extra HMO premium with the savings they realize from no longer paying medigap premiums. As a practical matter, however, Medicare HMO enrollees tend to be lower-income seniors who often do not have medigap insurance.26 Many cannot afford higher HMO premiums for the same reason that they cannot afford medigap insurance. To meet the needs of these seniors, some advocate Medicare reform that would condition Medicare's contribution on the income of the senior citizen. Under these "premium support" plans, private health plans would be an alternative to traditional Medicare and medigap insurance. The plans would also provide catastrophic coverage for prescription drugs.27 The idea behind premium support is that the share of the total premium paid by Medicare to the private plan would be inversely related to the senior's income. For example, Medicare might pay 100 percent of the premium for the lowest-income seniors and much less for those with the highest incomes. Although supporters of this reform expect that it will require additional federal spending, it is not obvious that more taxpayer subsidy is needed. |
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