NCPA - National Center for Policy Analysis

A Better Medicare Plan

June 27, 2003

We need not spend an additional $400 billion or more on Medicare to furnish seniors with prescription drug coverage, says John C. Goodman, president of the National Center for Policy Analysis. Instead, we can design a health plan that gives seniors access to the kinds of health plans most Americans have by utilizing the concepts of integration, competition, choice and patient power.

An efficient plan could overcome persistent problems with Medicare, such as:

  • Each year about 750,000 beneficiaries spend more than $5,000 out of pocket because Medicare pays too many small bills while leaving them exposed to catastrophic out-of-pocket expenses, including drug costs.
  • About two-thirds of Medicare beneficiaries acquire supplemental insurance, but "medigap" policies provide little or no prescription coverage.
  • Medicare pays for acute care, but not for chronic conditions; thus stroke victims get hospital treatment, but not the drugs that would have prevented the stroke, and diabetics get limbs amputated, but not the chronic care that could have made amputation unnecessary.

In a study for the National Center for Policy Analysis, Milliman & Robertson estimated that for the combined cost of the average Medicare expenditure and medigap premiums, seniors could be covered by the same type of health plans other Americans.

Such integrated private plans could compete to attract seniors, giving them a choice of plans tailored to their individual needs (rather than a one-size-fits-all benefits package). Long term contracts could provide stability and encourage plans to enroll the sick.

Fee-for-service health insurance like Medicare has largely vanished from the U.S. health-care system, replaced by managed-care plans, and Medical Savings Accounts that give patients choices. Seniors need these same options.

Source: John C. Goodman, "A Better Fix for Medicare," Wall Street Journal, June 27, 2003.

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