Medicare: It works great…Let’s fix it

America observes the 50th anniversary of the establishment of Medicare this summer. Condemned by many at its birth as a first step toward socialized medicine, Medicare has become one of the most popular federal programs. Few Americans who aren’t already Medicare beneficiaries can remember a time when the program didn’t exist, and more than 80 percent of the population reportedly believes that it is working very well. This is fortunate, because Medicare now finances care for one-sixth of all Americans and has risen in cost over the half-century from three percent to 14 percent of the total federal budget.

Generations, the quarterly journal of the American Society on Aging, has marked the occasion with a special issue devoted to Medicare’s 50-year anniversary—its past and, more importantly—its future. Guest editors Tricia Neuman, senior vice president of the Kaiser Family Foundation, and John Rother, president of the National Coalition on Health Care, assembled an impressive collection of authors for the issue, including Joseph Califano, chief White House assistant for domestic policy under President Johnson and Dr. Dorothy Rice, chief researcher on health insurance at the Social Security Administration in the year that Medicare was enacted. The historical narrative and anecdotes on the birth of the program make entertaining and insightful reading.

The main focus of the commemorative issue of Generations, however, is on the future of Medicare, as highlighted in a panel discussion organized to launch the publication’s June 15 release. Neuman and Rother served as moderators for the session, which was held before a near-capacity audience at the Kaiser Family Foundation auditorium in Washington, D.C.

Neuman set the stage for the discussion by observing that demography and economics alone are driving changes in the type of people whose care will be financed by Medicare. We can anticipate the number of Hispanic Medicare recipients, many of whom have limited English, to more than double over the next 20 years. Additionally, while most Medicare enrollees today have annual incomes under $25,000, Neuman predicted that the next several decades will witness an explosion of elderly beneficiaries with virtually no savings or assets. Most importantly, the health status of new enrollees is expected to decline, with significantly greater incidence of obesity and other chronic conditions.

With these facts in mind, the members of the ASA panel at Medicare at 50—and their articles in the special issue of Generations—were concerned with how to reform a program that most Americans believe is operating very well. Patrick Conway, MD, chief medical officer of the federal Centers for Medicare & Medicaid Services (CMS), recognized the irony of the situation in which a spokesperson for a federal program is advocating for major changes. “A few years ago,” he said, “my remarks would never have been cleared [for public release].”

Conway’s proposed solutions emphasize greater accountability, competition and transparency, as well as a push for more home-based care delivery. Important components of the proposals included “alternative payment services” and other changes “so that consumers and clinicians can make improved choices.” Reading between the lines, he implied initiatives to demand ever greater evaluation data from long-term care providers as a condition of payment, in hope of expanding the number of Medicare enrollees who are willing and able to use this information to reduce costs for the federal program.

Free market economist Joseph R. Antos of the American Enterprise Institute, a high-level White House and DHHS official under President Reagan, agreed with Conway’s goals during his panel remarks. As he wrote in The New England Journal of Medicine: “Given the serious fiscal problems facing this country, slowing the growth of Medicare spending is no longer optional. The only question is how to do it.” He noted that, realistically, “getting everyone to sign up for a competitive Medicare Advantage plan is not an option for a large portion of the over 64-year-olds,” while the structures and coverages of Medicare Part A, Part B and Part D are a source of confusion.

Antos’ proposed solution is a basic reform of the entire Medicare program, perhaps along the lines of a “defined subsidy” that would provide enrollees with a choice of applying their benefit to either traditional Medicare or an alternative insurance program. When moderator Rother asked if the trend of mergers and acquisitions among healthcare providers and insurers weakened the benefits of such competition, Antos acknowledged the problem but suggested that it also justified the need for more rapid action.

The audience at the event listened attentively to Conway and Antos, but saved their enthusiasm for the remaining speakers on the panel. Unlike the earlier presentations on how to make Medicare less costly in the future, the last three panelists focused on changing the program’s environment and benefit mix to improve its impact on the lives of its elderly beneficiaries.

Diane Rowland, chair of the Medicaid and CHIP Access Commission, raised the issue of eligibility requirements, noting that Medicare is unpopular with state governments because—unlike Medicaid—Congress initially was strongly opposed to the use of means testing as a basis for the program. The evolution of Medicare over time has changed this situation, and Rowland specifically suggested a “need to look at Medicare Part D and consider using that as a platform for eligibility.” She implied that critics who attack means-testing on the claim that millionaires manipulate assets to finance their long-term care with Medicaid are basing their arguments on a handful of isolated examples.

Marilyn Mason, director of the American Institutes of Research Center on Aging, pointed out: “We need to put revenues on the table.” Too often, the political debate over Medicare assumes that its finances are fixed and limited to a portion of Social Security. In reality, “from very early on” there has been recognition that Medicare would require an increase in taxes to sustain the program.

According to Mason, alternative solutions such as changing the age of eligibility do not change the financial future much and may actually cost more in the long run. Her suggestions of future financing involve tapping into taxes linked to consumer spending.

Attendees expressed their greatest interest in the remarks of closing panelist Linda Fried, MD, dean of the Mailman School of Public Health at Columbia University. Dr. Fried’s “prescription” for the future of Medicare emphasized a model in which lifetime prevention and health education would prepare the elderly to enroll in Medicare with better health status and maintain better outcomes afterwards. She acknowledged that Medicare has begun to incorporate prevention services in clinical settings, but urged that such efforts such be expanded to include lifestyle changes, such as encouraging volunteering by retirees.

The Robert Wood Johnson Foundation, the Benjamin Rose Institute on Aging, and Compassion and Choices has provided funding for the Medicare At 50 issue of Generations to be distributed to members of Congress and the interested public. Contact info@asaging.org for an individual copy.

Michael J. Stoil, PhD, is an Associate Professor of Political Science and Micronesian Studies in the College of Liberal Arts and Social Sciences at the University of Guam.

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