This is a brief explanation of Medicare from a physician’s perspective, as well as my thoughts on how Congress could make adjustments that would bring us closer to universal care and provide the private market the freedom to improve health care outcomes.
Medicare is a national health insurance program that provides health insurance for Americans ages 65 and older, and those who are disabled or have specific chronic conditions. Medicare covers 17 percent of the U.S. population, including the nation’s oldest, sickest and most disabled citizens. Medicare has achieved two important goals: ensuring access to health care for elderly and disabled citizens, and protection from the financial risks associated with health care. By ensuring access, Medicare has contributed to a five-year increase in life expectancy after age 65 and significantly improved the well being of residents over that age.
Before implementation of Medicare in 1966, 48 percent of Americans 65 and older had no insurance; today that figure hovers at 2 percent. Older Americans used to cover 56 percent of their health care expenses directly out-of-pocket; today they pay only 13 percent. Medicare is funded through a combination of a payroll tax, beneficiary premiums, co-pays and deductibles, and U.S. Treasury revenue. And it is administered by the Centers for Medicare and Medicaid Services (CMS).
Medicare is divided into four parts. Part A covers hospital costs, skilled nursing and hospice services. Part B covers physician and other clinical outpatient services. For both A and B, there are copays and deductibles, as well as gaps in insurance coverage. There are no annual out-of-pocket spending limits for Parts A and B, therefore supplemental coverage, known as Part C, protects from financial hardship.
The single greatest threat to long-term survival of Medicare is runaway costs, an issue which must be addressed before expanding the program. Between 1970 and 2013, spending per Medicare beneficiary increased 500 percent, from $385 to $12,210, and 0.7 to 3.5 percent of GDP. Current projections are that Medicare spending will make up 5.1 percent of GDP by 2030.
At the same time, researchers at the Dartmouth Institute for Health Policy and Clinical Practice estimated 30 percent of all Medicare spending and could be avoided without worsening clinical outcomes. According to the Congressional Budget Office, eliminating this waste could save as much as $700 billion annually.
Some bipartisan measures that might contain costs include funding additional primary care physician residency positions, eliminating accountable care organizations and allowing Medicare to negotiate drug prices with pharmaceutical companies.
Here’s how we got into the position to need those fixes.
First, the Balanced Budget Act of 1997 capped the number of residency slots in teaching hospitals which were eligible for Medicare payments. This mistake has facilitated a shortage of primary care physicians across the country. A larger supply of primary care physicians is associated with a lower mortality rate. In fact, adding 10 primary care physicians per 100,000 population increases life expectancy by nearly two months, whereas the same increase in specialty physicians only improves life expectancy by 19 days. Sens. Bob Menendez (D-N.J.), John Boozman (R-Ark.) and Chuck Schumer (D-N.Y.) introduced the Physician Shortage Reduction Act of 2019 to increase Medicare-supported doctor training slots by 15,000. Investing in primary care reduces overall expenditures by lessening morbidity and mortality; at the same time, this legislation would address the physician shortage and improve access to care for patients.
Second, in 2008, the Congressional Budget Office (CBO) warned Congress that Accountable Care Organizations (ACO) would not save Medicare dollars. Yet the Affordable Care Act required CMS to establish them within Medicare. ACOs — similar to HMOs — use narrow networks in an attempt to control cost yet bear considerable financial risk, because pay is on a per-enrollee basis with the obligation to provide all medically necessary services for enrollees.
After nearly a decade, studies consistently demonstrate that ACOs fail to achieve cost reduction, just as predicted. Universal care plans must strike a balance between a free market and government regulation necessary to protect patients. By eliminating the ACO construct, patients and private businesses will flourish.
And finally, federal law prohibits Medicare from negotiating prices for prescription drugs with pharmaceutical companies, a move that could reduce costs for nearly 43 million seniors enrolled in Medicare Part D. Sen. Tammy Baldwin (D-Wisc.) and Senator Amy Klobuchar (D-Minn.) have reintroduced the Empowering Medicare Seniors to Negotiate Drug Prices Act. Enabling the federal government to negotiate for reduced drug prices isn’t politically complicated. The policy is supported by a majority of Democrats (96 percent), Republicans (92 percent), and Independents (92 percent).
Over the last 50 years, Medicare has improved the delivery of health care services for nearly one-fifth of the U.S. population. But cost containment must be coupled with any sort of implementation of Medicare for all, as currently suggested. Without it, universal access will be unsustainable.
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