From: jfa@jfanow.org (Justice For All Moderator)

An Op-Ed from the New York Times:

"How Not to Fix Medicare"

July 2, 2003
By JACOB S. HACKER

NEW HAVEN, Conn.

Today we remember Medicare's establishment in July 1965 as
a ringing affirmation of the ideal of social insurance.
Less well remembered is how close Washington came to
creating a very different system. Not long before
Medicare's passage, the Kennedy administration seemed on
the verge of a compromise with Senator Jacob Javits, the
moderate Republican from New York. Senator Javits and his
allies wanted to give private insurance a leading place in
the new program so government could play a smaller role -
an idea opposed by liberal Democrats and organized labor.
The opposition won out, and the private insurance idea
seemed consigned to the dustbin of history.

At least it was until last week, when both the House and
Senate passed bills that would give private health plans a
huge new stake in Medicare as well as provide prescription
drug benefits. With pressure from President Bush to pass
legislation, Congress stands on the threshold of the
biggest overhaul of Medicare since its inception. But
unless crucial aspects of the Senate and House measures are
rethought, such an overhaul will come at the peril of
America's elderly and disabled.

If this warning seems apocalyptic, that's only because most
Americans are under the impression that the measures on the
table are centrist compromises that would protect
everyone's interests. In reality, neither the Senate nor
the House legislation would achieve this. And while the
Senate bill is indeed an attempt at compromise, albeit a
deeply flawed one, the House bill is a radical measure
directly at odds with Medicare's longstanding aims. It
threatens to cripple the program for generations to come.

Bluntly put, the House legislation is a ruse. The bill
delivers a prescription drug benefit, but this benefit is
simply the attractive window dressing for the legislation's
ultimate aim: fundamentally revamping Medicare to create a
competitive system based on private health plans. Consider
the bill's major features. Private health insurers would be
given increased government payments so that they could
sweeten their benefits to lure the elderly and the disabled
out of the traditional Medicare program. Beneficiaries
choosing private plans with lower premiums would get a
rebate from the government; those choosing plans with
higher premiums would have to pay more. In 2010, the
traditional program would be forced to compete with private
plans. From then on, the amount that beneficiaries paid for
Medicare would be set not by law, but by market forces.

This might sound like a great way to encourage consumer
choice - until one realizes that the cost of alternative
insurance options would be mainly determined by the health
of those enrolled. Since the least healthy enrollees would
most likely stay in traditional Medicare rather than brave
the private market, the program's premiums would likely
rise substantially. This would encourage healthier
beneficiaries to seek lower premiums in the private sector,
leaving only the sickest behind.

The problems don't end there, nor are they confined to the
House bill. Neither the House nor Senate legislation, for
example, provides what the majority of Americans want: a
drug benefit within Medicare itself. Instead, beneficiaries
would be forced to turn first to private insurers, which
would be able to set their own premiums for drug coverage.
(The Senate bill allows for a drug benefit directly through
Medicare only if a beneficiary does not have access to more
than one private drug insurance plan in his region.)

Because drug costs are risky and expensive to cover, few
insurers seem eager to sign up for this complex and
untested idea. But even if private plans emerged, the
likely result would be chaos as insurance companies
continually dropped coverage and altered their benefits -
which is precisely what has happened to millions of
Medicare beneficiaries enrolled in private H.M.O.'s over
the past five years.

Perhaps these risks would be tolerable if the standard drug
benefit authorized by the bills were generous. It is not.
Both bills feature an upfront deductible of $250 or more,
require significant co-payments above that amount and force
beneficiaries to pay a huge amount out of pocket before
catastrophic protection kicks in. As a result, an elderly
woman with $6,000 in total drug costs would end up paying
more than $4,000 of her own money under the Senate bill,
and even more under the House legislation.

A recent study by Consumers Union underscores the
meagerness of the benefit. According to the report,
beneficiaries with average drug costs and no private
coverage will spend roughly $2,300 this year. If either the
Senate or House bill takes effect in 2007, they will pay at
least $2,500. In other words, Medicare beneficiaries would
spend more, not less, on prescription drugs after Congress
came to the rescue.

The real solution is no secret: make the drug benefit a
part of Medicare and, yes, spend more money on it. The $400
billion over 10 years that Republicans have pledged for
drug coverage may sound like a lot, but it's just a
fraction of the nearly $2 trillion in pharmaceutical
expenses that beneficiaries are expected to incur over the
next decade. Of course, a larger benefit would cost more.
But, in the end, somebody is going to pay; the question is
how the burden is distributed. The whole point of social
insurance is to spread the responsibility across rich and
poor, sick and healthy, rather than letting the burden fall
on individuals and their families alone.

At a minimum, defenders of Medicare should insist that a
prescription drug bill truly is a prescription drug bill -
and not a vehicle for tearing down the existing system. If
history is indeed any guide, Congress needs to resolve all
these issues before rushing a compromise bill to the
president's desk. In 1965, Medicare advocates thought they
could wait until after the legislation was passed to revise
the measure and expand coverage for the nonelderly. Of
course, that never happened. In 2003, more than 40 million
Americans remain uninsured. If today's Medicare advocates
allow themselves to be steamrollered, they will be living
with the fallout for decades.

Not coincidentally, perhaps, none of this will become clear
until after the 2004 election. Republicans may ride a
prescription drug benefit back into office. But the bills
on the table now are mainly a prescription for resentment
and dashed expectations -- and, most fearful of all, for the
unraveling of the social compact that has made Medicare an
integral part of American social policy for nearly 40
years.


Jacob S. Hacker, assistant professor of political science
at Yale University and a fellow at the New America
Foundation, is author of "The Divided Welfare State: The
Battle Over Public and Private Social Benefits in the
United States."

http://www.nytimes.com/2003/07/02/opinion/02HACK.html

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