Is Medicare `reform` just a ploy to privatize?

Recent discussions by members of the 115th Congress and the Trump administration again have raised the specter of Medicare “reform.” Although they lack necessary key details, these talks seem to have two consistent threads: a private locus for program operations and a variable insurance benefit structure. Both will be discussed below.

For more than five decades, Americans have come to rely upon the federal Medicare program, which has a well-defined benefit structure for hospital, ambulatory, and, more recently, drug treatment. We have strongly and consistently opposed privatization of Medicare and additional restrictions on Medicare benefits. 

Before discussing “reform” options further, however, it is important to summarize the major features of the current Medicare Program.

The program

Medicare is a federal health insurance program for persons who are older (65+) and those with disabilities who have either worked under Social Security themselves or are a child or an adult child of a person who has worked under Social Security. Persons with disabilities have a two-year waiting period before they can qualify for Medicare benefits. The program has four components: Part A-hospital benefit; Part B-medical benefit; Part C-Medicare Advantage-private insurance that replaces Parts A and B, and includes additional benefits; and Part D-prescription drug benefit. Generally speaking, Part A is mandatory, and Parts B, C and D are optional at additional cost.

Part A helps pay for inpatient hospital care (limited to 190 days over a lifetime for psychiatric care in a psychiatric hospital), some skilled nursing facilities, hospice care, and some home health care. Part A is premium-free for most people because of earlier payroll tax deductions.

Most beneficiaries do pay a monthly premium to be covered under Medicare Part B – the part that helps pay for doctors, outpatient hospital care, and some other care that Part A doesn't cover, such as physical and occupational therapy. In 2014, the Part B deductible for mental health care finally achieved parity with the deductible for medical care at 20%.

Part C allows various health maintenance organizations and similar healthcare programs to offer health insurance plans to Medicare beneficiaries. At a minimum, they must provide the same benefits that the original Medicare program provides under Parts A and B. Part C organizations also are permitted to offer additional benefits such as dental and vision care. But, to control costs, Part C plans are allowed to limit patient choice, a major disadvantage if a patient's doctor or hospital is not a member of their networks.

Medicare's Part D provides prescription drug benefits through various private insurance companies. Like Part B, most people pay extra premiums each month to be covered for prescription drugs under Part D.

In 2014, 54 million persons were covered by Medicare. Of this number 45 million were older Americans and 9 million were persons with disabilities.

Medicare is exceptionally important for persons who have mental, substance use, or ID/DD conditions. About 26% of all Medicare beneficiaries experience some mental disorder, including cognitive disorders like Alzheimer's disease. Further, between 8 and 14% of Medicare beneficiaries have a substance use condition, and almost 2% had an ID/DD condition.

Severe mental illness, including major depression, bi-polar disorder or schizophrenia, is especially prevalent among beneficiaries who are under 65 and eligible for Medicare based on their disability. Approximately 37% of all disabled Medicare beneficiaries have a severe mental disorder.

By 2030, approximately 72 million Americans will be older adults age 65+ (up from 46 million now). By 2060, this number is expected to rise to 98 million. Rates of mental illness and alcohol conditions are known to be higher among older adults than among persons of younger ages.

Those Medicare beneficiaries who are younger and disabled by mental health, substance use or ID/DD conditions also rely frequently on Medicaid benefits for their care. An estimated two-thirds of these persons are dual eligibles, meaning that they are eligible for both Medicare and Medicaid benefits.

Medicare reform 

It is likely that any efforts by Congress or the administration to “reform” Medicare will have several key components:

• Private health savings accounts: These private plans likely would be designed to receive funds from payroll deductions, which could then be used to pay Medicare insurance premiums and, perhaps, also pay for the components of healthcare not covered by Medicare. They could be set up as either pre-tax or post-tax, or some combination. The essential difference from the present would be that Medicare funds would be managed by private sector entities rather than by the federal government.
• Private health insurance plans: Like current Medicare Part C plans, which are managed by private sector entities, all components of Medicare likely would be managed that way in the future. In effect, these new private insurance plans would cover some combination of the benefits currently offered through Parts A, B, and D. However, unlike the current fixed benefits, these new plans would offer a range of benefits from catastrophic to more comprehensive for progressively larger premiums.
• Variable benefits: Further, the new private Medicare plans likely would have benefits that vary considerably from plan to plan, with no core set of benefits shared in common. For some plans, this might even include a fixed total dollar payment each year in lieu of a defined benefit. Although this variability would enhance competition among plans and encourage shopping among plans, it would not assure that core health care needs are covered by all plans.

Discussion

For many decades, most of us have been seeking a public, single-payer, health insurance system, with a clearly defined core benefit structure that includes essential care, prevention and promotion. The likely proposals for “reform” of Medicare will meet none of these goals.

Our essential advocacy must be to defend the current Medicare program, which provides excellent coverage and service for 54 million Americans. We also must ask why additional groups, such as those between ages 55 and 64, are not incorporated into the current program.

One must always remember that the U.S. is the only developed country that does not have guaranteed healthcare for all citizens as a basic human right. Currently, 9% of Americans remain without any health insurance whatsoever. We do not want to support national actions that would have the potential to make this situation even worse.