Recently, on the state level, some
legislative and regulatory initiatives are being postponed while our new
Governor and his Administration get the "lay of the land," and the
Legislature and Governor come to agreement on how to deal with our current
fiscal crisis and the issues of education, gambling, and property tax
reform. At the federal level,
on the other hand, legislation which could be of monumental importance to
seniors (and to our society in general) is now pending. In Congress, a
battle is raging over profoundly different visions of government's
responsibility and role in providing health care for our elderly.
Our Health Care Delivery System
is Broken
It is hard to overstate the
significance for our society of the decisions that are about to be made in
the area health care delivery. Total
Federal Government spending is about $2.2 trillion this year, and about a
quarter of that ($500 billion) goes to health care spending. That's
about double the level of ten years ago. Total annual spending on health
care in this country from all sources is over $1.5 trillion a year.
We spend much more, per capita, on health care than any other
country.
But it
seems we don't spend this money very wisely.
A study released in the May/June issue of Health
Affairs shows that the
United States
spends more on health care than any other industrialized country - by far
- 44 percent more per capita than our nearest rival,
Switzerland
- yet Americans do not necessarily receive more care. (It's
The Prices, Stupid: Why The
United States
Is So Different From Other
Countries - available online at http://www.healthaffairs.org/1130_abstract_c.php?
ID=/usr/local/apache/sites/healthaffairs.org/htdocs/
Library/v22n3/s16.pdf.)
The Health
Affairs study suggests that the difference in spending is mostly
caused by higher prices for health care goods and services in the
United States
- not by increased use of those services.
In fact, we have fewer than the average number of physicians per
capita, and fewer doctor visits per year.
The higher rate of health care
spending in the
United States
is not a result of higher government spending. Our per capita rate of
government health spending - primarily Medicare and Medicaid -- is similar
to other countries. The added
costs of our health care system are paid by consumers.
In the
United States
, private spending on health care is more than 5 times as much as the
average in other industrial countries.
In most of the other developed countries the public expenditures
cover everyone pretty completely.
Americans have always liked to boast
that we have the best health care system in the world.
But the truth is that what we have is the most expensive system,
with most of that cost being privately financed.
We have a confusing and fragmented payment system, 15% of the
population is uninsured, and we lack a coherent national health care
policy. It is clear that,
whether compared to the rest of world or simply viewed on its own, the
current American health care delivery system is expensive, inefficient and
dysfunctional.
Everyone admits that the American
health care system is broken. The ideological debate in Congress is over
how we should try to fix it. The
liberal view is that we should move toward the government-run social
insurance model followed by most industrial countries.
The conservative view is that we need to recoil from the government
model and expand the role of private health plans with a goal of fostering
competition that hopefully will eventually lower costs and improve
quality.
This philosophical gap has swallowed
many a proposal. This year,
however, the existence of a popular conservative Republican President and
Republican control of Congress raises the potential for changes that will
set the direction of national health care policy for the foreseeable
future. First, to Medicare:
Medicare Reform and Prescription
Drug Legislation
Medicare reform legislation, including
prescription drug coverage, was passed in both chambers of Congress on
June 27th. With
Republicans in ascendancy, both House and Senate bills will move our
Society towards the conservative vision of private control of delivery of
health care services. However,
the House is pushing us much more quickly and inexorably toward this goal.
The drug benefit provisions in both
bills are fairly similar. Both
would add complicated, but limited prescription drug coverage to Medicare.
Both House and Senate bills would spend approximately $400 billion
over 10 years. The main aspects of prescription drug coverage would not
take effect until 2006. The
drug benefit would be made available through private insurance companies
which would be subsidized by the government.
Seniors would initially pay an estimated $35 per month premium and
would have to meet an annual deductible before any coverage would kick in.
Both measures have significant gaps in coverage before resuming benefits
for individuals with catastrophic prescription costs.
Most seniors will find that less than
50% of their prescription costs are covered.
The early betting in the Press is that seniors are going to end up
being unhappy with what they see as an inadequate benefit.
AARP has already come out in opposition to both plans unless
significant changes are made.
While there is pretty general
agreement between the House and the Senate regarding the prescription
coverage, there is a gulf between the chambers on some other provisions.
Under the House Bill, beginning in 2010, traditional
fee-for-service Medicare would have to directly compete with private plans
for seniors' health care business. The
competition would not be limited to prescription drugs but would apply to
all Medicare benefits, premiums, and cost sharing. Basically, the
Conservatives in the House are saying that their price for adding the new
prescription drug entitlement to Medicare is a big lurch toward
privatization of the entire Medicare program.
The Conservatives say that
"opening-up" Medicare to competition will result in cost savings and
improved services. Critics say that there will not be a level playing
field between the traditional Medicare, which has to enroll everyone - the
oldest and the sickest regardless of condition - and private companies who
will cherry-pick relatively healthy people while receiving reimbursements
based on the average person. This kind of unfair competition from private
companies will eventually destroy the traditional Medicare program.
Both the Senate and House Bills
contain numerous other provisions including various subsidies and other
incentives for insurers and private plans to expand their participation in
the Medicare marketplace. Both would create a new preferred provider
organization alternative to traditional Medicare, kind of a "son of
Medicare + Choice," and impose higher annual deductibles and other costs
on individuals who choose to stay in traditional Medicare.
It is expected that Conference
committee negotiations to work out the differences will be contentious and
continue for some time. The pressure is on both legislators and President
Bush to finally enact some form of Medicare prescription coverage to
comply with campaign promises. But,
I really can't tell you where Medicare will end up on this year's leg
of the journey to privatization. It
is difficult at this point to figure out what is going to happen.
One possibility is that a measure
close to the Senate bill, without the most aggressive House's provisions
for open competition in 2010, will come out of Conference.
In that case, the Senate should approve it.
The conservative House, (most of whose members really don't want
to spend $400 billion on a new entitlement anyway) probably will not
approve a Senate type bill unless President Bush really puts on the
pressure. So, for a
Senate-type bill to be approved, which will better maintain traditional
Medicare, the President will have to be willing to exert his influence in
the House.
Another possibility is that a measure
with the Conservative's open competition provision will emerge from
Conference. In that event, I
don't think it will pass in the Senate.
There will be adamant Democratic opposition and maybe even some
from moderate Republicans. In
that event we probably won't have prescription coverage this year.
But a House approved and Senate opposed bill could provide
political cover and advantage for conservative Republicans who could then
say that they passed a great prescription benefit and Medicare reform
package and the Liberals defeated it.
I can hear the Art Linkletter commercials now.
Stay tuned.
I will try to keep readers of the Elder
Care Law Alert updated as this battle plays out.
© 2000-2005
Marshall & Associates www.paelderlaw.com
