An Open Letter to the New HHS Secretary: Medicare Challenges
Dear Sylvia Mathews Burwell—
As a health economist and long-time Medicare observer, I’m hoping to bend your ear on the Medicare challenges facing you as the new Secretary of Health and Human Services. Much of the early attention will go to the Affordable Care Act and its implementation, but equally important is Medicare. My main aim is to ask you never to forget that Medicare is a program for the elderly and disabled. Doctors and hospitals deserve fair payments and incentives as care providers, but they are not the program’s intended beneficiaries.
I hope you’ll also agree that:
1. Medicare is a modest program.
Medicare is not overly generous. Program costs have soared mainly because more Americans are in Medicare and medical costs have outstripped general inflation. Compared to employer-provided insurance for younger families, Medicare is less comprehensive, paying for only about 65 percent of the costs of covered services and not covering most vision, dental, hearing, and long-term care. Since Medicare doesn’t cap out-of-pocket spending the way most employer-provided insurance does, heavy Medicare users can face extraordinary financial risk.
So hold Medicare to high standards of effectiveness, but don’t think that its size alone makes the program ripe for budget cutting. And recognize that those who buy extra supplemental protection are responding to legitimate needs. Better than discouraging such behavior would be expanding the program to put it more on a par with good private health insurance.
2. Low-income beneficiaries need more protection.
While health care spending has ballooned, protections for the most vulnerable have been frozen in time. Those living below 135 percent of the federal poverty line got a break in 1988, when their premiums and cost-sharing liabilities were reduced. And the addition of a drug benefit raised protections just a little further. But this protection hasn’t kept up with higher costs. In 1988, Medicare beneficiaries on average paid over $1300 on drugs, premiums, and cost sharing—about 15 percent of the income of someone at 150 percent of the federal poverty level in that year. By 2013, the liability of individuals with incomes at the 150-percent level nearly tripled, eating up 23 percent of income. Low income seniors and persons living with disability need more protection.
3. Medicare needs to be simplified.
Please ask whether any proposed change in Medicare helps simplify and streamline this complicated program. Especially scrutinize proposals to add more “choices” for program participants since they already face a dizzying array of options. More private plan and drug benefit choices are not needed. Medicare Advantage has a reasonable role to play in the program, but people do not want or need to have it predominate. Not once has anyone who counsels beneficiaries told me that clients want more options.
Precautions designed to curb overuse or abuse can also complicate choices and block care. For example, the hospice benefit must be sought at the worst possible time—near death. But fear that palliative care would be an extra cost to end-of-life care led to the requirement that a physician certify that a patient seeking hospice has less than six months to live. This restriction has served as an unnecessary barrier to care and needs to be modified.
One partial mitigation of the complexity of Medicare: The State Health Insurance Assistance Program helps people navigate the Medicare system. This federal program’s funding, falling now, should be expanded.
4. The basic Medicare program serves most beneficiaries effectively.
“Classic” Medicare needs to be updated and improved, but its critics exaggerate its flaws. Per capita Medicare costs have climbed more slowly than the costs of employer-provided coverage for similar care. Medicare innovations—such as the prospective payment system for hospitals—have been adopted by other payers.
Many who would gut or end traditional Medicare want to bolster Medicare Advantage, the private supplemental plan that over a quarter of beneficiaries buy to increase coverage. Over time, this plan has improved and can offer excellent managed care.
Yet, overpayments to Medicare Advantage plans (started as temporary inducements to participate) allow them to offer more benefits and flourish at the expense of the traditional part of the program. As a result, most beneficiaries in traditional Medicare now receive fewer benefits and pay higher premiums. Since this approach flunks the acid test of protecting beneficiaries, please let fairness be the rule when you judge calls for “protecting” Medicare Advantage that would continue this unnecessary differential.
5. Innovations and reforms should be implemented with beneficiaries in mind.
Promising ways to improve Medicare are being tested. But complicated policy that requires setting payment rates, creating new operating rules, and seeking cost savings can swamp designers in details. Care providers know how to represent their interests, budgeteers will demand cost savings, and beneficiaries could get lost in the shuffle. So please push for strong protections against unintended harm to beneficiaries. Who will speak for these vulnerable Americans if not the new Secretary of HHS?
Medicare has served the elderly and persons with disabilities well for nearly 50 years and can do so going forward. I wish you the best as you grapple with these issues and hope that amid the political hubbub in Washington you will keep your eyes on protecting the program for its beneficiaries.
Marilyn Moon, a former trustee of Medicare and Social Security and the recipient of this year’s Robert Ball Prize in social insurance, directs AIR’s Center on Aging.