MEDICARE: PAST, PRESENT AND FUTURE

James G. Anderson, Ph.D.

Department of Sociology & Anthropology

MEDICARE PART A Federal heath insurance for persons over 65

years of age Covers acute care hospitalization Covers limited nursing home care and other

institutional services The permanently disabled were covered at a

later date In 1973, the end-stage renal disease program

was added to Medicare

MEDICARE PART B

Requires financial contributions from enrollees Covers professional fees for medical and

surgical services

MEDICARE ENROLLEES(In Millions)

19.525 31.1

38.1

60

80

010

20

30

4050

60

70

8090

100

1967 1975 1985 1996 2020 2040

Enrollees

MEDICARE EXPENDITURES(In Billions)

837

148

225

309

0

50

100

150

200

250

300

350

1970 1980 1993 2000 2004

Expenditures

CBO PROJECTIONS (Enrollment as % of Population)

13.6 14.8

22 23.124.7

0

5

10

15

20

25

30

1995 2010 2030 2050 2070

%

CBO PROJECTIONS (Spending as % of GDP)

2.63.7

6.37

7.8

0

1

23

4

5

67

8

9

10

1995 2010 2030 2050 2070

%

PROBLEMS WITH MEDICARE

Impending insolvency of the hospital insurance trust fund

Favors acute care over chronic care Does not cover most long term care

services Omits prescription drug coverage Permits medical costs to impoverish

older adults and their families

THE FUTURE OF MEDICARENumber of Workers per Retiree

4 3.9

2.8

2.1

0

0.5

11.5

2

2.5

3

3.54

4.5

5

1980 2000 2020 2040

Enrollees

Medicare’s Dwindling Reserves

(In billions)110

85

55

18

-30-50

-30

-10

10

30

50

70

90

110

1997 1998 2000 2001

Reserves

MEDICARE ENROLLEES IN MANAGED CARE

5.7

9.5

-1

1

3

5

7

9

11

1990 1995

%

ELDERLY NEEDING HELP WITH ACTIVITIES (In Millions)

7.1

13.8

-1

1

3

5

7

9

11

13

15

1990 2030

Elderly

ELDERLY NEEDING NURSING HOME CARE (In Millions)

1.5

5.3

0

1

2

3

4

5

6

1990 2030

Elderly

REFORM PROPOSALS Gradually raise eligibility age to 70 Raise direct payments by recipients by higher premiums

for MD insurance or raise co-payments for services Provide incentives for Medicare beneficiaries to join HMOs Offer Medicare beneficiaries more choice in their health

care plans Institute a means test for Medicare Enact an annual budget for Medicare Authorize medical savings accounts

MEDICARE PRESCRIPTION DRUG BENEFIT

New drug benefit begins in 2006 Premiums are estimated to be $35/month, $420/year After the premium is paid and a $250 annual deductible the plan will

pay 75% of drug costs until the enrollee reaches $2,250. The coverage stops and the enrollee pays for the next $2,850 in drug expenses. At this point the enrollee has spent $3,600 0n drugs plus $420 on the premium.

For the rest of the year the enrollee pays $2 for every generic drug prescription and $5 for every brand name prescription or 5% which ever is greater.

Before the program starts in 2006, seniors will be able to purchase a drug discount cared for $30/year

.

 

                                                                           

MEDICARE PRESCRIPTION DRUG BENEFIT

Low income enrollees will be able to obtain drugs at $1-2 per generic drug and $3-5 per brand-name drug

The drug benefit will be provided through private prescription drug plans that contract with the Medicare program. Private plans can charge different premiums.

Premiums, deductibles and the “doughnut hole” will grow with the cost of the plan.

Financial incentives would be given to employers who continue retiree health coverage if it provides a prescription drug benefit.

In addition to the annual premium of $420 a year…

If your drug costs are… You pay… Up to…Cumulative total amount out

of your pocket…

$0 – $250 100% $250 $250

$251 – $2,250 25% $500 $750

$2,251 – $5,100 100% $2,850 $3,600

Over $5,100 5% No limit$3,600 +

5% of costs above$5,100

PRESCRIPTION DRUG BENEFITAdvantages

Prescription drug prices are out of control

More than 1/3 of Medicare beneficiaries lack coverage

Price discrimination against the elderly Drugs are now routinely used to treat

heart disease, cancer, arthritis, etc.

PRESCRIPTION DRUG BENEFITDisadvantages

The bill does virtually nothing to moderate drug costs. The legislation prohibits Medicare from negotiating

lower drug prices for beneficiaries Drugs can only be re-imported from Canada if the

Secretary of DHHSA certifies that they are safe and will significantly reduce costs.

Drug cost will rise significantly under this program.

Long Term Care BenefitArguments For (1) Long-term custodial care accounts for 81% of

catastrophic costs for the elderly. (2) Over half of those 65 years and older will need some

kind of long-term care (LTC). (3) Over 70 % of single elderly patients spend down to the

poverty level after 13 weeks in a nursing home. (4) 5% of Medicaid recipients in nursing homes consume

43% of the Medicaid budget. (5) The most equitable policy would be a universal

mandatory LTC health insurance program financed by the federal government.

(6) There are a number of ways of financing universal LTC.

Long Term Care BenefitArguments Against

(1) Family members should not be allowed to shift the cost of LTC onto the government and thus, onto taxpayers.

(2) A government sponsored LTC health insurance program would be enormously costly.

(3) Such a program would enormously increase both the demand for and the cost of LTC.

(4) A tax supported program would be regressive - taxing younger working people to provide benefits for elderly persons with substantial resources.

(5) The government should only provide assistance to those who do not have the resources to pay for long term care.

(6) Instead of a government sponsored program the government should provide incentives for private insurance and savings to finance LTC. Outline.

DISCUSSION QUESTIONS

Should we regulate drug prices like other countries do?

How would regulation affect development of new drugs?

Should Medicare cover prescription drugs? For all enrollees? For only the poor?

Should Medicare purchase drugs at a discount and sell them to the elderly?

DISCUSSION QUESTIONS

Should we extend Medicare to provide for Long Term Care?

Should Medicare cover Long term care for all enrollees? For only the poor?

How would we pay for Long Term Care? Increase the general payroll tax? Require the elderly to pay part or all of the premium for LTC?