Confronting Urgent Realities: NO NEED TO REINVENT THE WHEEL
Helping these underserved constituencies will require supplementing the aging traditional Medicare with more functional and durable enhancements. For a prototype of just such a model, we need only turn to a decades-old, soundly financed, and hugely popular All-American Plan. This plan is offered by a nationwide, heavily unionized employer with more than two million retirees. All retirees and their spouses are offered the choice of traditional Medicare or a variety of private plans with richer benefits, including drugs. Under its defined contribution (i.e., Premium Support) format, the employer contributes a fixed percentage of the premium for a chosen plan.
For example, a retiree pays only $75 for a $300-a-month policy and $100 for a $400-a-month policy. To control drug costs, the employer relies not upon its own mass purchasing power but, instead, upon each private plan’s own private pharmacy benefits manager (PBM). This exemplary employer is none other than the federal government itself, through its Federal Employees Health Benefits Program (FEHBP).
Extending that model to 40 million senior citizens, though, can be accomplished only by increasing revenue, reducing costs, or both. Traditional Medicare, by its very nature, is no longer up to either task.
Increasing Revenue …
Here is the sobering reality: Medicare is flat broke, and all three of its revenue sources are essentially “maxed out.” Although some money does remain in the Part A Hospital Trust Fund, for years Medicare has borrowed, without repayment, from general revenues to help pay for Part B services. The tab in 2003 was $82 billion. Furthermore, as current workers become less optimistic about their future Medicare benefits, they are not in the mood to increase their contributions to the second revenue source—the Medicare payroll tax.
Finally, Medicare beneficiaries themselves already pay a monthly Part B premium of $800 a year. The 2003 Act, for the first time, will impose means testing by raising the premium for wealthier seniors, effectively compromising that source as well.
… or Reducing Costs
As far as costs are concerned, one potential solution lies in adjusting the benefit mechanism itself. In this area, traditional Medicare is intrinsically obsolete because its defined benefits were set back in 1966, when hospital costs were paramount. As costs shifted to outpatient services, Medicare was politically compelled to fund these services without cutting the hospital benefit. Similarly, until now, Medicare has been unable to include drugs within its defined-benefit structure. In contrast, the FEHBP Premium Support mechanism provides alternative plans that do include drugs. canadian antibiotics
Similarly, the traditional Medicare fee-for-service method of paying health providers is inherently unable to control spending because neither physicians nor hospitals are held responsible for their patients’ total medical costs.