Donald J. Devine

Ambush on the road to Medicare reform
March 25, 2003

A few short weeks ago President George W. Bush was on the top of the world with a revolutionary idea to save the country's second-largest government program from bankruptcy and throw in a drug benefit for seniors as a kicker.

He promised those assembled for his State of the Union address that Medicare could be transformed so ordinary seniors would have a choice of medical plans similar to those available under the Federal Employees Health Benefits program, "just like you, the Members of Congress."

The president proposed to offer a choice for seniors stay in the existing Medicare plan or to move to a new one modeled on FEHB and also receive coverage for drug prescriptions. The drug benefit was the carrot to get seniors out of the old, expensive and inefficient plan. The very next day, the president was ambushed by the speaker of the House and most Republican committee chairmen for giving Aunt Minnie such a terrible choice. She must have the same drug benefit without changing plans. One chairman said he could not move even his "own mother with a bulldozer" off old Medicare and she needed drugs. There went the carrot.

OK, that's politics. But once a drug benefit is added to the old plan, it starts to get a bit costly even in the short run. The president suggested $400 billion more, which the Democrats have raised to $800 billion and this in a program slipping into the red in a dozen years and into bankruptcy a decade later, which trip will be shortened by any additional benefits. So, FEHB had to go out the window too.

At Mr. Bush's speech before the American Medical Association, the White House distributed the bad news. It turns out the choice will be very limited. All new plans "will provide full coverage of preventive services."
That probably means no high deductible plans and little likelihood for Medical Savings Accounts, the peferred free market solution.

But it is much worse. If such minor expenses as the prostate cancer screening and mammographies mentioned in the new plan are mandatory, there is really no way to cost an FEHB fee-for-service plan at all. The only way to implement the president's proposal is through Health Maintenance Organizations or Preferred Provider Plans with very tight screening methods. Forcing this is precisely what opponents disliked about the Clinton health plan.

Similarly, to keep any lid on spending, it is likely the government's mandated fee schedule limiting reimbursement to physicians the one causing the rash of doctor's strikes would be extended to Medicare's private plans.

The president's proposal does offer a uniform, single deductible rather than the confusing separate ones for parts A and B as at present, a stop-loss protection against catastrophic medical loss, and more rational co-insurance. These are improvements but are unlikely to provide a carrot to switch plans.

Rather than the diversity of the FEHB, a new MCBC [don't ask] bureaucracy would administer an unspecified "standard benefit package," which is guaranteed to lead to the fight of the century to define what must be covered and what cannot be. MCBC would also police the insurance companies to assure they do not change benefits or act in any other manner to attract healthy employees or discourage sick ones. That is, the "private" plans will not be able to underwrite insurance but will be administering a welfare
program to a declining health population.

That is why no rational insurance company would enter the business. The current Medicare+Choice program is hemorrhaging insurers. No one wants the business since insurance companies cannot make a profit with the government not reimbursing them enough. Few companies are left and those that remain
are losing tons of money. While the White House considers Medicare+Choice a different alternative, its own Enhanced Choice has the same inherent danger of insufficient funding.

Even if private plans could be guaranteed ample reimbursement and no one can bind future Congresses no middle-class senior in his right mind would switch to the new plan, bulldozer or not. Only 24 percent of those on Medicare do not have drug coverage today. The overwhelming majority of the rest are better off with the old plan plus their current coverage, even if they have to pay for it.

Well, reform is probably politically impossible today anyway. The president has produced a plan, as he promised. The media are already explaining it as the president "cutting his losses." Rather, it requires an amputation. Lay quiet and let the liberals kill it by grasping for too much and go back to the original plan, sharpening it for the second term when conditions might be more propitious.