Map of life expectancy at birth from Global Education Project.

Monday, September 14, 2009

Medicare -- can't live with it, can't live without it

Back when I was an impecunious graduate student I was a teaching assistant for a health care policy 101 type course. As I recall, it took us two weeks -- that's four lectures and two discussion sections, with the attendant reading -- to pound the basic info about how Medicare works into the heads of our bright and eager students. Like every product of our largely dysfunctional political system, it's a lot more complicated than it ought to be and it has a lot of absurd self-defeating elements that were put there basically to sabotage it by people who don't like it. Yes, it can be described as a "single payer" program except that a) thanks to the introduction of Part C it isn't really and b)it's not clear that it made sense to call it a single payer system in the first place because there are other payers active in the economy, which seems to conflict with the very definition of "single payer." But it still manages to be better than typical private insurance in a few important ways:

1) They can never take it away from you. It is an entitlement.
2) They can't refuse you in the first place, either. Once you turn 65, you are in. (People younger than 65, who qualify on the basis of disability, may have to wrangle.) So none of that jive.
3) It's much more efficient -- no profits, no marketing costs, no money spent figuring out how to exclude people from the plan or deny them coverage or kick them out.

But, there's also a lot of bad and ugly. Before we get to that, however, a lot of people don't even know the basic structure of the program. I don't want to bore my readers or insult anybody's intelligence, but I still feel it's best to begin at the beginning and make sure we all have the fundamentals in our minds before I get into the details. A good, accessible source of information is the Center for Medicare Advocacy, and I recommend that anyone who wants to get more in-depth knowledge of the program go there. Clicking on "information by topic" I find gives you the easiest way to find what you are looking for.

Medicare Part A pays for hospital care. It is funded by a 2.9% payroll tax. This finances the Medicare trust fund we hear so much about -- the one that is projected to run dry in (gulp) 8 years. That doesn't mean Medicare Part A will cease operations -- it will still have the income from the payroll tax, it just won't have a cushion to pay the gap between income and expenses. So the government will either start borrowing the money, or kicking in something from other revenue sources, or find a way to cut spending to match income, or something. Whatever happens, I expect it to be ugly.

You are enrolled automatically in Part A when you turn 65, and you don't have to pay any premiums. There are, however, immediate co-pays, and periodic and lifetime limits on benefits. The biggest problem from the consumer's point of view is that it will not pay for long-term care (beyond six months), or for so-called "custodial" care, which means feeding and bathing and dressing people who can't care for themselves. This is what bankrupts lots of elderly people and drives them on to Medicaid, where the government ends up paying for it anyway.

Part B pays for outpatient care. It is funded in part by premiums, but it is heavily subsidized out of general tax revenues. Since it is an entitlement, it sucks up money in the annual federal budget before Congress even acts -- an amount which is steadily increasing. There is a small deductible, less small copayments, and a lot of restrictions and exclusions, which I will get to later. Still, it's better than a poke in the eye with a sharp stick. When you turn 65, you have to sign up and start paying the premium. If you don't sign up right away, you will face a lifetime penalty premium increase, unless you are still working. Once you finally do retire, however, it's play or pay. Just about everybody does sign up, because it's subsidized and hence a good deal.

Part C is what happened when Congress decided back in -- 1997, IIRC? -- that all that socialist single payer stuff was just too offensive to Real Americans. The basic idea is, the government bundles the amount of money they expect to pay for the average beneficiary and gives it to an insurance company to provide coverage. The theory was that by "managing" your care they could save some money and pass part of the savings on to you, the beneficiary, in the form of lower co-pays and/or expanded services. It kind of works for people who can figure it out and pick the best plan for their own situation out of the welter of competing offers, but you can also kind of get screwed if your health situation changes and you find yourself in the wrong plan after all. And the government definitely gets screwed because the insurance companies are actually spending more per beneficiary than straight-up Medicare.

Part D is the prescription drug benefit, which GW Bush rammed through using false actuarial assumptions (real lies, in this case, since the Medicare actuary who computed the correct numbers was gagged). Part A pays for drugs given in the hospital, and Part B for drugs actually administered in a doctor's office -- meaning mostly cancer chemotherapy -- but most people take drugs at home, and those weren't covered before. It's good that people now have some outpatient pharmaceutical coverage, but again, the government intentionally screwed itself for the benefit of drug companies, which are the biggest winners here, while still leaving a lot of seniors with drug costs they can't pay for. Part D is also financed out of general tax revenues.

So that's the framework. In future episodes, I'll run it through the Critic-O-Meter.


love said...

Life is a struggle. Success for you.

Bix said...

Nice write-up. Oh ... it's so piecemeal. This is what I think we're going to get too.

That donut hole in Part D, the prescription drug benefit that George W. oversaw, is criminal. It's heartbreaking to see it played out.