Democrats and the Struggle over Medicare: Making Molehills out of the Mountain

...The Republican claim that Medicare is anachronistic and old-fashioned is true in one regard: Medicare's benefit package was close to the industry norm in 1965, but has hardly improved since...

...Eventually, Medicare could thus become Medicaid— a limited, if indispensable, safety net for a small fraction of the population it was originally expected to cover...

...After that, it will grow slowly for the balance of this century...

...Supporting benefits for aging baby boomers will cost more, but the incremental tax burden will, by most estimates, constitute only a fraction of the increase in real income of the average household between now and 2030...

...At the rate its defenders are going, it could be gone before they've figured out their response...

...Medicare does have very real problems, although in the last decade Democrats have largely permitted Republicans and their conservative allies to define both the problems and the range of plausible solutions...

...BRUCE C. VLADECK was administrator of the Health Care Financing Administration in the Clinton administration and is currently professor of health policy and geriatrics at Mt...

...Democrats should also be advocating an expansion of Medicare, on a voluntary basis, to people over the age of fifty-five...

...To begin with, DEMOCRATS AND MEDICARE Medicare—by design—is hostage to the continuing escalation of health care costs...

...By controlling the price of the voucher, future governments DEMOCRATS AND MEDICARE would also be able to shift the risk of increasing health care costs from the community as a whole to individual beneficiaries—thus sidling away, without visible fingerprints, from Medicare's basic commitment to provide access to health care...

...An excellent proposal to do this for those over sixty was formulated in the last year of the Clinton administration...

...Hence, for the last two decades, Medicare has been one of the few components of the federal budget that has grown...

...B UT THE ASSAULT On Medicare is not limited to the public/private front...

...and it is moderately redistributive...

...it is also directed at its universality...

...MEDICARE WAS founded on the same principles of social insurance that underlie the rest of the Social Security System: it is mandatory, contributory, and universal...

...Built on the framework of private health insurance, prohibited (by Congresses dominated by both parties) from effectively exercising its enormous market power, and unable to adopt the preferred private-sector response to cost increases— reducing coverage—Medicare's expenditures essentially track the growth in total health care costs...

...But "reformers" scored a number of frightening, if partial, victories last year, and one can be sure they'll be back at it as soon as the opportunity presents itself...

...Medicare still won't cover vision or hearing services, dental care, or all but a very limited amount of long-term care, and its mental health benefits are extremely limited...

...Decent health insurance for older Americans can no longer be considered a given in the American policy landscape...

...it was designed, however, to be financed solely by enrollees, without any subsidies for people with low incomes...

...Improving Medicare will cost a fair amount of money, of course—but if Medicare is to survive at all, it's going to be necessary to put more money into it sooner or later...

...In Washington, the Rubicon can always get re-crossed, but the precedent is hardly encouraging...

...At the moment, Medicare is covering barely half of its beneficiaries' total health care costs, and PDIMA won't help that very much...

...If Medicare is going to be there, though, and if it's going to be worthy of continuing support, Democrats are going to have to figure out how to argue the case...

...A real Democratic agenda for Medicare would start with the extension of PDIMA's lowincome prescription drug benefit—which really isn't bad—to everyone in Medicare...

...In general, the United States does poorly on comparative international measures of health systems performance: our life expectancy is lower and levels of untreated illness are higher, except among persons sixty-five and older, where the United States outperforms the rest of the world...

...A priority of three Democratic presidents, it was enacted by a Democratic Congress over protracted and strenuous Republican opposition (historically concealed by the fact that, once the battle was effectively over, *Generalizing about "Democrats" is a particularly risky exercise...

...Democrats should be proud to argue that expansion of a successful government program is a good thing...

...66 n DISSENT / Summer 2004 most Republicans voted for passage of what had become, after fifteen years, a fait accompli...

...Clinton responded in kind, successfully positioning himself in 1996 as Medicare's great protector...

...That givenness, hard-won by Democrats over many years of fighting, is rapidly eroding...

...Concerned with the very real and immediate plight of low-income seniors unable to afford life-saving medications, and in the context of rigid (if entirely arbitrary) budget constraints, many congressional Democrats felt backed into a corner, and supported the expanded but means-tested drug benefits...

...The Republicans, of course, saw through that strategy, and gave the money back to their wealthier supporters in tax cuts...

...It is inconceivable, on this view, that there are activities that governments clearly perform better than private agents...

...Giving them a head start would make them healthier when they turn sixty-five...

...This reluctance to defend a successful program stems largely, I suspect, from a fear of being accused of fiscal irresponsibility or of being captive to the "special interests" of the elderly and labor...

...Between 2010 and 2030, the number of Medicare beneficiaries will roughly double—from about forty million to about eighty million people...

...AS THE INITIAL implementation of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (PDIMA) proceeds in a welter of confusion, misinformation, and charges of manipulation and deceit, it appears unlikely that the Bush administration will reap the political benefits it sought when it appropriated a Democratic issue and displayed its "compassionate" conservatism...

...The most bizarre manifestations of this privatization policy are contained in PDIMA's drug benefits themselves, which must be offered through private insurance plans (even though, at the moment, no such plans exist...

...On the other hand, after paying those taxes, working people will have more left over than they have now, so that may not be such a terrible problem...

...During the 1980s and 1990s, the right wing did an effective job of convincing the editorial writers for the New York Times, the Washington Post, and other members of the opinion elite, that the "entitlement crisis" really was something to worry about...

...70 n DISSENT / Summer 2004...

...This means that future beneficiaries will receive the equivalent of a fixed-price voucher with which they can purchase whatever combination of utilization controls, deductibles, and co-payments private insurance plans choose to offer...

...Health status and longevity among America's elderly have improved dramatically as a result of Medicare...

...But PDIMA's failures hardly make for a Democratic victory...

...Most of the opposition to this idea derives from the dogma that any expansion of government programs is a bad idea...

...Establishing "parity" between Medicare's benefits for mental health and all other illnesses should follow, along with at least some coverage of hearing, vision, and dental care...

...And yet a case can be made that the real problem with Medicare is not that it spends too much, but too little...

...This policy is invariably justified as a way of saving money and improving efficiency—thus solving Medicare's long-run financial problems—despite overwhelming empirical evidence (accepted by professionals on both sides in the recent dispute over how much PDIMA will cost) that, all other things being equal, private plans cost Medicare more than the old-fashioned, sixties era, "traditional" governmentadministered insurance program...

...But Americans between the ages of fifty-five and sixtyfour who don't have employer-provided health insurance (including the spouses of more than a million Medicare beneficiaries) are now essentially uninsurable, and they are at very high risk for financial catastrophe due to illness...

...I personally have had the privilege of working with perhaps a dozen member of the U.S...

...Some of those younger people probably realize that, were it not for Medicare, they might be stuck with the responsibility for their older relatives' health care costs...

...it provides guaranteed benefits, is closely integrated with private insurance, and relies on private service providers...

...Americans like Medicare, as well they should, and they are prepared to support it...

...He was also heavily influenced by Progressive Policy Institute types and other "New Democrats" (including Howard Dean), who scorned Medicare as an old-Democrat avatar of fee-for-service, administered pricing...

...It's always hard to get people to support taxes in the abstract, without some clear conception of what they are going to pay for...

...These plans will be free to vary coverage patterns and formularies, while the cost to beneficiaries is determined by the market, which the government is forbidden, by PDIMA itself, from trying to influence...

...Of this year's major primary candidates, only Richard Gephardt sought to make it an issue—while Howard Dean disingenuously DISSENT I Summer 2004 n 67 DEMOCRATS AND MEDICARE backed away from his proto-Republican track record...

...More insidiously, privatization is also the vehicle through which the masterminds of the Republican agenda seek to convert Medicare over time from a defined-benefit to a definedcontribution program...

...More defensibly, national Democrats have focused on the harder problem of extending health insurance to the millions of Americans without any, and so they have tended to take Medicare as a given, a solid building block around which the rest of the system could be reconstructed, even while Medicare's opponents are busy undermining its foundations...

...Its bizarrely configured drug benefit will cover less than 25 percent of the average beneficiary's drug expenses, while at the same time it raises premiums and deductibles for other services...

...pRIVATIZATION HAS been at the heart of the Republican agenda during the last decade, and that means forcing a growing proportion of Medicare beneficiaries to get their services through HMOs or other private insurance plans...

...Whether that's a crisis, as the Concord Coalition and the Congressional Budget Office would have us believe, or a real but easily manageable problem, is more a question of political spin than objective economics...

...But the Bush tax cuts have been so egregious—and so transparently tilted in favor of the very wealthy—that it is now possible at least to suggest rolling these back...

...On the single issue on which Democrats should have the greatest political and rhetorical advantage, they have ceded the agenda to the Republican right and have let themselves be trapped in a posture of naysaying and defensiveness.* Democrats have reasons to be proud of Medicare...

...In fact, the enthusiasm for privatization reflects the reflexive Republican preference (shared by many conservative Democrats) for all things private over all things public...

...The additional benefits for lower income individuals in PDIMA mean that for the first time in Medicare's history, beneficiaries will receive differential benefits for reasons other than their health care needs...

...Medicare has also served as a major factor in the development and expansion of what is best in the American health care system, in the facilities and technologies of its teaching hospitals, outpatient centers, and rural clinics, Its administrative costs are the lowest of any major health insurance program in the world...

...On the one hand, people will have to pay more taxes, and for people on the right, that's close to the essential definition of "crisis...

...Medicare was essentially an afterthought in the Health Security Act, although that Clinton proposal did contain an excellent prescription drug benefit, largely as a defensive mechanism to rebut anticipated— and accurate—accusations that much of its coverage for the previously uninsured would be financed from cuts in Medicare payments to providers...

...Senate and perhaps two dozen members of the House of Representatives—and many veterans of the executive branch—who feel about these issues much as I do, and have probably done much more to promote effectively our shared ideas...

...So the pool of insured persons will become sicker and poorer with each passing year...

...Since the Mondale debacle in 1984, Democratic candidates have been reluctant to admit that the continued provision of goods and services that the public desires might require increased taxation...

...Then Democrats should also aim to create a cap on total beneficiary out-of-pocket expense—perhaps tied to individual incomes—which would also permit restructuring the market for Medicare supplemental insurance so as to make it more affordable for beneficiaries and the few employers still providing retirement health benefits...

...Clinton learned better quickly enough, however, once Newt Gingrich stumbled onto Medicare "reform" as part of the unavoidable arithmetic needed to make the Contract with America budget compute...

...Since Medicare was enacted, no Democratic presidential candidate has made its expansion and improvement a major campaign priority...

...Gingrich invested millions of dollars in focus groups and opinion surveys to create a rhetoric of "reform" and "modernization" with which to conceal a systematic attack on Medicare's underlying principles...

...It is also financed largely (although to a lesser extent than Social Security) on a pay-as-you-go basis...

...Bill Clinton and Al Gore tried to finesse this problem by setting aside part of anticipated budget surDISSENT / Summer 2004 • 6 9 DEMOCRATS AND MEDICARE pluses for Medicare (and Social Security...

...These principles, I would argue, are just as valid today as they were seventy years ago, but they are much less fashionable, and only a minority of Democratic leaders has been willing to talk about them publicly, let alone defend them directly against systematic Republican attacks...

...Compounding population shifts with health care costs means that Medicare expenditures, in real dollars, can be expected roughly to triple over a relatively short period of time...

...The added cost could be financed in part by recapturing some of the more egregious overpayments to HMOs and other private plans contained elsewhere in the legislation...

...Those who survive will eventually become Medicare beneficiaries anyway...

...Nor, unlike almost every other health insurance policy available in the United States today, does Medicare provide a cap on out-of-pocket expenses...

...Even if it is ultimately judged a partial success, everyone knows that Medicare will have to be revisited in the next Congress or the one after that...

...Defenders of PDIMA point with pride to its provision of additional subsidies to the five million or so Medicare beneficiaries with the lowest incomes, ignoring the extent to which most of the elderly, who don't technically qualify as "low income," still have very modest means: three quarters of Medicare beneficiaries live in households with incomes below $40,000 a year, and most of that income derives from Social Security, which is only modestly indexed, and private pensions, which frequently aren't indexed at all...

...Provisions in PDIMA designed to increase enrollment of Medicare beneficiaries in managed care plans will cost something over $40 billion...

...Medicare beneficiaries thus bear an increasing share of their health care expenses, at a time when their incomes are growing slowly, if at all...

...Black and Hispanic Medicare beneficiaries do less well than their white counterparts, but the difference is significantly smaller than in other age groups...

...Many Democratic economists, it should be noted, more loyal to neoclassical ideology than political principle, have bought into this nonsense about "market" solutions to health care problems...

...Sinai School of Medicine...

...But they are far from being the dominant group of party leaders...

...Republican efforts at "reform" were at least partially beaten back in the Balanced Budget Act of 1997, and in the shenanigans surrounding the little-lamented Bipartisan Commission on the Future of Medicare in 1998 and 1999...

...They also believe in participatory social insurance, and in providing needed health care to the "deserving"— that is, to retired working people...

...And Medicare is enormously popular, not only with its beneficiaries, who are probably more satisfied with the program than it really deserves, but also among the non-elderly, who know much less about the program, but remain highly supportive...

...A remarkably cynical and complex piece of legislation even by the standards of contemporary Washington, PDIMA may well implode under its own weight...

...They were eager to move into the brave new world of efficient health maintenance organizations (HMOs) and competitive health care markets...

...Indeed, in 2000 a bipartisan panel of professional experts reported that, even under the most optimistic scenarios for reducing expenses through privatization or anything else, the existing benefit structure could not be maintained through 2030 without additional revenues...

...And the problem of Medicare costs will get substantially worse over the next two decades, as the enormous cohort of baby boomers ages into eligibility...

...Combined with the introduction of income-related premiums (a barely defensible idea that many Democrats, confusing the issue with progressive taxation, have long supported), the path has clearly been established along which, in some not-too-distant future, more and more relatively affluent (and relatively healthy) seniors will find it financially disadvantageous to participate in Medicare at all...

...It has been remarkably successful...

...The much-vaunted intergenerational conflict that political pundits and partisans have sought to promote has not yet materialized, possibly because most younger Americans have parents or grandparents, or aunts or uncles, who depend on Medicare...

...Bill Clinton came to Washington committed to comprehensive reform of the health system, but with limited knowledge of Medicare and its historical resonance...

...68 n DISSENT / Summer 2004 But the issues haven't gone away...

...For politicians concerned—or pretending to be concerned—with fiscal prudence, this represents a real issue...