Protection from catastrophe: The Medicare reform we really need
Keisling, Phillip
Protection from catastrophe: The Medicare reform we really need by Phillip Keisling Now yet another entitlement program is hellbent for bankruptcy. A graph depicting the fate of Medicare’s...
...Fortunately, the possibility for such a deal already exists...
...Slash benefits for the elderly, thereby ensuring political obliteration at the hands of 29 million Medicare recipients...
...A graph depicting the fate of Medicare’s hospital trust fund in the years ahead resembles the topographic profile of a long, low island that slopes gently to the sea, meeting the water line (a zero balance) in 1988...
...Doubling the premium on part B and raising the deductible to $1,000 over two weeks would generate over $10 billion a year...
...Nearly half the nation’s nursing home patients are afflicted with this disease, which affects one in five of all those who reach 80 years of age...
...The elderly should be offered a new Medicare benefit that will cover most of their long-term care needs...
...We don’t think the elderly should have to give anything up:’ says Janet Myder of the National Council of Senior Citizens...
...The wealthy dead will help keep the friends and datives they’ve left behind free from the terrors of catastrophic illness...
...last year it contributed just $400 million of the $20 billion that Americans spent on long-term care for the elderly...
...The first is to pay their own way, which most do upon entering a nursing home...
...You read that figure right...
...fewer than onehalf of 1 percent of the elderly have out-of-pocket medical expenses of more than $4,000 a year...
...Medigap insurance covers even less, contributing less than 1 percent of the total bill, even though nearly 60 percent of the elderly have policies that promise some nursing home care...
...For hospital care, however, the chances of true financial catastrophe are remote...
...all should be part of one system that protects people against true need...
...Unions, for example, fought actively against catastrophic coverage, in part out of a commitment to national health insurance but influenced also, one suspects, by the fact that their own members already enjoyed catastrophic protection through employer health plans...
...The second choice is to follow the Cordons’s path, liquidating one’s remaining assets to qualify for Medicaid...
...Caught between reduced revenues and soaring Medicaid costs, many states are now making a virtue out of necessity by giving some long-overdue attention to nursing home alternatives...
...The contract that society now has in force with the elderly for health care must be renegotiated...
...Last year, Medicare paid just 44 percent of the medical bills for the nation’s elderly...
...But are the elderly so greedy that they will ignore the burden the current Medicare system puts on younger workers, and the false promise if offers them...
...Of course, representatives of senior citizen groups likely will protest any sort of deal...
...Before she did so, the Cordons enjoyed better financial circumstances than all but the top 10 percent of America’s households...
...Let’s Make A Deal What the elderly want and need should now be clear: an assurance that their illnesses, regardless of their cause, won’t impoverish them or their family...
...Another third who are in the $10,000 to $20,000 bracket pay an average of less than 10 percent...
...Others are so anxious that they buy three or four medigap policies that uselessly duplicate each other...
...A second source of income lies in raising the premiums for Medicare Part B and increasing the deductibles for hospital care...
...This in itself would help to reduce costs...
...Consider a 73-year-old man with assets of $200,000 who succumbs in the hospital to a massive heart attack following several operations...
...A far bigger worry for the old doesn’t involve the hospital at all-it involves the nursing home...
...Phillip Keisling is an editor of The Washington Monthly...
...the federal government subsidizes the rest at an annual cost of $14 billion...
...In exchange for this protection, the elderly must bear the primary responsibility for putting the entire Medicare system back on a sound footing...
...Here’s where the political horse-trading comes in...
...The immediate problem is how to restructure Medicare in a way that spreads the sacrifice fairly among doctors, beneficiaries, and taxpayers while remaining true to our obligations to the elderly...
...In effect, the current system of health care for the elderly has created two classes of citizens, divided largely on the circumstances of how they will die...
...It’s time to stop whining about our predicament and get off the dime...
...What do you do...
...But as with the best of bargains, in the end both sides can gain something that’s of much greater importance...
...A millionaire like Claude Pepper, when he finally passes into the great beyond, can do so with the sure knowledge that he‘s doing one more good deed for the elderly whose cause he now champions so fiercely...
...The best argument for this move is that one-third of the 1980 tax returns with adjusted gross incomes exceeding $1 million claimed the exemption...
...A means test can be instituted to help the truly needy meet these increases...
...Gordon asked...
...meanwhile, poor mothers with sick children are labeled freeloaders just for trying to see a doctor...
...A modest tax on these estates-say 10 percentcould raise $30 billion a year...
...The Congressional Budget Office has identified the reason: “An elderly couple reaching age 65 in 1982, of whom one spouse had average earnings over the 1966-82 period, would have paid in $2,200 (to the hospital trust fund...
...had both contributed their entire working lives, the ratio would still be about seven to one...
...This, mind you, is 25 years before the baby-boom generation comes of old age...
...Why indeed...
...Even so, to pay for nursing home care that cost $38,000 a year, Mrs...
...With Medicare we set up a system for old people that assumed they were 40 years old:’ observes Dr...
...Premiums pay for only 25 percent of benefits...
...Now consider a 73-year-old woman with identical assets who falls victim to Alzheimer’s disease, a progressive deterioration of the mental faculties that can cause forgetfulness, sudden personality changes, and, in extreme cases, bizarre and violent behavior...
...To become eligible for Medicaid, the Cordons had to “spend down” until their annual income was $5,200 and their assets totalled less than $2,000...
...It’s not so much the old fear of ‘I’m going to the snake pits, I’ll be abused...
...Those who reflexively bristle at such a “Pay as You GO” system should give it some more thought...
...To help keep costs reasonable and prevent abuse of the system, the patient should pay for the first 90 days of care, unless he or she voluntarily submits to a means test...
...There are alsosome legitimate concerns about the potential cost and appropriateness of nursing home care...
...Conservatively estimating that the old have assets averaging about $150,000 (most of this in their homes), the 2 million Americans over 65 who die each year leave behind estates valued at $300 billion...
...In fact, some of the elderly already recognize what has happened...
...this will redress that balance in the least painful way...
...And even if you think runaway medical costs can be tamed only by drafting the nation’s over-paid doctors into a publicly controlled national health system (see “Radical Surgery: American Medicine’s Last Hope:’ February 1983), that day is still some time off...
...The modest estate he worked hard during his life to amass will pass largely intact to his surviving wife and children...
...As for the hospital deductible, beneficiaries now pay $304 the first day but nothing for the next 59, an arrangement tailor-made for doctors who don’t want their decisions about hospitalization questioned by their patients...
...This is...
...Before examining this trade in detail, it’s important to understand why the elderly are as upset about Medicare as those of us who are paying for it...
...Recounting the bitter fight over national health insurance between President Carter and Senator Ted Kennedy, former HEW Secretary Joe Califano in his book Governing America describes (sympathetically), “the fear of the labor movement that providing relief to the middle classes for catastrophic illness costs would take the political pressure off providing health care for the poor...
...In making the elderly help pay for this new program as well as rescue Medicare, a basic principle of equity should be followed: those of means should help those in need...
...If the woman is widowed-and nearly three-quarters of nursing home patients are single-Medicaid officials may have already put a lien on her home...
...It’s their Great Fear...
...To make up the difference, plus raise a substantial sum to go toward more general Medicare expenses, the government should turn to a third source: the elderly’s wealth...
...One is the prejudice respectable opinion holds against nursing homes, similar to the 19thcentury attitude that hospitals were places of sickness and death that should be avoided whenever possible...
...If this woman’s death comes ten years after she enters the nursing home, she will have exhausted her entire estate...
...The vast majority of nursing home patients enter as private payers...
...On the other hand, many liberals fear that inclusion would stifle the development of alternatives such as home care that are often cheaper, not to mention preferred by the elderly...
...But why should people who have been together as long as we have, and who feel about each other the way we do, be forced to get a divorce...
...Declare a moratorium on research and development of expensive new medical technology, since a cure for cancer, the artificial heart, and longer life spans will inevitably result in more hospital visits and an increase in lingering, expensive deaths...
...The nation’s 1.4 million nursing home patients have only two other choices...
...Fiscal conservatives fear that such an extension would prompt a sudden increase in demand for care, much as the 1972 decision to extend Medicare to kidney dialysis patients has prompted a 1,000 percent increase in the program’s costs...
...One can’t help but feel some sympathy for anyone assigned the responsibility for straightening out this mess...
...In a “My Turn” column that appeared last year in Newsweek, Gordon described how his wife’s 15-year-long bout with Parkinson’s disease had finally forced her to enter a nursing home...
...Besides, isn’t a modest tax spread out among all the elderly better than the current version of medical roulette, whereby most estates escape intact while an unlucky few (and their families) watch helplessly as everything is lost to Medicaid...
...Another part of their strategy is also one the federal government could easily emulate: a moratorium on the construction of new nursing homes...
...Both sides will have to give something up...
...After 150 days, the enrollee pays everything...
...Today we have a system where elderly millionaires jet between their Florida condominiums and Manhattan townhouses, and get generous pensions and heavily subsidized medical care...
...After working hard for 40 years, many middle-class retirees are still reluctant to take the trip abroad that they’ve always dreamed about...
...Congress could allow Medicare to pass into insolvency, or it could raise payroll taxes dramatically on young workers who already believe Medicare and Social Security will be gone long before they collect a penny...
...The elderly can afford to give something upthe 1980 census reveals they are now better off on the average than the rest of America-but it will take some hard and savvy bargaining to convince them to do so...
...Many don’t read the fine print...
...This approach also has a certain rough justice to it...
...It should be clear what the workers now paying the elderly’s Medicare bills want: a guarantee that the system will still be around when they need it...
...numerous studies suggest that up to a third of the nation’s nursing home patients could receive adequate care elsewhere...
...One would hope not...
...And in many respects, the combined clout of the elderly, physicians, insurance companies, hospitals, and health care bureaucrats would make the typical defense contractor drool with envy...
...Should the surviving spouse die, or if the patient is already single, the home can be attached for sale after death...
...Unfortunately, procrastination will only make the problem more intractable...
...Gordon was finally forced to go on Medicaid...
...Start with the most modest change: the elimination of the income tax deduction now given to everyone over 65, regardless of income...
...This scheme admittedly runs contrary to Congress’s recent decision to all but abolish the inheritance tax, a move prompted in part by the argument that the tax placed an onerous burden on the surviving family members...
...the Cordons were also forced to liquidate their savings account and the stocks they had accumulated...
...One of the major compromises congressional sponsors felt was necessary to ensure passage of Medicare in 1965 was to limit the program largely to hospital-based care...
...the policies usually cover only care that qualifies for Medicare...
...For now, the crisis in Medicare is real...
...But with nursing home care averaging about $20,000 a year-and for more specialized care it’s frequently double that-the financial cushion built up over a lifetime can vanish within a year...
...Those too poor to pay the deductibles can qualify for Medicaid, which now covers 3 million elderly...
...Institute a mass euthanasia campaign, given that one-third of all Medicare expenses occur in the last 12 months of life...
...She will die with the knowledge that she has left nothing to pass on to her family...
...But changing our whole approach to social welfare won’t happen overnight...
...No wonder congressmen would rather spend their time debating Lebanon...
...Yet even as hospital insurance, Medicare is stingier than most of the private insurance plans that cover employees and their families...
...To maintain current benefits, payroll taxes must inexorably rise, with each new generation paying several times more than the last one...
...Her spouse, having endured the anguish of watching her suffer the ravages of this disease, will have been reduced to penury...
...Still, some heartening developments in recent years suggest that they can be overcome...
...Indeed, about half the nation’s nursing home patients-average age 81, three-quarters of whom are women-end up on Medicaid, a program originally intended to provide health care for the nonelderly poor that now spends 40 percent of its money on nursing home care...
...But with Medicare headed toward bankruptcy, how can we possibly afford yet another costly government benefit...
...And during the early 1970s, when some form of national health insurance still seemed likely, many liberals argued against catastrophic protection for fear it would cool the ardor for a much broader program...
...The Reagan administration recently proposed that houses be allowed to be sold before death if a physician certifies that the elderly person will not be able to return home...
...Paying for a nursing home is of paramountparamountconcern for the elderly, ” observes Tom Higgins, who oversees the Medicaid program as health officer for Multnomah County in Portland, Oregon...
...And what do the elderly really want...
...Once submerged, the line suddenly plunges into an abyss of red ink, hitting a cumulative deficit of $300 billion in 1995 and passing the $1 trillion mark in 2005...
...A second reason relates to the politics of national health policy...
...More specifically, it’s time to cut a deal...
...If the dying know that their estate will not be wiped out by catastrophic expenses, why should they balk at a 10 percent tax bite...
...At least in theory, workers eventually might be contributing their entire salaries to provide pensions and health care for their parents...
...But now comes the other half of the bargain...
...Eligibility rules differ from state to state, but in most cases, the assets of the surviving spouse are included in this “drawing down” process, which often leaves an elderly couple with little more except their house and a small stipend that puts them just above the poverty line...
...The present value of their future lifetime benefits is projected to be $63,000-28.6 times their contribution...
...Cheryl Beversdorf of the American Health Care Association, which represents 8,000 non-profit and for-profit nursing homes, has an obvious bias as a lobbyist, but she makes a related point that’s echoed by many others familiar with the industry: “Nursing homes conjure up so many negatives-sickness, for-profit, death, guilt-that there’s a real reluctance to even think about them...
...We have no other choice...
...Rather, it’s ‘I’ll be financially ruined, I’ll have to depend on my children and maybe go on welfare: ” Higgins adds, “To most elderly, a cut in Social Security really isn’t a life or death proposition...
...But let’s be realistic...
...These changes will almost cover the cost of the new program...
...Some will object that this approach will hurt the poor...
...But nearly 33 percent of all Medicare recipients live in households with an annual income above $20,000, and they pay an average of less than 5 percent of that for medical care...
...Medicare, like Social Security, must be seen for what it is: a massive chain letter that will eventually come due...
...Gordon’s pension was attached by the state to defray its Medicaid expenses...
...Though Medicare may have spent $100,000 on his behalf, his family will experience little financial burden...
...Whether he has mild pneumonia or needs an expensive heart operation, the hospitalized patient has little to worry about if he’s quickly out the door...
...There’s also “medigap” insurance, which is now an $8 billion-a-year industry whose policies are hawked in television and newspaper ads by the likes of Harry Morgan (late of M*A*S*H), Art Linkletter, and Danny Thomas...
...Something that Medicare implicitly promised, but has yet to deliver: an assurance that a serious illness won’t lead to financial catastrophe...
...Yet it’s exactly these people-future beneficiaries of Medicare and catastrophic coverage-who will benefit most from this new tax...
...Ultimately, there should be no distinction between Social Security, Medicare, unemployment, and welfare...
...What would they do if one of them suddenly fell very ill...
...Financial catastrophe looms if he lapses into a year-long coma...
...For the first 60 days in the hospital the Medicare patient pays only a $304 deductible...
...Still, over 10 million elderly have no extra insurance, and even among those who do, the fear of being wiped out by a long illness weighs heavily on their minds...
...As for protecting the elderly against catastrophic hospital expenses, the government should simply get into the medigap insurance business...
...Yet as any negotiator knows, you usually don’t get something you want without giving the other side something it wants...
...One of the best buys in the insurance business, part B covers up to 80 percent of physicians’ fees...
...within a year, most of them transfer to Medicaid...
...The state and federal governments already pay half of all nursing home costs...
...When his accountant looked at the situation, he advised Gordon that the sensible thing to do was to get a divorce...
...Robert N. Butler, former head of the National Institute on Aging...
...Lynn Ethridge and Jeffrey Merrill of Georgetown’s Center for Health Policy Studies have calculated that government-administered insurance covering all deductibles past the 60th day would cost each beneficiary only $3.25 a month...
...Medicare will pay for nursing home care only in a few, special circumstances...
...Medicare, which was ,intended to provide protection against acute, shortterm illnesses, pays almost nothing for such common medical expenses as prescription drugs, dental care, and eyeglasses...
...Abolishing this loophole, which benefits most those with the highest incomes, will raise $2.4 billion a year...
...The bill last year was over $12 billion...
...for Medicare to assume this responsibility would add about $15 billion to federal spending...
...Unfortunately, this latter strategy will doubtless resemble so much chair shuffling on the decks of a financial Titanic...
...Indeed, just as the Pentagon exploits our natural fear: of “too little security, ’’ the medicalindustrial complex has made even the smallest reforms next to impossible by exploiting our fear of “too little health care...
...Two working spouses could only reduce the ratio to 14 to one...
...But this crisis also affords a rare opportunity to renegotiate what has proved an unsatisfactory bargain for both main parties...
...But that’s how the system now works...
...To be even more specific, millions of the elderly fear having to endure the nightmarish experience that befell David B. Gordon and his wife...
...Along with his $20,000 pension as a retired New York City policeman came $9,400 a year in Social Security benefits and $12,000 from dividends and interest...
...The elderly usually don’t talk about it until the subject comes up, but when it does, it unleashes the floodgates...
...Loren Dunton, 64, recently observed in The New York Times that “As a father and grandfather, I am guilt-ridden to realize that young people will be paying for benefits I never expected and never actually earned!’ Moreover, a major reason any talk of tinkering with Social Security or Medicare now prompts the old to dash off angry letters to Congress is that they feel they may need everything they have someday to pay for a nursing home...
...But for the next 30 days the deductible is $76 a day, rising to $152 a day for the 60 days following that...
...It often has little to do with the disorders old people really sufferl’ There are several major reasons tor the government’s glaring failure to protect the aged against the potentially catastrophic costs of nursing home care...
...The government should also screen all patients to determine if appropriate care could be provided elsewhere...
...The former is an insurance program that 99 percent of allMedicare enrollees purchase for $12.20 a month...
...Most likely, amidst much earnest handwringing and after waiting until the last possible moment, Congress will fashion a compromisehigher taxes, increased payments by beneficiaries, and yet another announced crackdown on doctors and hospitals...
...The elderly have now received far more in Medicare than they contribute, endangering the whole program...
Vol. 15 • November 1983 • No. 8
