Yesterday afternoon, I received and email/newsletter from a very large insurance company that linked to a press release titled “Industry Seeks Savings from Medicare Beneficiaries”.

Here are some excerpts from the press release and my reaction to them:

Seeking to fend off larger cuts in federal medical spending, executives from big pharmaceutical, hospital and insurance companies are crafting their own plan to reduce the deficit which calls for wringing Medicare savings from beneficiaries, not just from hospitals and drug makers. 

Members of the Healthcare Leadership Council—which includes top executives from Pfizer Inc., Aetna Inc. and the Mayo Clinic—are expected to approve a proposal that would call for raising Medicare’s eligibility age and shifting the program toward private plans for beneficiaries. My reaction:  I can’t print it here – The idea of raising the eligibility age really gets my blood boiling.

The group plans to press members of the congressional “supercommittee,” charged with finding $1.2 trillion in budget savings, to include the changes in its broader cost-cutting plan. My reaction:  So lobbyists will play a big role in influencing the closed-door meetings of the Supercommittee??   Who will be representing seniors, whose average income is around $30,000 per year??

The council’s proposal is part of a larger effort inside the health industry to overhaul how lawmakers achieve savings from federal health programs. For years, Congress largely has relied on slicing payments to doctors and hospitals that treat Medicare beneficiaries to shrink spending in the program that insures 48 million elderly and disabled Americans.  My reaction: American doctors make hundreds of thousands of dollars per year – poor them. For-profit hospitals make profits, even with the cuts they have faced over the years. Pharmaceutical company profits are huge.

Frustrated at being the target, the health industry is pushing back, arguing that some of those savings should come directly from the pockets of Medicare beneficiaries.  My reaction: Let’s compare the percentage of an average senior’s income spent on the health care costs to the profits of the companies represented by this Healthcare Leadership Council.

……The health-industry council estimates its plan would save $410 billion over a decade. The central plank is reworking Medicare so that, starting in 2018, beneficiaries could either shop for a federally subsidized private insurance plan in a new Medicare-only exchange, or stay in traditional Medicare. My reaction:There’s that Ryan Plan again… that would “end Medicare as we know it”…all so for-profit companies can make more money.

My Final Reaction: As I re-read this press release, it really seems like a joke or a prank. How can The Healthcare Leadership Council think their proposal would not be seen as garish and greedy?  And doesn’t it seem strange that they openly admit their highly-paid lobbyists will be all over the Supercommittee to stick it to seniors? Wow. This press release would be comical – if it weren’t serious.

I recently read a good article on the problems facing Medicare now and in the future. They are: too many baby boomers; controlling costs; and our divided health insurance system that pits Medicare beneficiaries against people under 65 in the private insurance market.

One-and-a-half million baby boomers will turn 65 every year for the next 18 years. Today, 47 million people are in the Medicare system, but that number will nearly double to 79 million by 2029.

The article appeared in The Center For American Progress newsletter and can be read in-full here.  I’ve highlighted some of the points made in the article, “What’s Driving Up the Cost of Medicare?”.   Note: [  ] means the words in brackets are mine.

**”The payment changes in the Affordable Care Act enacted last year actually do “bend the cost curve” by bringing the projected growth in Medicare spending per beneficiary well below projected per capita growth in health care spending overall.”

**”From now until 2019…  overall health spending per person is expected to increase at an average annual rate of 5.6 percent. Medicare spending will grow 3 percentage points slower.” [This means that Medicare is more efficient than the under-65 health care market.]

**”Medicare’s payments can deviate only so far from private insurers’ payments before health care providers start avoiding Medicare patients or demanding that private insurers make up for Medicare’s low rates.”

 

Okay, so this article was written by people who probably believe a single-payer system would be the way to control costs for all age groups.  Because, if the private sector can’t control costs, Medicare’s cost cutting and cost control will pit the program for seniors against private insurance for people under 65. So the idea of having two distinct insurance systems (for people under 65 and people over 65) pits one against the other.

I suppose this is why Republicans say we should just put everybody into the privately-run, for-profit health insurance system. Unfortunately, the private sector has not been very good at controlling health care costs or health insurance premium increases.  I wrote about this last year when I wrote about a study of the VA health care system:

The CBO estimates that the VA’s health care cost per enrollee grew by only 1.7 % from 1999 to 2005, which amounts to 0.3% annually. Medicare’s costs grew 29.4 % per capita over that same period, or 4.4 % per year.  In the private sector insurance market (employer and individual plans) premiums increased by more than 70% during this period.

The Affordable Care Act tries to rein in health care and health insurance costs by putting the squeeze on insurance companies and their profit margins, even while it gives them 40 million new customers. Republicans consider this to be government interference in the “free market” and  “a government take-over” of health care.

Because seniors vote, “Medicare as we know it” is probably pretty safe. The real danger might be a growing gap between  Medicare fees for service and those paid by insurance companies for under-65 patients.  Then the “Mediscare” slogans about doctors rejecting Medicare patients might become a reality.

Congressman Paul Ryan of Wisconsin has given a lot of thought to the future of Medicare and how this program, which takes up 13% of the federal budget, should be shaped in the future.  Ryan is one of the Republican “Young Guns” who will take leadership roles on key committees if their party becomes the majority in the House of Representatives.

An article in Kaiser Health News provided an overview of Congressman Ryan’s proposal for Medicare:

Current Medicare beneficiaries, and those nearing retirement (55 and older), would get Medicare as it exists today. For everyone else, eligibility would begin at 69 and a half, and there would be a “standard Medicare payment” for the purchase of private health coverage.

At the beginning, Medicare vouchers would cover $11,000 of the cost of a health plan, which the proposal lists as the average amount of money that Medicare currently spends on a beneficiary. The total would increase with inflation, based on a combination of the consumer price index and its medical care component. If the payment exceeds the cost of a plan, the beneficiary could invest the leftover money in a medical savings account to pay for other medical needs, or buy long-term care insurance.

Government payments would vary depending on an individual’s income, health status, and initially region. Individuals with incomes less than $80,000 would receive the full amount, those between $80,000 and $200,000 would get half, and those above $200,000 would receive 30 percent. The government also would fully fund medical savings accounts for low-income beneficiaries.

Ryan is the top Republican on the House Budget Committee and a senior member of the Ways and Means committee which has jurisdiction over Medicare and Social Security.  He could become the chairman of the committee that oversees Medicare.

From my perspective (as I’m over 55), Ryan’s plan has some interesting ideas.  But unless the under-65 insurance market changes – and Republicans say they will repeal the recent health insurance changes  – the idea of raising the Medicare eligibility age to 69 is …frightening.

The idea of the government giving people money to buy their health insurance sounds interesting to me.  But the problem is that insurance companies will be making a profit from that money.  Why not get rid of health insurance for-profit and save the U.S government billions of dollars?  Other countries like Germany, France, and Switzerland have health insurance companies – but those companies are “not-for-profit”.  Medicare is a not-for-profit insurance organization. Its overhead costs are 2%.  Insurance company overhead costs are 15-20% and include profits.  What is the better deal for American taxpayers?  2% vs 20%:  I think the answer is obvious.