OP-ED

Health Care Reform in 2 Short Sentences

Foes of the Patient Protection and Affordable Care Act (PPACA) made a big point of complaining about the length of the bill. Personally, I think that criticism is unfair, because the law deals with a complex industry that’s almost one-fifth of the economy.

But today I read a brilliant two-sentence proposal in the letters section of the Wall Street Journal from David J. Gross, a Florida dermatologist. He was reacting to an article about the extensive cardiac care received by former vice president Dick Cheney.

Before any of Dick Cheney’s heirs get a nickel from his estate, Medicare should be reimbursed for the difference between what it paid out versus what he paid in all these years. This same paradigm should apply to all of us.

(Actually the essence is expressed in just one sentence.)

If we actually implemented that solution it would have significant salutary effects:

* Make Medicare financially viable for the long run
* Improve inter-generational equity
* Instill cost consciousness in Medicare beneficiaries, thus keeping a lid on expenses
* Reduce the need for an estate tax

Of course this proposal would have drawbacks and unintended effects:

* It would cause Medicare recipients to spend down or gift their estate. This phenomenon is well known among patients trying to qualify for Medicaid payment for nursing homes
* It would penalize those who are sickest
* It might cause people to avoid needed care, harming health and ultimately driving up costs
* In some families, it might lead to tensions among the generations
* The rules to actually implement such a system would be lengthy in any case, so a simple solution would turn into a complex one

On balance I think this proposal deserves some serious consideration. Maybe a modified version, e.g., a 10 percent repayment could be tried at first.

David E. Williams is co-founder of MedPharma Partners LLC, strategy consultant in technology enabled health care services, pharma,  biotech, and medical devices. Formerly with BCG and LEK. He writes regularly at Health Business Blog, where this post first appeared.

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therealcostTracy McManamonMaggie MaharNate OgdenJohn R. Graham Recent comment authors
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Gary Levin MD
Guest

Given that health care affects and/or controls 1/6th of the economy, how can one bill manage that without more input from the public. Utter balderdash, and misses the point.

Tracy McManamon
Guest

I think until we can actually get the US debt process under control we should leave Medicare alone. I realize the drain on the budget that Medicare currently takes but until we get true leadership and less politics this will never get solved…. How many years have we been talking about fixing Medicare???
Thanks

Barry Carol
Guest
Barry Carol

“But, if some very wealthy Americans who undergo many very expensive procedures actually take out more from Medicare than they put it, it seems to me fair that their estate should make up for the difference.” Maggie – I don’t think it would be practical and I don’t think it would raise much money either. First, to calculate how much one paid in, we need to, I think, give credit for the employer’s contributions as well as the employee’s plus a modest invest return (ten year Treasury interest rate) on the combined contributions. Second, where do you set the cutoff… Read more »

Maggie Mahar
Guest

David– You write: “Before any of Dick Cheney’s heirs get a nickel from his estate, Medicare should be reimbursed for the difference between what it paid out versus what he paid in all these years. This same paradigm should apply to all of us.” I totally agree. I don’t think that we should “means-test Medicare” because that would undermine support for Medicare among wealthier Americans. But, if some very wealthy Americans who undergo many very expensive procedures actually take out more from Medicare than they put it, it seems to me fair that their estate should make up for the… Read more »

Nate Ogden
Guest
Nate Ogden

Interesting argument. We should not allow wealthy people to opt out of Medicare and pay 100% of their personal cost and spend no Medicare money, but if after forcing them to be in Medicare they should spend more then they contributed we should collect the difference from them.

And its fair to force people to pay for insurance they don’t want and if they use pay the difference so it was never really insurance.

Barry Carol
Guest
Barry Carol

In any given year, 5% of Medicare beneficiaries account for about 50% of the program’s costs or a bit less. The healthiest 50% of beneficiaries account for only 3%-4% of costs which implies that the 24 million people in this group accounted for only about $15-$20 billion of spending in the most recent year or well under $1,000 each. Plenty of people die within a few years of becoming eligible for the program while millions of others live to a normal lifespan in pretty good health. Only Medicare Part A was designed to be financed by a dedicated payroll tax… Read more »

John R. Graham
Guest

Mr. Williams’ repeating this recommendation is astonishing. Does he not believe that Medicare should be insurance? Or, to put in another way, should Aetna or Cigna or UnitedHealth or Blue Shield or whichever insurer(s) covered Mr. Cheney when he was in the private sector also be reimbursed by Mr. Cheney’s estate after he passes? Also, pretty much every Medicare beneficiary claims more benefits than he pays into the system – by a multiple (see Eugene Steuerle’s research). So, everybody’s estate should be clawed back. Finally, because there is no cap on earnings subject to the Medicare payroll tax, I’m not… Read more »

Nate Ogden
Guest
Nate Ogden

“Does he not believe that Medicare should be insurance?”

“pretty much every Medicare beneficiary claims more benefits than he pays into the system”

If every policy holder receives more in benefits then its not insurance John. There is no risk tranfer thus no insurance.

John R. Graham
Guest

Quite right, Mr. Ogden. I should have been clearer: I was addressing two separate issues.

Gary Levin MD
Guest

Spending down assets is used in the Medicaid system to be eligible. It drives people into poverty….Spending down assets creates untimely disposition of assets at a much lower value than market values. There needs to be a reasonable t hreshold in the spend down…not to zero. The devil is in the details.

Tim
Guest
Tim

This is sincerely meant as a time saver.

This premise: “If everyone would be reasonable / fair / like me / etc. we could ____ , and there’s a simple solution to ________. ”

is a political tautology. If everyone were reasonable, we’d not need government.

BobbyG
Guest

LOL. That’s good.

Barry Carol
Guest
Barry Carol

One thing I think Medicare could do which would cost little or nothing is to include on each explanation of benefits form (EOB) a line that shows how much Medicare has spent cumulatively on the patient’s behalf since he or she joined the program. I don’t think most people have a clue about how much of society’s resources they’ve consumed and they might be somewhat more sensitive to it if they did. Some private insurers do this now. Medicare Parts B and D are already subject to modified means testing which started in 2007 for Part B. Singles that make… Read more »

therealcost
Guest

That’s a great idea to put the cumulative amount spent on the EOB. Certainly private insurers should do the same. People have no idea what the cost of medical care is. Means testing is certainly a discussion we could be having, but the main thing people must come to understand that health insurance – public or private – is a means to pool risks and costs. That means you don’t try to get your money’s worth of care for every year’s premium because this year somebody else needs it, and someday you might. So it clearly is in all our… Read more »

eppie ward
Guest
eppie ward

I have worked in the health care system for several years and now even though I developed a terminal illness, I can’t qualify for disability and I really need it. The reason I first had to quit work was not my terminal illness and I could not get a diagnosis for my first illness for eight years so I was told no disability since I could not prove I was disabled in the first three years after I could not work. Anyway on the subject of Medicare, my parents and many of their friends are on Medicare. These people are… Read more »

Dr. Mike
Guest
Dr. Mike

That is incorrect Margalit. It is in fact illegal for me to accept payment from the patient for a medicare covered service other than their co-pay or deductible. If I later find out that they have medicare, I must refund them their money and bill Medicare. That’s the law.

Margalit Gur-Arie
Guest

Hmmm… How is the Mayo Clinic then publicly refusing to accept Medicare in that one Arizona location and asking for cash instead?
http://healthpolicyblog.mayoclinic.org/2010/01/05/medicare-and-mayo-clinic-in-arizona/

Dr. Mike
Guest
Dr. Mike

If the provider opts out of Medicare then they can ask the patient to sign a waiver that allows the provider to bill the patient directly. But the provider then cannot bill medicare for anyone. So the patient can pay cash only by going to providers who are not signed up with Medicare or who have opted out. Not very useful for hospitalization, lab, xray, specialty care, etc. as it is very very rare to find such entities who have opted out.

Margalit Gur-Arie
Guest

I wonder how Mayo finagled things so they can accept Medicare for everything but office visits….. Perhaps the PCPs were set up as a separate tax ID that is non par and the ancillaries under another tax ID that is participating… Very creative stuff.

pcp
Guest
pcp

If you’re non-participating, you can accept the non-par fee in full at the time of service. Medicare will then send the check to the patient. That’s what we do in our office, and it works great for us and the patients. What you can’t do, if registered with Medicare, is take payment of more than the non-par fee. The docs at the Arizona Mayo Clinic must have severed all ties with Medicare, meaning that the patient will not receive any reimbursement from Medicare to help cover their charges in that office. Up till now, Medicare registration was a requirement of… Read more »

Margalit Gur-Arie
Guest

Ditto. I just your comment after I posted the above.

Margalit Gur-Arie
Guest

I don’t think it’s illegal for a person over 65 to see a doctor and pay cash instead of producing a Medicare card. Mixing the two is illegal. Allowing balance billing is equivalent to providing vouchers for medical services with no control over the cost to seniors. How many seniors that cannot pay the “balance’ will you agree to see? How is this even going to work? Are you going to bill them the “customary” charges like you bill private payers (two or three times the allowable) and then have a bargaining session with each senior? Means testing, which is… Read more »

MD as HELL
Guest
MD as HELL

Allowing balance billing (collecting that which Medicare does not presently pay or allow the doctor to bill and collect) would have a less destabilizing effect.

Dr. Mike
Guest
Dr. Mike

I think it would be important to add the provision that it would no longer be illegal for a Medicare patient to pay for some of their care out of pocket. Paying cash and receiving a cash discount would both save the taxpayers money and preserve more wealth for the patient’s heirs.

MG
Guest
MG

Nonsense comment although I wouldn’t mind seeing some level of means-testing for Medicare but good luck getting that past in this environment where the Boomers & Elderly control the ballot box.