Let’s Fix Medicare Before We Expand It, Mrs. Clinton, But Then….!

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Dear Mrs. Clinton –

It’s probably good politics to suggest making Medicare available to some under 65s , just when Congressional Republicans are proposing to increase the Medicare eligibility age. Sometimes, though, good politics doesn’t produce good policy.

Medicare may be well-regarded by most Americans, but the program has four huge weaknesses that need to be fixed before considering any expansion.

Here’s what’s wrong.

Medicare is absurdly, insanely overcomplicated.  When Medicare was created in 1965, it consisted of just two components, Part A hospital care and Part B physician and other care, with the split made only to gain AMA support for the legislation. Fast forward to 2016: we now also have Part C (Medicare Advantage), Part D (prescription drug), and seven versions of dual Medicare-Medicaid eligibility (in turn dependent on 50-plus states’ and territories’ own Medicaid regulations). And that’s all before the thousands of pages regulating payments to providers. The complexity provides a lot of jobs for bureaucrats and consultants, but does little for beneficiaries.

Medicare payments are unfair to many (including taxpayers).  For beneficiaries in the fee-for-service program, Medicare currently pays all allowed provider charges (after copays and deductibles). For those choosing Medicare Advantage, the program typically pays the full premium bid by the private plan.  The effect of this misplaced generosity is that one senior’s care may be subsidized by up to $5,000 a year more than another’s with the same health status in the same city—with taxpayers paying the difference.

Medicare is regressive. Traditional Medicare imposes the same deductibles and coinsurance regardless of income and charges the same Part B premiums for the vast majority of beneficiaries. Similarly, Medicare Advantage plans impose the same cost-sharing for all incomes. Congress’s answer has been to allow Medicaid to pay premiums or cost-sharing for lower-income seniors, but many of those potentially eligible are not enrolled, while Medicaid’s rules can mean that a difference of a dollar of income make the difference between eligibility and otherwise.

Medicare is enormously (and unnecessarily) costly—and getting rapidly more so. According to the latest Medicare Trustees report, Medicare expenditures will rise from $683 billion in 2016 to $1.3 trillion in 2025. Even though Medicare per capita costs are rising slightly less rapidly than overall health care costs, the Trustees project that—unless changes to the program are made—these will increase from $12,925 in 2016 to $19,400 in 2025, far, far more than we can afford!

What’s the answer?  Three fixes.

One:  Streamline the program structure. Consolidating the four program parts into a single whole, with all current Part B and D services available to all beneficiaries, will reduce administrative costs and enhance access. Eliminating the need for dual eligibility as described below will do even more.

This is consistent with past consolidation proposals from MedPac, the Bowles-Simpson Commission, the Commonwealth Fund, the Bipartisan Policy Center, and individual members of Congress, but more sweeping and more effective.  It means a single premium and, potentially, a single deductible and out-of-pocket limit to protect beneficiaries against unexpectedly high medical expenses—something current Medicare fails to do. It also means that all Medicare beneficiaries will have a full range of medical coverage, including prescription drugs, guaranteed—again, something Medicare now fails to provide.

Two:  Tie premiums, deductibles, and out-of-pocket limits to income. Medicare has to be made affordable for all seniors without imposing the humiliation of applying for Medicaid on the less well-heeled. This can be done either directly by making all beneficiary costs income-dependent, or indirectly by offering a “gold” coverage option with lower deductibles and out-of-pocket limits for a higher premium that is subsidized for low-income seniors.

Either option could eliminate the need for expensive and inefficient Medigap insurance, as well as protecting lower-income seniors from having to choose between applying for Medicaid and risking financial disaster.

Three:  Move to an equitable “guaranteed contribution” approach. Various forms of premium support have been recommended by bipartisan commissions over the past twenty years as the fairest answer to controlling Medicare costs. The guaranteed contribution approach would differ significantly from that proposed by Congressional Republicans in that beneficiaries choosing coverage options below the benchmark cost would share in the program savings.

All beneficiaries would be guaranteed a choice of traditional fee-for-service and private plan options, and all beneficiaries would be assured that an option would be available for no more than their basic premium cost (with shared savings for lower-cost options). The Congressional Budget Office has estimated that such an approach could cut Medicare spending by up to $45 billion a year, not counting possible additional savings from more effective competition. Although critics have complained that such an approach would mean some beneficiaries would pay more than their basic premium unless they were willing to choose a less expensive plan, this is a far better option for controlling Medicare spending than cutting coverage, increasing all premiums, or slashing provider payments.)

So, imagine if these changes were made.

The result would be a fairer program with less administrative burden, less likely to bankrupt either the government or individual seniors, and one more in line with modern insurance than with the ideas of fifty years ago.

It would be one that could accept enrollees below the age of 65, as you have suggested, Mrs. Clinton, on a pay-as-you go basis (since under-65s would not be entitled to the same level of subsidies as over-65s). In fact, it could replace Obamacare for over-55s—a politically popular move that would give enrollees more choices, potentially lower costs, and reduce taxpayer spending.

Senator Sanders’ supporters would love it as a possible step towards Medicare-for-All (but without costing a hundred thousand insurance jobs), President Obama would be pleased to see his liking for an Obamacare public option being implemented, Republicans would hate it, and you’d be back in charge of healthcare innovation. Why wait?

Roger Collier is the founder of the Campaign for a Rational Healthcare System ( He was formerly CEO of a national healthcare consulting firm.

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Steven FindlayRoger CollierDon LevitBobbyGvegasJ Antonucci MD Recent comment authors
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Steven Findlay
Steven Findlay

There’s one part of this post that all should agree on: the structure of the program needs to be simplified so consumers/seniors can better understand it. Most important, Congress needs to enact an out-of-pocket spending cap. As for allowing 55 to 64 years olds to enroll/”buy-in” to Medicare: it’s an idea whose time for serious consideration may have come…when Hillary becomes president. It has the potential to solve myriad problems…with coverage gaps for this at-risk, costly age cohort, and exchange enrollment and costs. But, as always, the devil will very much be in the details. For example, there no way… Read more »

Roger Collier
Roger Collier

A few corrections and clarifications to other comments: To Don Levit: 1. Medigap plans are inefficient because they require claims to be processed twice, by Medicare and by the Medigap insurer. They are expensive for the insured because they typically are high-profit (20 percent or more) for the insurer, and expensive for all taxpayers because they encourage excessive utilization of services. 2. There are actually two Medicare trust funds. The Part A trust fund is financed by payroll taxes and interest. The Parts B and D trust fund is partially funded by premium payments, but with general revenues paying for… Read more »

Don Levit

I wonder why the author thinks Medicare supplements are inefficient and expensive When discussing the solvency of the trust fund he neglects to mention that the trust fund actually receives in cash only about 15 cents on the dollar of the amount allocated This is because taxes go to the Treasury’s general fund where they then pay General appropriations including Medicare If Medicare consumes 15 percent of the budget, it receives 15 cents of every dollar allocated The balance is made up of debt which when utilized from the trust fund increases our total debt (debt held by the public… Read more »

J Antonucci MD

This post nicely describes the patient’ s side .It is staggering to try to enroll in medicare and try to figure out which of ones’ meds are covered and for which there are what level of copays and then, oh , the donut hole, but the medicare advantage plan does not cover the right meds and and but and the 20%, but oh the premiums and deductibles… Really hard. In addition I want to speak about he physician side of CMS complexity. We have an epidemic of diabetes in this country but to provide the very cheap little machines that… Read more »


“Medicare is absurdly, insanely overcomplicated. ”

Indeed. And MACRA and MIPS will make it even more so.

Dennis Byron

Mr Collier I agree with the thought expressed in the headline but the way you got there seems to be based on some basic misunderstandings of Medicare. I guess it’s OK to get to the right destination the wrong way but just FYI, you write: 1. “ When Medicare was created in 1965, it consisted of just two components, Part A hospital care and Part B physician and other care, with the split made only to gain AMA support for the legislation.” In 1965, almost all health insurance – for the 65%-70% of people who had it then — was… Read more »