Medicare Is Lousy Insurance

The House budget proposal is serving as the latest piñata for Democrats who always use the exact same cudgel — “Extremist Republicans are threatening to throw America’s elderly into the streets!”

This, after these exact same Democrats cut half-a-trillion from Medicare to subsidize ObamaCare.

How do they get away with it?

Partly because Republicans have failed to tell the truth about Medicare for decades. They have enabled the Democrats to create this sacred cow because they either: (1) don’t know enough about it to articulate a different view, (2) don’t care enough about health care in general to become better informed, or (3) are so timid that they are afraid the speaking the truth will get them in trouble with the electorate.

Now their ignorance and/or timidity has come back to haunt them. Most of the elderly hold on to Medicare for dear life because there is nothing else available and they have no basis for comparison.

But the fact is that Medicare is a lousy insurance program. It would be impossible to sell a benefit structure like this on the private market.

California Health Advocates has published a handy dandy little table laying out the premiums, deductibles and coinsurance for Parts A and B. It would be interesting to put the table in front of some of the know-it-all health policy wonks in Washington and quiz them on it after they have studied it for fifteen minutes. I’m guessing not one in five would pass such an exam.

While ObamaCare made a big deal about out-of-pocket costs in private coverage, Medicare has absolutely no limit on out-of-pocket spending. None.

As a consequence, people on Medicare pay an enormous portion of their incomes on health care. The Kaiser Family Foundation finds that the average household on Medicare spends 14.9% of its income on health care, while the average non-Medicare family spends just 4.8%. These are averages, and the lowest income Medicare families are also eligible for Medicaid. If we leave out the Medicaid portion of the population, the average Medicare household actually spends 16.6% of its income.

Because of the coverage gaps in Parts A and B of Medicare, most seniors also obtain MediGap insurance (either directly or through an employer) and even then they don’t have the drug coverage that most nonseniors have. So enter Medicare Part D — a third plan which requires yet another premium. The typical senior, then, is paying three premiums to three plans. Each one has a different premium arrangement, different deductibles and coinsurance, and different coverage limitations.

So, in addition to being massively underfunded, Medicare is also vastly complicated and enormously expensive to consumers.

It is also rife with corruption, as the Medicare bureaucracy refuses to spend the money to make sure it pays only legitimate claims to legitimate providers for legitimate services. It prefers to round up a handful of crooks every five years or so and charge them with fraud rather than perform normal due diligence when paying claims.

It is a monstrous program. Republicans should be proud to offer the nation’s seniors something better.

This post first appeared at John Goodman’s Health Policy Blog.

Greg Scandlen is an independent health care analyst in Hagerstown, MD. He has over 30 years experience in health policy, especially in health care financing.