Myths about Medicare, the Deficit, and Consumer Choice

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Before Medicare began in 1965, many American senior citizens – and their children – struggled to pay for their doctor bills. Ever since, Medicare’s been an American success story. Why, then, do so many Beltway pundits and members of Congress – including Mitt Romney’s running mate, Rep. Paul Ryan,  – go after it?

Some of its critics claim that slashing Medicare is the only way to control the deficit. Like most attacks on Medicare, this assertion is based on ideology, not evidence. Medicare’s critics often claim that rising federal health care spending is America’s biggest fiscal challenge. In fact, the federal deficit is bloated today primarily due to the Bush administration’s irresponsible tax cuts, economic mismanagement, costly wars, and increased defense spending.

Of course large numbers of retiring boomers mean Medicare will need more revenue. But Medicare costs won’t need to spiral out of control. The Affordable Care Act includes steps to limit per person health care price hikes. It’s already saving Medicare money. Yet Romney and Ryan promise they would work to repeal it.

What’s their alternative? The Ryan budget plan calls for extremely deep cuts to Medicare, while promising more and longer-lasting tax cuts for a few very wealthy Americans. Most House Republicans have already voted for that. It would end Medicare as we know it and instead force seniors to buy private insurance with vouchers that would cover less of their healthcare costs each year.

These vouchers would reduce seniors’ choices, not their costs. Why? Republican voucher plans assume that if government ends Medicare, private insurance companies will start to deliver cheaper, more efficient plans. But what’s their evidence?

When the nonpartisan Congressional Budget Office analyzed vouchers, it found that even a slight dip in future federal spending on health care for older Americans would drive costs up. Vouchers with slowly rising buying power would simply leave seniors and their loved ones to pay more out of pocket for bigger medical bills.

In fact, Uncle Sam’s already lost money on Medicare contracts with competing private health insurance plans. Although they spent more per patient, those private plans didn’t improve coverage or quality of care. Meanwhile, Medicare has shown that it bargains more effectively for better prices than most private insurers say that they can afford to do.

How are frail older people – one in three with cognitive impairments – supposed to wade through pages of fine print to understand new, complicated and often confusing “choices”? Is that what seniors really want? Surveys show most people care much more about being free to choose their doctors than to do complex comparison shopping among insurance companies.

Consumer choice, it turns out, is just a fig leaf that Medicare’s critics use to try to hide what would truly be in store for seniors if Medicare were to be gutted over time: fewer benefits, higher costs, and the loss of Medicare’s guarantee of access to a wide range of doctors and hospitals. What’s more, its supporters aim to mask their true aim by grandfathering in those over 55, keeping them from having to face a transformed Medicare program.

The Ryan budget plan wouldn’t really control Medicare’s costs. It would simply shift them to future senior citizens and make Medicare less efficient.

Virtually every other industrialized nation provides universal health insurance without vouchers or expensive copays and deductibles, and does so at strikingly lower per-capita costs than the United States. And the two nations that have expanded the scope of insurance coverage through regulated competition in the last two decades – Switzerland and the Netherlands – have seen sharp increases in medical and insurance costs.

There’s no good reason to weaken and eventually dump a program that’s met the needs of America’s seniors and disabled citizens so well for decades. Instead of wasting time and money pushing snake oil schemes to replace Medicare, let’s tackle the real problem of rising health care costs with sensible cost controls, paid for by taxing – not cutting taxes for – those who can best afford it. That way, Medicare can survive and succeed for a long time to come.

Theodore R. Marmor, 73, is professor emeritus of public policy and political science at Yale University and has testified before Congress about Medicare reform. He is a member of the Scholars Strategy Network, a new national organization that brings together many of America’s leading scholars to address pressing public challenges at the national, state and local levels.

21 Responses to “Myths about Medicare, the Deficit, and Consumer Choice”

  1. alice herb, JD, LL.M

    I am adamantly opposed to the Ryan plan to gut Medicare and Medicaid but while the heath care system is less broken for seniors, it is nonetheless flawed and needs much repair. The Obama plan of paying less money to physicians, hospitals, etc. is a poor idea. Increasingly physicians are opting out of Medicare because what they are paid is insufficient to cover their costs not to mention the mounds of paperwork involved. Excellent physicians are thus lost to seniors.making choices for people dependent on it fewer and possibly more risky. Moreover it often means that patients are separated from the very physicians they trust and rely on. It is not an acceptable situation but is only one area that needs fixing.

    • Ted Marmor

      The point of my comment was to criticize “myths,” not to explain how Medicare could be improved. But you should hesitate about the claim that paying less to medical professionals is “a poor idea.” The crucial premise is that a dollar of expenditure is a dollar of income and therefore any degree of reduction in the future per capita payments by Medicare will have to come out of someone’s hide. Medicare needs improvement for sure, but one place is using its payment power to force doctors and hospitals either to take no public money or treat beneficiaries of Medicare fairly. We have yet to discuss this serious matter in our public debates, but it is crucial to the success of the Canadian form of universal health insurance.

  2. James O'Barr

    Thanks so much, Dr. Marmor, for speaking truth to power regarding the politics of US health care generally, and Medicare specifically. Unfortunately, power isn’t listening, either because it’s dazzled by dollars and fearful of missing a payday or a future sinecure, or, as you point out, high and delusional on ideological fairy dust. One can only hope that this too shall pass before irremediable damage is done. While we’re waiting, and some of us are actively, some of us passively resisting, I hope we’ll all have the benefit of your wisdom and your voice.

    • Ted Marmor

      thanks for those approving words. Sadly, I agree completely with your description of the muddled state of American debate about medical care financing in general.

  3. Cris Elstro

    My understanding is that the “average” person pays over $100,000 less into Medicare than that person receives in benefits. I have read several different estimates. All of the estimates are eye opening and $100,000 is a low figure. The second part of this comment is that we obviously spend a lot more of our paychecks in private insurance than Medicare. It appears that the private insurance companies keep a lot of money that could and should go in to the public Medicare program. It is ludicrous to spend the most money on private insurance when one is younger and healthier and save the least amount of money for public insurance when one is older and less healthy. It would be great if we could switch the amounts paid in and pay out of pocket for health care when we are working. I have two questions:
    1. How much is paid into private insurance by the average worker and how much is spent on care?
    2. How much is paid into public insurance by the average worker ad how much is spent on care? I think this is eye opening.
    We need single payer with options on the amount of deductible. It could be paid through state or federal income taxes with five levels based on family income and deductible size. Health care should not be connected to work. Then Americans would have increased freedom to choose jobs.

    • Ted Marmor

      The first comment is, to my mind, misleading. It does not make any serious difference to American medical care whether a particular cohort “paid” for their care. Social insurance is a pooling device, not an investment. And, when Part A is short, all any government can do is pay less or have more revenue in. This is not a savings account, Medicare, but a social insurance pooling program, most obviously Part A.
      The problem of out of pocket costs is serious and not seriously discussed. Having cost-sharing income related is expensive to administer, useless as an allocator of care, and fails to separate worthy from worthless care. Bad idea, but a reeal problem.

  4. HK Books

    I have a medicare insurance which I rarely use due to good health but at least twice a month I get calls or mail from my medicare insurance company encouraging me to get some type of care. Our parents did not use nearly the medical resources that are being used today and yet I do not see a big difference in life expectancy. Have we not overdone the value of constantly having tests? Have we encouraged too much medical care and certainly at the end of life?

    • Ted Marmor

      Your comment is worrisome, the conflation of the government program Medicare with a supplementary insurance firm that contacts you about using care. Medicare does not do that, though from time to time you may get an announcement of the new importance of preventive checkups as a consequence of the health reform legislation of 2010. Too little care is as bad as too much, but it is not easy to figure out where one is on that spectrum.

  5. ralph freidin

    Underlying the debates over Medicare is the theme “How do we want to see ourselves as a nation?” When vouchers are proposed to replace Medicare, to me it says that as community, our neighbor’s health is not my concern – until it is your health that need attention When I hear that reducing payment to physicians will lead to fewer physicians accepting Medicare patients, I hear physicians more concerned for their own well being. Is there no responsibility to provide care for the citizens who have paid taxes so that a large part of our medical education was subsidized by our state and federal government? That we avoid the obvious, a single payer system, because health care is a commodity as much as it is a service in America.

    • Ted Marmor

      I agree with your sentiments, but differ only in your characterization of physician complaints about payment levels. When a public program pays as much of the nation’s medical bills as Medicare does, it needs to flex its muscles and try to make sure the care is widely available. See the answer above. But I do not complain about doctors’ complaining when their hourly payments are seriously inadequate. The remedy is yearly negotiations within a closed budget, where there are adaptations to anomolies like the relative rewards of some surgery v. old-fashioned discussion between patient and doctor.

  6. jane gross

    As a brand new Medicare recipient, my very first doctor’s visit was to an optholmologist who has now been tending to my serious eye issues for almost a year. He is 50 and I commiserated with him about being of an age where he would not be “grand-fathered in” in a Romney/Ryan Administration as I would. He looked at me like a naive fool. “Don’t count on them keeping any promises to you, either,” he said. Oh my!

  7. Jane gross

    Me again. In this, my first week on Medicare, I learned the doctor most significant to my physical health and overall well-being long ago opted out of Medicare. Do I replace her as if she were a puzzle- piece in my life? Or do I pay her $16,800 a year out-of-pocket? A week ago my retiree health coverage from the New York York Times paid 65 percent. No, I am not among the frail elderly, but lately I think about changing light bulbs being an unacceptable risk. Minor eye surgery is routine. Afterward, briefly, I’m an invalid. This has come as I shock. I assumed 65 was not much different than 40. But it is.

    • Ted Marmor

      Jane, you raise two very different issues. The first is your doctor’s rather casual–and misguided–prediction that Medicare will not be available in 15 years. This is silly. The increase in the numbers of Medicare beneficiaries, absent a catastrophic political change, will bolster, not weaken Medicare. So, tell your eye doctor to stick with his profession and decline the role of sage.
      The second issue is your doctor’s opting out of accepting Medicare’s fees as limit of what she can charge you (leaving out deductibles and co-insurance for this calculation). Medicare should make such exits more painful for doctors, but you should be able pay directly to the doctor and get reimbursed by Medicare. Check with you local Medicare and Social Security office. I used to know in detail, but cannot recall right now the applicable rule. But I know that you have medical insurance under Part B that will pay some. And the figure should not be $16,800 because that is the average of out of pocket costs for many items, including supplemtary insurance.

  8. Betsy Stone

    I am a caregiver for my nearly-96-year-old father. Weyerhaeuser, his former employer, recently converted their retiree health insurance to a system that requires retirees to navigate a Health Savings account and select a MediGap plan (or plans). Dad would be completely lost were it not for me handling all the details. No one seems to be talking about the complexity of a voucher-based system. For older seniors, who may be hearing impaired and who are unused to health plan selection, submitting claims, etc., managing health care in a voucher-based world would be very challenging. Medicare has its weaknesses, but it is pretty easy to use and understand.

    • Ted Marmor

      You are absolutely right. The worst feature of a voucher system is the burden on chosing coverage. The worst feature of American medical care for the insured is the complexity. Medicare began as quite simple and sadly C and D have complexified matters a lot, compounding the confusion that supplementary coverage adds in its effort to reduce out of pocket expenses when ill.

  9. Marge Applegate

    First I would like to say that the increased premiums for Medicare will, in 2014 exceed my premium for my private insurance. The government can increase costs like no other entity in the world.
    Second – universal health care in the “other nations” is not quite as rosy as indicated. I have (had) a relative in Sweden. Sweden has wonderful nursing home care. Unfortunately, it is rationed. She was on a waiting list for 3 years trying to get in and died waiting. Speak to me about dialysis, for example, in the UK – seriously rationed. Government care = biased rationing.
    Third – I believe that if we addressed Medicare fraud and government reallocation of the money, Medicare would not be in the “crisis” indicated.
    Fourth – I do not favor repeal of the ACA, but I do favor some serious clean up. The commissions listed give too much power with very little representation by the stake holders. Those with final approval power are often/mostly people with no medical knowledge.
    Fifth – I am so tired of the “blame Bush” response that has become almost knee jerk. Why not address the issues of Medicare and attempt to solve the problems instead of fighting over whose fault it is and whether voucher or government control are the answer. I worked in the government run Veterans Hospital. The care was not all that good and the red tape was staggering. I left after a year and a half b/c I could not handle the poor ethics of it and was powerless to change it. Yes, I am against government control of health care, but I am in favor of dealing with the issues and reforming care.

    • Ted Marmor

      Neither your first or second comment, Marge, is very plausible. First, I don’t use a single case of a Swedish nursing home to establish anything in general. Second, all systems of health care ration–by income (as in the US), by delay (as in many areas of American and other medical systems), by dilution (when time in the office is paid for at 15 minute intervals). So the hope for a rationless system is misplaced. Finally, your comment about HMO care is not understandable; the differences between Kaiser-Permanente and a commercial firm is large, but both may fallunder the HMO aCT. And your reference to the VA is at odds with many more positive evaluations. So, we disagree, which is not surprising since health care is about values and beliefs, not about established facts alone.

  10. Marge Applegate

    P.S. If you want a view of how government health care will look, study the HMO system.

    • Vijay

      Florida has a large number of Medicare Advantage plans aaablvile.a0 One reason could be the large population of seniors that retire to the state.a0 The first thing to consider if you are looking for a Medicare Advantage plan in Florida is that the plans are NOT state specific.a0 The are in fact county specific.a0 Check here to look up Medicare Advantage plans by state for 2012.a0 Chances are you will find a company in South Florida that is not at all aaablvile in the Northern part of the state.a0 One exception to this is United Healthcare.a0 They offer a plan that is identical across the state.a0 This is probably because of the size of the company.a0 They also offer a large network across the state.Source: medicare-plans.net

  11. david haber

    Nice of you to respond to everyone.
    I’ve always wondered about Medicare supplemental insurances. They advertise, “save thousands of dollars.” Yet, clearly the insurance company is a for-profit business, and it depends on people paying more, on average, for it than receiving in benefits. Has anyone evaluated the pros and cons of getting supplemental Medicare insurance? Does it protect you from medical bankruptcy? Is it a better investment than, let’s say, bonds (stocks are obviously more risky) which can be liquidated to pay for health care expenses in times of need? Thanks for considering this.