Jason Saba Miss Prockovic English 363 March 12, 2010

Medicare Reform: Redistribution of Aid After President Franklin Delano Roosevelt enacted his New Deal reforms and pulled the nation out of the Great Depression, he attempted to pass a bill through Congress that would provide Social Security for America¶s elderly. In 1965, twenty years later, President Lyndon B. Johnson introduced an amendment to the Social Security Act which would change the nation forever (³Social Security over the Years´). He called it Medicare, and it would provide healthcare for the elderly until their passing. Today, Medicare is facing serious financial issues and is being debated fiercely by democrats and republicans. Although many may have different views on how to fix Medicare, the best way to do so would be to raise the retirement age, allow the elderly to opt out, and redistribute benefits based on health. Medicare is a health insurance program run by the government designed to give benefits to those at or above the retirement age, 65, and offer benefits to those who are permanently disabled (³Social Security over the Years´). Beneficiaries are allowed their pick of three types of Medicare: Medicare Part A is usually automatically given to those that have reached retirement age and covers overall medical care and hospital stays. To receive all benefits under Part A, one must fully pay a yearly deductible. Medicare Part B is voluntary and mostly covered by the government, with the beneficiary paying a monthly premium and an annual deductible.

Medicare+Choice, also known as Medicare Advantage, is a third option in which Medicare pays HMOs (Health Maintenance Organizations) a set amount each month while members pay another monthly premium on top of their Medicare Part B premium. Medicare Advantage allows for more choice and greater insurance when an incident happens (³Social Security over the Years´). The idea of healthcare for all was not new towards the end of the Great Depression. Presidents Franklin Delano Roosevelt and Harry Truman had both supported legislation for national healthcare systems. (³Update: Medicare and Medicaid´). In 1943, a House representative introduced the Wagner-Murray-Dingell bill, which would create a national health insurance program to be funded by a payroll tax. Congress ignored it until it was reintroduced two years later. It was heavily debated but never voted on. The ProQuest staff reported that many conservatives on the political right opposed national healthcare and fiercely linked it to socialism and communism (³Healthcare Reform Timeline´). Those who supported Medicare argued over whether it should be compulsory or voluntary and who it should be applied to: low income or high income, or both. Not until 1965 when President Lyndon B. Johnson was in office was Medicare finally amended into the Social Securities Act (Foner & Garraty). Congress decided on a middle ground: Part A would be compulsory and Part B would be voluntary. The article by Eric Foner and John Garraty continues to explain that it would be applied to all persons of retirement age and not applied to the disabled until 1973. In 1988, those labeled with catastrophic conditions were amended into the bill, but it was repealed less than a year later as costs soared. In 1997, under the Bush Sr. Presidency, Congress passed the Balanced Budget Act, which established the Medicare Advantage program. The program allows for more choice and less government spending. It is now 2010 and President Obama is eager to pass a series of

healthcare reforms. The issues surrounding these reforms spark many debates and will decide for the future of Medicare, as discussed below. One problem with Medicare today is that it is unprepared to handle the 77 million Baby Boomers reaching the age of retirement. Sue Kirchhoff of USA Today Magazine outlined the future of Medicare if no action on boomers was taken. She said, ³By 2017, Social Security is expected to start paying out more than it collects in payroll taxes« That gap could be addressed by raising taxes or cutting benefits by a like amount´. Another issue mentioned in the article said that not only will the number of beneficiaries increase, but they are living longer, which means Medicare would have to provide benefits for them and for those soon to retire. It is an ultimatum; if Congress does act now, someone is surely going to suffer (i.e. insurers, beneficiaries, or the public). If Congress doesn¶t act now, Medicare will surely go broke. Another issue surrounding Medicare is the high cost and poor quality of prescription drugs. The Alliance for Retired Americans Educational Fund report that ³between 1994 and 2005, the number of prescription drugs purchased has increased 71 %± from 2.1 billion to 3.6 billion´. President Bush¶s Medicare Modernization Act (MMA), according to the Centers for Medicare and Medicaid Services, is designed to provide the elderly and disabled with drug benefits. However, the alliance argued that because of the act, Medicare is now paying 2% more than it had in the past five years. Pharmaceutical companies are abusing their revenue by taking more for profit and marketing and spending less on research and development. Furthermore, the issue with the Medicare Advantage choice continues to be debated. An article from the Medicare Rights Center states that ³the government pays the private insurance companies between 12 and 19 percent more than it would cost Medicare to serve the same

people´ (³Too Good to Be True: The Fine Print in Medicare Private Health Plan Benefits´). It goes on to say that Medicare Advantage does not provide quality nor affordability. Out-of-pocket costs increase dramatically as private plans become more complicated. Although private insurers are forced to meet certain regulations, they can still choose how to carry out those regulations; whether or not they want to lower or increase copayments is their choice. Medicare Advantage poorly enforces it¶s regulations and does not compete with Medicare Part A. Some people have proposed solutions to fixing Medicare¶s issues with financing. Doug Bandow and Michael Tanner, writers for USA Today Magazine, believe that increased deductibles, an annual amount that beneficiaries must pay before receiving most or all of their benefits, would make up for the increased number of elderly and disabled persons enrolling in Medicare (³The Wrong and Right Ways to Reform Medicare´). They say that the deductibles should be ³adjusted each year to be large enough to keep Medicare expenditures no greater than revenues´ (Bandow and Tanner). In addition, they propose raising the eligibility age. They argue that as the life expectancy rate rises, so should the eligibility age. In doing so, Medicare beneficiary numbers would substantially decrease, allowing for less spending and more quality care. Their final suggestion was to allow the elderly to opt out of the program in exchange for ³a voucher equal to the average annual per capita expenditure under Medicare´ (Bandow and Tanner). Currently, all retirees are automatically enrolled into Medicare Part A at the age of 65 (³Social Security over the Years´). Those who choose this option can decide what to do with that voucher: whether to save it or use it to purchase private insurance. This way, the elderly will not be struck with the increasing costs of premiums if a catastrophic accident were to occur (Bandow and Tanner). They would be able to have more choices with their private insurer and would be taking less money from the Medicare program.

Others believe that the government should focus Medicare reform around prescription drugs. The National Committee to Preserve Social Security and Medicare (NCPSSM) advocates the addition of Medicare Part D to the program. Medicare Part D benefits would allow the Medicare program to negotiate prices on prescription drugs with pharmaceutical companies. According to NCPSSM, ³establishing Medicare as the collective buyer of prescription drugs ± rather than thousands of individual plans ± would better harness the purchasing power of Medicare¶s 43 million beneficiaries and substantially lower prices´ (³The Government Should Allow Price Negotiations for Medicare Drugs´). They compared Medicare beneficiary prescription costs in 2006 to those of veterans of the same year and discovered that veterans received a significant discount on prescription drugs solely because the Department of Veterans Affairs (VA) negotiated with these companies to 42% of the Average Wholesale Price (AWP). They say that the savings contracted from these price negotiations could be used to solve other issues with Medicare. Another huge advocate of Medicare reform is current President Barrack Obama and his administration. President Obama¶s healthcare reform proposal would ³insure millions more Americans than the current system covers, while lowering costs and benefiting the U.S. economy in the long term´ (³Health Care Reform´). Obama is promoting competition between private insurers by creating a non-profit government-run healthcare program, affordable for all. The article goes on saying that the healthcare reform bills will create an exchange system which would allow beneficiaries to choose the plan and insurer that appeals to them the most (i.e. pricing, convenience). For insurers to appear on the exchange list, they ³would have to meet basic standards and would no longer be allowed to deny coverage or rice exorbitantly because of preexisting conditions´ (³Health Care Reform´). Some argue that the plan places a heavy amount

of regulations on insurers and puts too much power into the hands of the federal government. Others argue that the millions of new customers rushing for health insurance make up for these regulations and that ³if more people were insured, more people would pay their medical bills, which would bring down the overall costs´ (³Health Care Reform´). The article reports that the bills would fine individuals with higher incomes if they refuse to carry any form of insurance and would also fine employers with more than 50 employees that do not offer health insurance. Conversely, they would give subsidies to companies who abide by their regulations and offer health insurance. Furthermore, the bill would place a ³Cadillac tax´ on insurers whose customers purchase expensive healthcare plans. The tax would ³drizzle down´ onto the customers through the insurers. Although increasing deductibles, as suggested by Doug Bandow and Michael Tanner, will ease financial issues with the Medicare program, it creates more issues for the elderly. The point of this program was to make affordable insurance available for the elderly and the disabled. However, by increasing deductibles, it is no better than abolishing the program itself. Bandow and Tanner suggest that deductibles should be increased as the number of beneficiaries increase. By their logic, deductibles would increase dramatically as Baby Boomers reach retirement age. Not only will these increased deductibles anger new and current beneficiaries and force them to seek private insurance, but it would take even longer for them to fully receive their benefits, destroying the main purpose behind Medicare. On the other hand, they propose raising the eligibility age and allowing the elderly to opt out. This, in my opinion, would allow for more choice for beneficiaries and also allow for more time to come up with an effective solution for the baby boomer issue. It is not necessary to mandate a program that only takes more and more money from the government.

As for the issue with prescription drugs, I completely agree with the National Committee to Preserve Social Security and Medicare and their proposal to add Medicare Part D to the program. I honestly see no reason why Medicare shouldn¶t negotiate prices with prescription drug prices. It would increase the popularity of program by decreasing the prices of prescription drug costs and would save Medicare a huge portion of their annual budget. Beneficiaries would be able to receive the drugs that they need at an affordable price and Medicare wouldn¶t get flamed as much; everyone wins. Although President Obama¶s reform proposal has good intentions, it is flawed and unconstitutional. Obama¶s friendly smile is misleading; his plans for Medicare are a sample of socialism. He uses the uneducated and desperate public as a tool to promote his healthcare proposal ± he even created a Facebook account to appeal to America¶s future voters. The plan aims to insure millions more Americans, not including future baby boomer beneficiaries, with affordable healthcare. It promises more choice by allowing one to choose his/her insurer and pricing but fines those of high-income if they refuse to purchase insurance and large companies refusing to offer it their employees. These groups should not be punished for their success in our nation. Not only that, but the Cadillac Tax punishes those who want better and more expensive plans. Also, the exchange system is unconstitutional because the federal government places many regulations by controlling whether or not these private insurers succeed or not. By not being able to deny people coverage based on preexisting conditions, costs for private insurers would rise drastically, and even higher because of Baby Boomers! My solution to fix these many issues with Medicare would be to raise the retirement age, allow the elderly to opt out, and to redistribute benefits based on health. Beneficiaries under Part

A all receive the same benefits as long as they pay a yearly deductible since it is automatically given at the age of 65. My plan does not raise deductibles or decrease benefits. It does, however, decrease spending by specifically targeting those who are ill and providing them with the benefits. The way it does this is by allocating benefits from those less likely to be sick to those who are already ill or have preexisting conditions. I would implement this by forming an interest group called the People for the Redistribution of Aid (PRA). I would put up flyers around town describing the group and meeting dates. The group would receive funding through donations and required membership fees. As an interest group, we would support candidates running for the House or Senate seat who share our healthcare reform beliefs by directing funding to the candidate and his/her party. If this candidate is elected, he/she will propose bills to reform Medicare the way our group had suggested and Congress would then vote on it. Republicans will favor this idea since it does not place regulations on private insurers; beneficiaries will still have the choice to opt out of the program or switch over to Medicare Advantage program. Democrats will favor this idea because it won¶t cut into our deficit and will pull us out of the recession without raising deductibles or cutting benefits. Funding won¶t increase; it will redistributed. The quality of care will increase since fewer benefits will be wasted on those less likely to be sick. This plan is sure to work. To conclude, Medicare is an increasingly debated topic in our nation and although many people may have different solutions to fixing Medicare, the best way to do so would be by raising the retirement age, allowing the elderly to opt out, and redistributing benefits based on health conditions. It is an undeniable fact that Medicare will go bankrupt in 2011 once the Baby Boomers reach the age of 65. We must act upon this issue as it not only affects the elderly and disabled, but will also affect the everyday-working American once he/she turns 65.

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