The Future of Medicare Is on the Line in Budget/Debt Battle in Washington

While Democrats and Republicans have continued to battle in Washington over the federal budget and the so-called debt ceiling, leading to a shutdown of the federal government, conservatives are using the fight as an opportunity to try to include what they call “entitlement reform” in the discussion. What is entitlement reform? It’s GOP-speak for cuts in Social Security and Medicare. We’ll discuss Social Security and the program’s latest Trustees report in an upcoming edition. For now, let’s take a look at Medicare, a program that virtually all American workers will use after they reach age 65.

There is much to consider when talking about Medicare. The Republicans are fond of pointing out that the Medicare program faces trillions of dollars in unfunded liabilities. That is a fancy — and entirely inaccurate — way of saying that America’s health coverage plan for seniors is going bankrupt. In reality, however, Medicare is close to being financially solvent right now. But the question that our country needs to answer is how will Medicare be adjusted in future years, as America’s working population lives longer and longer. A brief history of the program is a good way to begin answering that question.

History

Many believe that Medicare had its beginning in 1945, when President Harry Truman sent Congress a message asking for legislation to create a national health insurance program. Truman’s plan called for universal coverage: every man, woman and child, regardless of age, would be insured for health care through a federal program.

The Truman proposal began a debate that lasted two decades. Truman saw a need to insure everyone, saying it was the best way to keep costs down, but his opponents called his proposal “socialized medicine.” The opposition campaign worked, because it used false arguments to convince many Americans that the quality of health care would decline under Truman’s proposal. By the end of Harry Truman’s administration, the focus had turned to providing a health insurance program for Social Security beneficiaries, a model that more closely resembles today’s Medicare.

The 1950s

In the early 1950s, it became clear that older Americans were facing a health care crisis. It became equally clear that the greatest single cause of economic dependency in old age was the high cost of medical care. Since seniors required more prescription drugs and more medical care than the general population, it was becoming extremely expensive and in most cases unaffordable for them to obtain health insurance. In addition, the 1950 census showed that the aged population had grown four-fold, to 12 million, in the last 50 years, doubling the percentage of elderly as part of the total population in the U.S. Making matters worse, in 1950 only one in eight seniors had health insurance. Private insurers had long considered seniors to be an illness-prone population that was a “bad risk,” and, yes, even many unions were generally unable to purchase coverage for retirees through employer-sponsored plans.

As a result of this situation, a national conversation began taking place about the need for a social insurance program to provide seniors with reliable health care coverage. Many public hearings were held in Congress and in communities across the U.S., and several proposals were considered by the House of Representatives. Still, by the end of the decade, there was no effective legislation enacted to help resolve the fact that more than 80 percent of the senior population in the U.S. was without health insurance.

Medicare Enacted

By 1960, when John F. Kennedy was elected President, it became obvious that private insurance companies were becoming increasingly unwilling to provide comprehensive, affordable health care coverage to the rapidly growing population of older adults. Between 1950 and 1963, the aged population grew from 12 million to 17.5 million, or from 8.1 to 9.4 percent of the U.S. population. At the same time, the cost of hospital care was rising at a rate of about 6.7 percent a year, several times the annual increase in the cost of living. Health care costs were rapidly outpacing growth in the incomes of older Americans. This led private health insurance carriers to repeatedly raise premium rates and reduce benefits, making private insurance too expensive or inadequate for seniors.

Finally, in July 1965, the House and Senate passed the bill that established Medicare, a social insurance program designed to provide Americans over age 65 with comprehensive health care coverage at an affordable cost. The bill was signed into law by President Lyndon B. Johnson, and the first U.S. citizen to enroll in the new Medicare program was none other than former President Harry S Truman!

Changes in Medicare

Of course, there have been many changes in Medicare since it was enacted 48 years ago. As an example, in 1972 Medicare eligibility was extended to two other groups that were facing problems in obtaining reliable health coverage: people with disabilities and people with end-stage renal (kidney) disease. In 1982 hospice benefits were added to Medicare. In 1984 federal government employees that were not included in coverage under the original Medicare law became covered under the program. This included the President and members of Congress and the federal judiciary.

The biggest change in Medicare in its 48-history occurred just 10 years ago, in 2003. That change was the Medicare Modernization Act (MMA).
Like so many other pieces of legislation, the Medicare Modernization Act is almost humorously misnamed. It should be called the Medicare Privatization Act. Touted by the Bush administration as a way to reduce Medicare costs, the law is actually a big step in the attempt to privatize Medicare. In addition, the Medicare Rights Center, an organization that advocates for Medicare recipients, says that many are likely to look back on the law’s passage in 2003 as the beginning of a battle over the very soul of the Medicare program.

Medicare Advantage Programs

In effect, MMA created a Medicare benefit that is not available through traditional Medicare. These are called Medicare Advantage programs. They are private Health Maintenance Organizations (HMOs) that solicit seniors to sign over their Medicare coverage. They offer all sorts of incentives to seniors to drop traditional Medicare, but then they often change coverage, raise premiums and deductibles and/or drop participants altogether. These plans are potentially unreliable and costly — since there is no guarantee that a private plan that offers coverage one year will offer it the next and there is no limit on the premiums that private plans can charge. In contrast, traditional Medicare has never dropped a single enrollee and it must limit what it charges in premiums to what Congress will allow.

Beware!

We have talked about HMOs and Medicare Advantage programs in Hotel Voice many times in the past. It is extremely important for members of our Union who are over age 65 or older to understand that if they join a Medicare Advantage program (or a private HMO) they lose the right to use the Health Centers as well as the right to use traditional Medicare. Seniors who sign up for Medicare Part D as part of a Medicare Advantage program will not be eligible to use the Health Centers’ pharmacies. This could result in substantial out-of-pocket expenses, depending on a number of factors. Seniors with questions about their benefits can always call the Benefits Funds’ Member Services department at 212-586-6400.

Any conversation about Medicare facing financial shortfalls or even going bankrupt should begin with the huge expense suffered by taxpayers as a result of the changes in the program that took place during the Bush administration. That’s because unlike traditional Medicare, the Medicare Advantage and Medicare Part D programs are available only through private plans that are wasting billions of taxpayer dollars through handouts to the pharmaceutical and insurance industries. While traditional Medicare negotiates doctor and hospital rates and pays them directly, several Congressional studies have revealed that Medicare Advantage programs are costing the federal government far more while providing seniors with far less. In addition, the Medicare Part D Program uses private drug insurers as middlemen and even forbids the federal government from negotiating drug prices! This, too, wastes billions of dollars.

Medicare’s Future

Now that you know the history of Medicare you are in a position to understand the future of the program. This is important, because even with the implementation of the Affordable Care Act — or what the media likes to call Obamacare — people over age 65 will be covered by Medicare. That’s why the program is becoming a target of government-haters like the Tea Party and other conservative Republicans. With people living longer than ever, the cost of the Medicare program is rising rapidly. As a result, various ideas are being tossed around to bring about so-called entitlement reform regarding Medicare. These ideas include means testing, higher monthly premiums and co-pays, more privatization and raising the age of eligibility.

Means testing would call for charging many seniors — depending on their income — a lot more for their monthly Medicare premiums. It would also mean eliminating some seniors from Medicare eligibility altogether, under some proposals. The other ideas are self-explanatory, and every one of them represents a loss of benefits, some more severe than others.

As the discussion about “entitlement reform” heats up in the months ahead as Congress continues to fight over the federal budget, all of us should remember that it is a code phrase for a cut in benefits or adverse changes in eligibility. Almost all of today’s workers have spent their entire working lives paying for Medicare through payroll taxes. Any reforms to Medicare — a program to which they are clearly entitled — must be carefully considered, and certainly not used by Republicans to create additional budget and debt crises.