An eye on the long view

October 19, 2003

THE DRIVING force behind congressional efforts to redesign Medicare is the short-term prospect of pleasing older voters demanding prescription drug coverage. But it would be foolish to lose sight of the long view.

The aging population is growing, medical costs are rising, and the government's ability to subsidize health insurance is undermined by huge budget deficits for the foreseeable future. Meanwhile, a decline in employer-subsidized coverage for retirees and younger workers threatens to boost the demand for government help even higher.

As House and Senate negotiators draft their final bill, they have a duty to try to prepare Medicare for the challenges ahead. Costs need to be cut where possible, services need to be delivered efficiently as well as humanely; beneficiaries will have to carry a reasonable share of the load.

In this climate, adding an expensive new benefit to a program that is already financially unsustainable seems counterintuitive. But drug therapy that keeps patients out of the hospital is cost-effective, and demand for the coverage may have enough political momentum to allow for less popular changes in the program as well.

So, it is encouraging that Medicare negotiators seem to be summoning the courage to urge that wealthy retirees pay higher premiums than those less well-fixed. The original concept of a universal benefit for a universal premium is no longer affordable. Charging more for those with annual retirement incomes of say $70,000 to $100,000 a year or more is preferable to the options -- such as raising premiums for everyone; reducing benefits; or increasing co-pays and deductibles, which hit the sick hardest.

Means-testing is a relatively small step that would likely affect less than five percent of Medicare's 40 million beneficiaries. Federal taxpayers now foot the bill for 75 percent of all Medicare outpatient services so even with a surcharge on the wealthy, they're still getting a good deal. Negotiators should resist frittering away the savings on a collection process crafted so it doesn't look like a tax increase.

Two-thirds of Medicare's current beneficiaries now also have private Medigap policies, offered by employers or purchased on their own. With a drug benefit added, Medicare may evolve to the point where such additional coverage becomes superfluous.

Legislative negotiators appear to be headed in the wrong direction, however, on a proposal to charge a co-payment for home health care services. Care at home is costly, but not nearly as expensive as alternative hospital or nursing home care.

Co-pays for some services, such as office visits, can be helpful in discouraging overuse. But home health care is an approach that should be encouraged.

Instead of putting more burden on sick people, lawmakers ought to be looking for ways they can use the government's vast purchasing power to restrain medical costs. The obvious place to start is negotiating with the pharmaceutical industry for the sort of discounts they provide to Canada.

Preparing Medicare for the long-term is going to require more than cosmetics. For a stronger, fitter, more flexible program, a major overhaul is in order.

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