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Mending medicare

The future of Medicare is hanging in the balance with revelations that in just nine years the programme will be bankrupt, leaving thousands without care and politicians with a major challenge

Medicare, the US federal government programme that provides healthcare coverage to people who are aged 65 and over, as well as to a limited number of people who are younger but are permanently physically disabled, has been part of the American social fabric since it was signed into law by President Lyndon B Johnson in 1965. From the beginning, the programme was controversial, with political opponents arguing even early on that it was too expensive and eroded personal responsibility.

However, Medicare now provides health insurance coverage to about 46.3 million people and is popular enough with America's citizens that politicians who propose cutting the services it offers do so at the risk of losing votes.

Not much is clear when it comes to the Medicare programme these days: complex proposals for overhauling an already complex system are competing for the public's approval, with any evaluation of the schemes being even further complicated by the obfuscations and exaggerations that are the weapons of choice in this sort of political battle. However, there is one point on which there is near universal agreement: something has got to change.

According to the Congressional Budget Office (CBO), at the current rate, the Medicare system will go bankrupt just nine years from now. So, as US Representative Richard Hanna (R-Barneveld) recently put it: "There are changes that are going to happen. How we get there is the big question."

The President's plan
President Obama's healthcare reform law aims to cut $100bn from the Medicare programme, but to do so largely by eliminating fraud and abuse rather than by cutting benefits. The CBO has projected that Obama's Affordable Care Act will slow the annual growth of per-person Medicare spending over the next decade below the rate of overall economic growth.

As a way to curb spending further, Obama has recently proposed strengthening the Medicare Independent Payment Advisory Board, a 15-member committee created through health reform legislation to make cost-cutting recommendations. The committee's recommendations will be binding unless they are overridden by large majorities in the House and Senate, but the board will be limited in the steps it can take – for one thing, it cannot cut patient benefits.

Republicans are calling on the President to disband the group, claiming that reliance on the board would reflect a lack of leadership on Obama's part. As of now, however, the group remains scheduled to begin holding meetings next year.

'As a result of the Patient Protection and Affordable Care Act, as amended, the financial outlook for Medicare is substantially improved compared to prior evaluations,' Don Berwick, MD, Administrator of the Centers for Medicare and Medicaid Services (CMS), wrote in a recent blog post on the CMS website. 'This improvement is not without some important qualifications, but it nonetheless represents a very positive change in the expected operations of the Medicare trust funds.'

Based on the cost-containment efforts of Obama's Affordable Care Act, Medicare is projected to represent 6.4 per cent of GDP in 2084, rather than the 11 per cent projected without the overhaul, according to Berwick.

Supporters of the legislation argue that Obama's plan slows spending without turning Medicaid into a grant that would leave it up to individual states to determine who gets benefits or into a programme in which seniors get federal help to buy insurance from the private market – two plans from other quarters that the President has strongly opposed.

Republicans' response
Many Republicans are sceptical that Obama's plan can deliver promised savings and complain that the proposal is short on concrete details.

Meanwhile, Congress must decide whether to raise the debt ceiling, the maximum allowable amount of debt for the federal government. If the debt ceiling is not raised this summer, the government will not be able to meet its financial obligations. In the midst of that crisis, some members from both the Republican and Democratic parties are pushing a number of budget reductions that could dramatically affect social programmes including Medicare. Some Republicans originally insisted that they would not agree to any plan to raise the debt ceiling that does not include radical changes to Medicare, but they have since backed away from that ultimatum.

In April, the US House of Representatives passed a budget resolution that would make major, long-term cuts to Medicare beginning in 10 years, with only four Republicans voting against the plan and no Democrats voting in favour. In the Republican-backed plan, authored by Budget Chairman Representative Paul Ryan (R-Wis.), the government would offer voucher-like payments to help people buy their own health insurance that they could select from a list of private health plans.

The battle
The CBO argues that the Republican plan is flawed because medical care costs are rising much faster than the consumer price index, meaning that the value of the proposed Medicare vouchers would erode over time.

The Democrats maintain that the plan could even leave some seniors with no coverage at all, as the private insurance companies would not be required to offer all seniors insurance. Even those who didn't have trouble obtaining coverage might have trouble paying for it, the Democrats add, claiming that out-of-pocket costs could more than double for Medicare enrollees. "I will not allow Medicare to become a voucher programme that leaves seniors at the mercy of the insurance industry, with a shrinking benefit to pay for rising costs," Obama said in response to the Republican plan.

In late April, a group of 200 prominent economists sent a letter to Congress urging them to forego the Republican plan in favour of Obama's Medicare proposal. "[Obama's reform plan] supports research on identifying those procedures that work best," the economists pointed out. "It emphasises payment reforms and new ways of organising delivery of care to slow spending growth while improving care."

The Republican proposal has not been popular with the public or with advocacy groups. AARP, the membership group for Americans over 50, recently issued a statement opposing the budget cuts and urging its millions of members to fight against them. 'Changing to the voucher Medicare system creates a gamble of whether the government payments would keep up with the rising costs of health insurance,' AARP said.

'The proposed limits on Medicare could force seniors to pay higher insurance premiums and copays, and threaten their choice of doctors and hospitals. Instead of making harmful cuts to Social Security and Medicare, Congress should cut down on waste, fraud and inefficiency throughout the healthcare system and target other wasteful and inefficient spending, including spending through the tax code in the form of loopholes and other unnecessary subsidies,' the group argued.   

Reckless and irresponsible
In early May, Republican leaders issued a statement ostensibly reaffirming their commitment to the Medicare privatisation plan, but the statement was so weakly worded that some pundits saw it as something close to an admission of defeat. 'We are committed to our budget and to making the reforms necessary to grow our economy and create jobs, preserve and strengthen Medicare, and put our nation on a path to pay down the debt,' said the statement, which was signed by Speaker John A Boehner (R-Ohio), House Majority Leader Eric Cantor (R-Va.) and four other top Republicans.

Still, some Republicans have remained loyal to the plan in the face of opposition and their leaders' potentially weakened stance on the matter. Representative Tim Huelskamp, a Republican from Kansas, is among those who have continued their support, arguing that competition among health insurance companies for the government-supported premiums would improve coverage and cut costs, while a component of the plan that would expand health savings accounts could help encourage people to be proactive about their health. "We need to have a model that will encourage folks to take care of their own healthcare," Huelskamp said at a recent public appearance.

Meanwhile, at about the same time as the Republicans released their joint statement, a coalition of 50 Senate Democrats led by Senator Sherrod Brown (D-Ohio) continued their battle against the Republican plan, issuing a letter to Obama calling the proposal 'reckless and irresponsible'.
'If Medicare is turned into a voucher system and the health reform law is dismantled, millions of seniors will be left under- or uninsured,' the economists wrote. 'This will add to the burden on our nation's already overwhelmed emergency rooms and result in increased demands on Medicaid as seniors exhaust their life savings.'

Kate FodorCorrespondent
Contact Kate Fodor at





16th June 2011


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