With all of the controversy surrounding proposed cuts to Medicare, it would be a good idea to understand just what Medicare is, and is not.
Medicare is a medical payment program that pays for seniors, over the age of 65, who qualify for Social Security. If you do not qualify for Social Security, you do not qualify for Medicare. Medicare covers the cost of hospital care, doctors expenses and the cost of drugs. It does not pay 100% for any of these services. To be blunt, Medicare is NOT health insurance and it is also not an entitlement program. It is a program paid for by working Americans who contribute to it their entire lives.
While Medicare needs serious reforms there are countless misconceptions are to the solvency of the programs and how it’s funding works. Medicare will be able to pay full benefits for almost 15 more years, and 90% of benefits for decades after that.
Medicare needs reform, not cuts, because of the way it was initially structured, because of retiring baby bommers and due to it’s incredible success in increasing the longevity of our nation’s seniors. Since 1965, Medicare has led to better health for most seniors and thus has increased their life span. Since seniors have better health due to more use of the health care system, and longer longevity, cost must increase. Also, as baby boomers began to qualify for the program, a higher percentage of the population was ulitizing the plan. No viable attempt has been made to restructure contributions to cover this increase in use, even though we have known this was going to happen since the advent of the program.
Another reason contributions have not kept up with use is that for the last twenty years, the number of high paying jobs, and therefore the money going into the system has been declining. With fewer and fewer workers contributing, especially now during this long lasting unemployment phase, nowhere near enough money is collected.
The House of Representatives has passed a disastrous plan to revise Medicare with the Ryan budget. Their plan would change Medicare from a non-insurance payment program to one of a voucher program to buy insurance on the open market. That is, seniors would buy health insurance the way most others, who are not in an employer health plan. Seniors, depending on their income would receive a Federal subsidy which would barely cover the ever-increasing costs of private insurance.
Let’s talk about insurance. The basic premise with insurance is spreading “risk”. That is, the more individuals in the pool, the more the risk is spread. This is true for auto, life, home and health care insurance. Basically, those who use it less are subsidizing those who do, but the overall intent is to keep prices low for all. Auto, and other insurances cover risks, but charge higher rates for high risk groups. Note, the rates for single males under 25 years old and much higher than other groups. I don’t think ayone would disagree that senior citizens are a high risk group needing far more care than other groups. Health insurance now does not have to consider this group when the develop their rates because seniors are part of the Medicare program. Because of this they can keep rates relatively low.
What will happen when we add this large high risk pool to the existing system? All rates will escalate and the seniors will receive subsidies. As a consequence, more and more employers will opt out of the system leaving more and more of those under 65 unable to afford their own health care.
The last consequence is the administrative cost increases which will occur when all Americans will have to purchase their insurance in the “open” market. It is estimated (by the Medicare Administration and the Congressional Budget Office) that the cost to administer medicare is 5%. Private Insurance bare an administrative cost of between 15% and 20%. Add to that their profit margins and other fees and sometimes as much as 40% of the cost of private insurance does NOT go to improve the health of one person. We can do better than that.
We must strengthen Medicare for future generations. But it seems that some members of Congress are not looking for responsible solutions but instead are looking to dismantle the most successfull health care program in American history all while giving more tax breaks to millionaires and corporations.
