Medicare Reform Deja Vu

Published August 1, 2003

In 1988, President Ronald Reagan signed the Catastrophic Health Care Act–sweeping Medicare reform legislation meant to respond to what legislators saw as overwhelming demand for government-provided health care benefits.

But a revolt erupted once the public realized the new entitlement came with a steep price. Former House Ways and Means Committee Chairman Dan Rostenkowski (D-Illinois) was mobbed by more than 50 angry seniors in downtown Chicago. One senior citizen made media history by attacking Rostenkowski with her umbrella. Hundreds of thousands of letters protesting the new law wee delivered to the floor of Congress.

In a rare and rapid about-face, Congress repealed the legislation within a year.

The Medicare reform legislation now under discussion in Congress has set the stage for a repeat of one of history’s most obvious policy-making blunders. While opinion polls report the public’s concern over the health care system as a whole and Medicare in particular, federal legislators have moved ahead on a schedule that appears to be set more by political priorities than by sound policy considerations.

The positive spin lawmakers have put on the pending Medicare reform proposals obscures a financial reality awaiting seniors and all U.S. taxpayers: Neither bill currently under consideration will bring Medicare spending under control. The Senate measure promotes no meaningful financial reforms, while the House postpones any meaningful change until 2010.

If a reform measure is passed, the nation will be exposed to potentially catastrophic costs that will be passed on to the grandchildren of today’s and tomorrow’s seniors.

The House and Senate still must reconcile the plans each chamber passed in late June. Both bills contain serious policy flaws:

  • Low-balling the costs. Though lawmakers claim they can provide drug coverage to seniors at a reasonable expense, they rely on accounting tricks to underestimate the real cost. The $400 billion cost over the next 10 years is achieved by delaying the effective date of the benefit for three years. In 10 years the expected cost more than doubles–the program would cost more than $900 billion the subsequent 10 years.
  • Casting a wide net. Rather than target the prescription drug benefit to the one-fourth of seniors currently without drug coverage, both plans offer something for everyone in Medicare. That approach will encourage employers to drop drug insurance for seniors who now have coverage as a retirement benefit. The Congressional Budget Office estimates more than one-third of retirees would lose their company coverage and be forced into the Medicare plan.
  • Benefit gaps. Like 1988’s Catastrophic Health Care Act, the new reform proposals shift additional costs to seniors. In the Senate plan, recipients would pay their first $275 in drug costs out of pocket each year. Following that, the government picks up half the cost, but only until the annual drug bill hits $4,500. Then coverage stops until a senior has spent $3,700. Then the plan covers 90 percent of costs.

It’s anybody’s guess what Medicare reform will look like next week or next month, as Senate and House leaders try to reconcile the two measures. But if the result includes a prescription drug plan anything like what’s currently under consideration, politicians had better beware of little old ladies carrying umbrellas.

Conrad F. Meier is managing editor of Health Care News. His email address is [email protected].