August 27, 2002

August 27, 2002 | Commentary on Health Care

ed082702b: Restoring Medicare To Good Health

When President Johnson signed the 1965 law that created Medicare, he hailed it as the end of Americans being "denied the healing miracle of modern medicine."

More than 35 years later, the prognosis is a bit more negative.

The program has failed to keep pace with modern medicine and is slow to offer access to the latest treatments and therapies. For instance, Congress did not approve Medicare coverage for annual mammograms for women over 40 until 1997.

Typically, once the FDA approves a technology, it takes another 15 months to five years for Medicare to cover it. It took Congress seven years to approve Medicare coverage for state-of-the-art bone-density screening. This bureaucratic lag is more than a nuisance-it keeps the program from meeting the needs of our seniors.

As for the debate in Congress over whether and how to add a prescription-drug benefit to the Medicare program, virtually everyone agrees that a program focused on caring for the elderly should cover such items. But none of the four proposals the Senate voted down before the August recess would have done what's necessary to help Medicare adjust for future medical progress or address its crumbling financial future.

When Congress returns after Labor Day, pressure will resume for senators to "do something" about prescription drugs. The danger, of course, becomes that senators driven by election-year concerns-a third are up for re-election this fall-will try to fashion a bill from the four bad ideas already rejected. Yet adding an expensive prescription-drug entitlement without making fundamental structural improvements to an already rickety program is unwise and puts future retirees at risk.

In just nine years, the first of the 77 million baby boomers will retire. Absent major health reform, most will be forced to give up their current private health plans and enroll in an unsound, government-run program that fails to provide seniors the care they deserve and expect. A report issued this year by the Medicare board of trustees says that in 2022 the program will begin paying out more in benefits than it takes in through payroll taxes-and that the trust fund will run out of money completely in 2030.

What Medicare needs is a complete overhaul-structural reforms that enable the program to adjust to progress and change. As a majority of the National Bipartisan Commission on the Future of Medicare, made up of members of Congress and outside experts, recommended in 1999, it should be modeled on the highly successful and extremely popular Federal Employee Health Benefit Program (FEHBP). The program provides health-care benefits-including prescription-drug coverage-to 9 million people, including members of Congress, retirees, federal employees and their families.

In the FEHBP, a variety of private health plans-at least nine at every federal workplace-compete for beneficiaries. Customers choose the plans that best fit their needs and pay extra only if they choose one with particularly pricey benefits.

In the case of Medicare, retirees would have an assortment of competing private insurance plans to choose from, and government would contribute the monthly premium-again, leaving any remaining premium dollars for the retiree to pay.

This system would ease current regulatory burdens on providers and administrators and better meet the medical needs of retirees. The forces of competition would push insurers to design health-care packages that work for seniors, not shortchange them. The availability of medical innovations, such as the latest high-blood-pressure drug and cancer screening, would increase as insurers looked to gain market share and keep their senior customers healthy. And employers could work with employees to set aside funds to further assist with health costs in retirement.

In the meantime, perhaps Congress should look to the bigger picture-how to fix Medicare once and for all. And it could start with the plan that works for members of Congress and their families-FEHBP. Then, perhaps, it could place the "healing power of modern medicine" within the reach of all seniors.

Nina Owcharenko is a policy analyst in health care at The Heritage Foundation, a Washington-based public policy research organization.

About the Author

Nina Owcharenko Director, Center for Health Policy Studies and Preston A. Wells, Jr. Fellow
Center for Health Policy Studies

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