February 21, 2003 | Commentary on Health Care
Listening to the debate in Washington over Medicare, you'd think
the whole issue revolved around the need for a prescription-drug
benefit. But as President Bush emphasized in his State of the Union
address, the problem goes much deeper. Medicare faces serious
challenges, and if we don't act soon, we'll likely wind up with
exploding costs, crushing taxation and lower-quality health
Because it's based on outdated principles of central planning and price regulation, Medicare is in a managerial crisis. The program is governed by literally tens of thousands of pages of rules, regulations, guidelines and administrative decisions that cover virtually every aspect of the financing and delivery of medical services for America's seniors.
This metastasizing regulatory growth imposes enormous administrative costs on doctors, hospitals and other health-care providers who must comply with a growing morass of Medicare paperwork. An American Medical Association survey of doctors found that more than one-third spend an hour completing Medicare paperwork for every one to four hours of patient care. A similar study for the American Hospital Association found that for every hour of care delivered to a Medicare patient, hospital officials spend roughly one half-hour or even more complying with Medicare paperwork. Yet every dollar spent coping with Medicare's bureaucracy is a dollar less for patient care.
Another organizational pathology: Medicare's complex price-control system. Over the last several years, doctors have seen lawmakers cut their reimbursements and pile on reams of regulations. More than eight out of every 10 health-care professionals say they don't consider Medicare's fee schedules "fair," according to a survey by Yankelovich Partners, a nationally prominent survey research firm. In many cases, the Medicare reimbursements don't begin to cover the cost of providing care to Medicare patients. Small wonder that more doctors aren't accepting new Medicare patients.
Medicare also faces a long-term financial crisis. The aging population will mean a doubling of the number of Medicare beneficiaries over the next three decades. As a result, a proportionately smaller base of working taxpayers will be burdened with larger payments for the progressively more expensive benefits of a rapidly growing number of retirees.
There's no question that the president and Congress must address the need for a prescription-drug benefit, particularly among poor seniors. But they also should focus their efforts on ensuring better coverage for all retirees. The best model is the Federal Employees Health Benefits Program (FEHBP), a consumer-driven system of competing private plans that covers nine million federal workers, retirees and their families.
Meanwhile, Congress could jump-start reform by taking two quick steps:
New retirees should be free to use the accumulated funds in
those accounts for routine medical services or the services of
specialists or alternative care -- whether or not they're covered
by Medicare -- as well as for prescription drugs. Such retiree
health-care accounts would also let new Medicare patients maintain
the personal relationship with doctors they enjoyed during their
working lives. Retirees should be able to pay doctors and other
health-care professionals directly from these accounts without
navigating complex Medicare rules or worrying about maintaining
their medical privacy or getting the treatments they need when they
The expansion of health-care accounts among retirees would promote direct patient payment for routine medical services, and thus maximize the efficiency of health care delivery among Medicare beneficiaries. They would also give doctors the freedom to practice medicine without having to cope with the bizarre regulatory restrictions, costly paperwork and maddening hassles imposed by the Medicare bureaucracy and its contractors.
But we must act soon. The time for bold action on Medicare is now. Never mind giving the program a facelift. America's retirees need to have their health-care program fully rejuvenated.
Mr. Moffit is director of domestic policy studies at the Heritage Foundation.
Originally appeared in the Wall Street Journal