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Executive Summary #1295es on Health Care

June 18, 1999

Executive Summary: Why an Unreformed Medicare System is Hazardous to Your Health

By

Too many Medicare patients are unaware that the quality of their health care is in jeopardy. The almost 40 million older adults and disabled persons who are covered by Medicare are subject to the most aggressively managed and overregulated health plan in the United States. In fact, the federal health care regulations, rulings, and paperwork pertaining to Medicare require over 111,000 pages, many times more than even the federal income tax code. The complexity of the system makes it difficult for both patients and their health care providers to understand what procedures and treatments will be covered under Medicare, and which ones will be ruled "medically unnecessary."

According to 1997 statistics from the Health Care Financing Administration (HCFA), over 19 percent of all denied physician and supplier claims are for services deemed "medically unnecessary." And this amount increases to 45 percent if claims that are denied for "reason of statutory exclusion" are excluded. Auditors for the U.S. Department of Health and Human Services' Office of Inspector General reported in February 1999 that if HCFA rules and regulations were followed in all cases, even more claims would be denied for lack of "medical necessity."

Members of Congress determine in legislation what can be covered under Medicare and at what price. They have avoided making the tough decisions affecting patients, however, by shifting responsibility for Medicare coverage to HCFA, which, in turn, regulates the delivery of health care by imposing voluminous rules, regulations, and guidelines on doctors, hospitals, and other health care providers. It is a profound mistake to think that Medicare patients are insulated from the negative effects of this huge regulatory system in Washington. If Members of Congress are genuinely concerned with improving health care for all Americans, they should examine the many roadblocks to quality care that the Medicare system imposes on those who provide health care to senior citizens and disabled Americans. For example:

  • In Medicare, "medical necessity" often is determined by distant bureaucrats using standards that are arbitrary and ill-defined.

  • Doctors who treat Medicare patients face a Catch-22 dilemma of choosing treatments based on their best professional judgment and facing fraud and abuse charges if the Medicare bureaucracy says the treatments were "unnecessary," or if it prescribes the treatments. This undermines the professional independence of physicians and imposes a de facto gag rule.

  • Patients who challenge Medicare denials of their claims face an arduous review and appeals process. For Medicare Part B claims, which covers physicians' and other outpatient services, the average time for administrative law judges to render a decision is 524 days.

  • Even if an appeal is decided in their favor, Medicare beneficiaries can hope to recover only the cost of the benefit itself, regardless of the extent of injury that resulted from the claim's original denial.

The real fix for Medicare is not more rules and regulations, another insufferable pile of paperwork, some palliative treatment, or tinkering at the edges. Radical surgery of the program's bureaucratic control is needed. The best approach to the problem of patient care in both the private and public sectors is the expansion of patient choice, which would enable individuals and families to pick the kinds of plans and benefits they personally want and need.

The National Bipartisan Commission on the Future of Medicare came close to a formal recommendation of expanding choice when 10 of its 17 members supported a model for reform similar to the consumer-driven system enjoyed by federal employees, Members of Congress, and congressional and White House staff--the Federal Employees Health Benefits Program. In Medicare, choice would mean patients could keep the traditional plan, choose a superior private plan, or bring their private health plan with them into retirement for primary coverage but obtain a government contribution to offset its cost.

Today, real Medicare reform is medically necessary and should put patients first. Members of Congress should create a new system based on choice and competition that respects the personal liberty and privacy of Medicare patients as well as the medical expertise of their doctors.

Sandra Mahkorn, M.D., M.P.H., M.S., is Visiting Fellow in Health Policy at The Heritage Foundation.

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