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Saturday, April 23, 2011

Memo to US Congress: "Hello?" Medicare is an Insurance Benefit!

Okay, I've tweeted, blogged and posted all over the Internet about Medicare being an insurance benefit.

It's supposed to be paid for with premiums deducted from beneficiaries' Social Security checks plus the contributions made from payroll FICA withholding.  So, last night on the PBSNewsHour with Jim Lehrer, there sits intellectually savvy David Brooks railing on Mark Shields about how money paid to Medicare is holding back our nation's ability to meet Medicaid obligations.  Oh boy!  This is exactly how misinformation gets perpetrated.  There's absolutely no way this lowly blog will educate Mr. Brooks about what he doesn't know, but I'm going to at least try "Medicare 101":

1.  Medicare is the best health insurance program in the world.  (Yes, David Brooks, in the world!). Because the cost controls are built into reimbursement caps to providers while premiums are supposed to meet the costs.  So, it's true, it doesn't really happen like that, but why?  Well, before Medicare was sold to Managed Care, the administrative cost of the program was less than 10 percent.  Then, of course, the Republicans wanted their insurance company friends to have a piece of the "aging of baby boomers" insurance pie, so the US Congress was sold on the idea of "competition", and Medicare Managed Care proliferated.  It was an awful decision except for one provision.  Medicare Managed Care put more emphasis on wellness initiatives thereby helping the insurance programs to become better than "sickness care".  Everybody knows, keeping people well brings down the cost of sickness care.  But, in order to reach this astounding conclusion, Medicare Manged Care consumed 25 percent of the money received from qualified beneficiary contributions, i.e., money used for advertising and administrative cost.  If US Congress wants to bring down the cost of Medicare, they should go back to the tried and true intention of the program - let the Centers for Medicare and Medicaid Services (CMS) run the program, reduce the administrative cost back to under 10 percent, hold on to those wonderful and cheap wellness benefits and get rid of Medicare Managed Care. Meanwhile, CMS and MedPac, the group that advises Congress about Medicare and Medicaid policies, could recommend a risk adjusted premium/cost model whereby my first sentence in this explanation would become reality.

2.  Of course, the above won't happen.  So now what?  I'll tell you what.  By increasing the beneficiary pool who are enrolled in Medicare, the program would benefit from higher premium contributions while spending less money on those who are younger than 65 years old.  It's a risk based model.  Let's say you have 100 people in a pool of people paying into Medicare but they range in age from 21 to 100 years old rather than being 65 and older - it's simple math. Each beneficiary pays a defined contribution based upon their age, but let's average $115 a month into the program for each person per month.  At the end of just one month, the sample Medicare program collects $11,500 from beneficiaries.  Now, multiply this by 12 months = $138,000 in one year from 100 beneficiaries.  Now, we see the 21 year old beneficiaries go a full year with no costs against the premiums.  Perhaps 10 of the 50 year old beneficiaries use outpatient services at a total aggregate cost of $30,000.  We now see a remaining $108,000 left in the fund to use for the roughly 85 other beneficiaries.  This is how Medicare should work.  The remaining $108,000 should be spent with less than 10 percent allocated for administration and the remainder of the money could be put toward the cost of providing care. Some people in the 85 persons risk sample will be healthy and not use any of the money while one person will likely consume about 25 percent of the entire pie. An actuarial analysis can be done based on something like my model and, "Voila!", Medicare can become a wonderful risk adjusted insurance program where everyone shares in the benefit, not just the expensive to care for 65 plus year old beneficiaries.

3.  Medicaid, on the other hand, is nothing like Medicare.  It's a federal poverty program that's going broke because nobody seems to want to fund poverty.

4.  Medicare, on the other hand, can be risk adjusted, the premiums can be increased or decreased based upon actuarial data and - MOST IMPORTANT - payments to providers like doctors and hospitals can (and are!!!) capped!!!  So, if the program is running deficits, the risk of running out of money can be shared between providers and beneficiaries - higher premiums and capped reimbursement.

Obviously, my simple Medicare 101 blog cannot cover the thousands of pages of Social Security, Title XX and Medicare laws which have been amended countless numbers of times.

Therein are the programs detail problems, i.e., the volumes of paperwork associated with these huge programs have a daunting effect on people's ability to learn the basics - like Mr. David Brooks, who speaks as though he has authority and knowledge when he has neither when it comes to the differences between Medicare and Medicaid funding, reimbursement methodology and actuarial analyses.

Although I enjoy David Brooks, as he and Mark Shields are my two favorite pundits on television (thanks to NewsHour for carrying them weekly) it's clear neither of these gentlemen should speak facts about programs they don't understand.  At least, in the Friday (April 22) commentary where Brooks mis-spoke, it was Shields who stood the moral ground in favor of protecting Medicare and Medicaid without assuming any authority about the concrete policies of either program. 

Again, I say, make Medicare the single payer health insurance program it should be and include everyone who works over 21 years old in the beneficiary pool.  For those who don't work, they should be included, so long as somebody pays their risk adjusted premiums based upon their actuarial data.  Perhaps, by creating a Medicare single payer universal health program, we might even eliminate or marginalize the poverty Medicaid program for all but the most indigent and those who cannot care for themselves. But, let's face it, the reason our government is unwilling to try this sensible approach is because a ton of money is being made by private insurance companies to sell useless plans, charge high premiums and not pay providers their costs.  So, as the political debate heats up to save Medicare, Social Security and Medicaid, we must educate people like David Brooks to understand the way Medicare should work.

# Beneficiaries x premiums - (less) $costs = Medicare.

Balance the equation.

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