Medicare reform comes to the fore

When it comes to trying to reduce federal government spending, the biggest issue is the ever-increasing cost of Medicare and Medicaid, the two largest government health care programs.

Recently, President Obama proposed reducing payments to health care providers and increasing copayments for wealthier recipients. But a lot more reform is needed.

Obama and some Republican leaders are considering making Medicare less complicated and having people pay more of their own health care costs.

Medicare involves four different kinds of insurance. Part A is hospital insurance. Part B is coverage for doctors’ costs. Part D deals with prescriptions. Medigap is supplemental insurance to deal with what’s not otherwise covered.

Part C is Medicare Advantage, a government-subsidized program that replaces some or all of the other parts. Its future is uncertain.

Medicare could be simplified by combining Part A and Part B. That makes increasing sense, because most doctors are becoming hospital employees.

A single program would have one deductible to be paid by the individual. That deductible could be higher than is usually the case with the two separate programs.

When people meet more of their medical care costs, it supposedly will make them more careful in deciding to get care. If today’s low patient payments promote wasteful and unnecessary usage, this approach could reduce program costs.

Obama goes even further. He dislikes private Medigap options that also may relieve the insured of any medical costs, because they encourage overuse. Even though such policies have high price tags, he would impose a special tax on them, either leading people to avoid them or pay even more for using them.

By increasing deductibles, Obama and some Republicans believe that people would have what House GOP Leader Eric Cantor calls “reasonable and predictable expenses.”

In fact, by setting fixed limits on total Part A and Part B outlays required of individuals, people might not even need to purchase Medigap coverage, according to the proponents of these reforms. If that proves to be true, total health care costs for the insured could decline.

Merging programs could lead to the eliminating a couple layers of insurance currently needed. Interestingly, for those eligible for Medicare, it would make the health care coverage look more like the single payer system.

Democrats could support cutting down on the number of insurers, while Republicans seem to like the idea of getting people to have an increased stake in their medical costs as a way of reducing the size of Medicare.

This concept has extended into the discussion of Medicaid, the program for lower-income people, which covers both seniors and younger people.

As part of the Affordable Care Act known as Obamacare, states were required to expand Medicaid, which they administer. The federal government would cover all costs of the program’s expansion for three years and 90 percent afterwards.

In approving Obamacare, the Supreme Court said the federal government lacked authority to force states to accept this change in Medicaid. But the Court said it could be offered as a voluntary program. Most states are finding it politically difficult to turn it down.

The federal Department of Health and Human Services and Arkansas have been negotiating an approach designed to make Medicaid expansion more appealing to reluctant states.

Instead of the new federal money going into Medicaid, it would be used to pay insurance premiums of newly covered people. The coverage would be provided by the new state insurance exchange, which is intended to provide a lower-cost alternative to traditional private health insurance.

This approach would require the participant to pay some costs and would support a market system for Medicaid rather than more direct government operation.

The problem with this idea is that the health exchange approach could be more costly than what Obamacare would pay for Medicaid. The reason? Like Medicare, Medicaid pays less reimbursement to health care providers than does a private insurer, even an exchange.

Some studies suggest that, over an extended period, the cost of the proposed alternative way of expanding Medicaid would be about the same as the state program. But, if those studies prove to be wrong, who will make up the shortfall?

Whatever the outcome of these discussions on Medicare and Medicaid, it is a positive development to see both parties and the federal government and some states talking about common solutions to reforming Medicare and Medicaid.

 
The question remains how to control hospital costs, which is the real driving force behind the rising cost of government health care programs.