V I E W P O I N T

The Truth about Medicare and Health Care Reform

Since its creation in 1965, Medicare has provided universal, reasonably affordable health care to millions of seniors. Medicare is an extremely efficient program, but it is not immune from the same cost inflation that is making health insurance unaffordable for millions of Americans under age 65. Medicare patients use the same doctors, hospitals, drugs, MRI machines etc. as everyone else, and although Medicare generally reimburses providers at lower rates than private insurance, it cannot overcome the tide that is pushing all health care costs higher every year.

This cost inflation is not sustainable for either the federal government or for seniors. The Medicare Hospital Insurance Trust Fund, which pays for Medicare Part A, is projected to be exhausted by 2017, at which point payroll taxes will only be sufficient to cover about one-half of hospital costs. Individual seniors are also bearing the burden of higher out-of-pocket costs for their health care coverage. These costs today consume about one-quarter of the average senior's Social Security benefit - an amount projected to continue growing over time. Even with Medicare, experts estimate the typical older couple may need to save $300,000 to pay for their health care out-of-pocket costs alone in retirement.

The goal of health care reform is to provide quality, affordable health care for all Americans. As our nation attempts to achieve this goal, Medicare must not be left behind. A key element of reform is to slow the growth of costs across the entire health care system so they more closely parallel growth of costs in the rest of the economy. This universal approach to cost containment is critical to the future of Medicare. If health care reform fails, Medicare will surely be singled out for cuts in subsequent legislation, as has been the case in numerous budget proposals over the years. Such cuts would cause the program to suffer and seniors to face growing difficulties finding care. It will become increasingly more profitable for providers of all types to serve patients with private insurance rather than Medicare beneficiaries, effectively resulting in rationing of care to seniors. Successful health care reform would make the entire health care system more efficient, thus maintaining a level playing field which protects seniors and does not leave them at a disadvantage.

The National Committee has not endorsed any specific health reform legislation, in large part because there is presently no single bill that has emerged from Congress. At this time there are three different bills that have been considered by Committees in the House of Representatives and one in the Senate, with a second Senate bill expected in the fall.

These bills can be expected to change as they move through the legislative process.

As an organization, we have defended the Medicare program for the past 25 years and would never support legislation that would hurt Medicare or the millions of seniors who rely on it. Seniors will decide on their own whether to support the final health reform legislation as it emerges from Congress. We believe it is critical that this decision be made on the basis of fact, not the fictions being circulated by certain vested interests and other opponents of health reform. For this reason, we have attempted to set the record straight about what is and is not being considered as health reform legislation moves through the congressional process. We hope this information will prove useful to America 's seniors as they evaluate the impact of reform on Medicare and their own health needs.

Frequently Asked Questions & Answers

Congress is considering cutting half-a-trillion dollars out of Medicare. How can that possibly not hurt the Medicare program?

The House legislation currently being debated reflect about $540 billion in Medicare savings over the next decade. During this period, Medicare will continue to grow, it will simply be growing about 3 percent slower than currently expected. By the end of the decade, the federal government will still have spent almost $9 trillion dollars on Medicare. The health care bills are designed to slow the growth of costs for all of health care, although only the Medicare savings show up on the Congressional Budget Office's ledgers because of the federal government responsibility for payment.

In this same House legislation, about 60% of the savings are reinvested back into the Medicare program. The largest portion of the reinvestment, totaling almost $230 billion, is being used to increase payments to doctors and other providers who treat Medicare patients. These providers are currently on track to have their reimbursements cut by 21% next January if nothing is done. According to a recent survey by the American Medical Association, a cut of even one-half that amount will result in 60 percent of physicians reducing the number of new Medicare patients they will treat, and 40 percent reducing their number of existing Medicare patients.

In addition to permanently correcting the physician reimbursement formula, the House bills invest significant resources into closing the coverage gap in Medicare Part D known as the "doughnut hole", eliminating copayments for preventive care, improving benefits for low-income seniors, and other Medicare improvements.

The Medicare savings in the bills are designed to improve the program rather than merely reducing government expenditures. For example, over $100 billion will come from eliminating the subsidies now being paid to private insurers to do the job traditional Medicare can do just as well. Another big savings initiative is designed to reduce hospital readmissions and ensure hospitals do the job right the first time.

Wouldn't it be better just to fix the Medicare program by itself?

The House bills currently reinvest much of the savings back into the Medicare program and would extend the solvency of the Part A Trust Fund by about five years. A key goal of health care reform is to lower the rate of growth of costs system-wide. Part of the reason this is possible is because lowering the number of uninsured Americans also lowers the costs for providers who are currently subsidizing their care.

If Medicare is singled out for cuts, seniors will inevitably face increased obstacles to finding care. As the differential between Medicare reimbursements and those provided by private insurance increases, providers will find it more profitable to minimize the number of Medicare patients they accept. More seniors will have problems getting the care they need from the providers of their choice. There are some pockets of the country where access is already a problem because Medicare reimbursement rates are lower than private insurance. If we single out Medicare for cuts, this problem will only become worse. It is critical that Medicare be included in health care reform legislation to maintain a level playing field for seniors and to ensure that Medicare is not left behind as improvements are made to the rest of the health care system.

Aren't we going to end up with health care rationing for seniors?

There is nothing in these bills that would ration health care. The bills are designed to help doctors and other providers have access to the most accurate information possible about which type of care works best. When that information becomes widely available, patients and their doctors can make informed decisions about what works best for them. In fact, the bills specifically prohibit using this information to determine whether a particular type of care will be paid for or not.

A good example of what the bills are attempting to achieve can be found in treatments for breast cancer. It was not that long ago when the standard treatment for breast cancer was a double mastectomy, a traumatic and dangerous procedure for women. Over the years, comparative effectiveness research proved that a lumpectomy could be just as effective at eradicating the cancer, without the higher risks and costs associated with mastectomies. Today, lumpectomies are considered the standard practice - a result of precisely the research the House bills would encourage.

I'm in a Medicare Advantage plan and am very happy with my coverage. My insurance company tells me these bills are going to take away my plan.

Medicare Advantage plans are plans offered by private insurance companies to Medicare beneficiaries. Many of these plans have flourished for decades. The Medicare Modernization Act created extra subsidies to entice more private insurers into the market because most private companies do not want to insure older people - a situation that generated the need for Medicare in the first place. These extra subsidies are paid for in part by taxpayers and in part by every other beneficiary in the form of higher premiums. It is estimated that every couple receiving Medicare will pay about $90 in additional premiums next year to subsidize those in the private plans.

Historically, Medicare Advantage plans have only passed on a portion of these subsidies to their beneficiaries while a significant portion has gone to profits. In addition, many plans concentrate these offerings in relatively lower-cost benefits, while expensive services such as chemotherapy are short-changed. The National Committee believes all Medicare beneficiaries should receive improved benefits, not only those who chose to enroll in private plans, and we will continue to advocate for improvements in Medicare's standard benefit package.

Both the House and Senate health care bills are expected to reduce or eliminate most subsidies to private insurance plans. There is nothing in the legislation prohibiting those plans that that are truly providing efficient and effective care from continuing to cover Medicare beneficiaries and competing based on cost and quality. If a plan is eliminated when the extra subsidies are phased-out, it is because the insurance company sponsoring it decided to put higher profits ahead of the seniors enrolled in their plans.

Won't these bills spend billions on health insurance for illegal aliens?

No, the bills are specifically limited to covering those here in this country legally.

What about death panels?

The whole issue of so-called 'death panels' is a scare tactic designed to create opposition among seniors to health care reform. In fact, there is nothing remotely like a death panel in any of the health care bills under consideration.

The provision allowing Medicare to pay for Advance End-of-Life Planning in the House bill is actually an extension of a provision that was originally included in legislation signed into law in 1992 by the first President George Bush. The original provision required hospitals and nursing homes to help patients with advance directives or living wills if patients so requested. This language was strengthened and expanded in the Medicare End-of-Life Care Planning Act of 2007, sponsored by Senator Johnny Isakson (R-GA) and signed into law by the second President George W. Bush. This new law required physicians to provide counseling on advance directives and other end-of-life issues during a patient's initial visit to the doctor as a newly enrolled Medicare participant (the "Welcome to Medicare" visit). While the legislation required physicians to provide the services in the initial visit, it did not allow them to be reimbursed for the time spent on the counseling.

H.R. 3200 makes two changes to the existing legislation: it provides for Medicare to reimburse physicians and others who provide the advance planning counseling, and it allows the counseling to take place outside the initial Medicare visit. Under the new language, this consultation could take place as often as every 5 years if a beneficiary voluntarily requests it and there has been a change in the beneficiary's health status. The language in the House bill does not mandate counseling or in any way limit services to seniors.

Isn't the public plan just another government take-over of health care?

The National Committee does not have an official position on the public plans being discussed in the context of health care reform. However, we believe the experience millions of seniors have had with Medicare, which is a government run program, can be instructive to anyone evaluating the need for a public plan in health reform. Medicare may not be perfect, but it has been a godsend to millions of seniors who were abandoned by private insurance companies. Most seniors are very, very happy with their Medicare coverage and worried they will not be able to afford it in the future.

When the Medicare Modernization Act that created the Part D drug benefit was passed, the National Committee fought hard to give seniors a choice to receive prescription drug coverage from a government-operated plan. The government does not have shareholders and is not required to make a profit like private companies, which is one reason why the National Committee firmly believes drug costs would be lower today if a government option had been made available to seniors enrolled in Part D. Those who cite the cost of premiums as evidence Part D is saving money are only looking at one portion of the cost, as insurance companies place the more expensive drugs in tiers that require higher cost-sharing by seniors.

This is the battle Congress is fighting all over again in the context of health care reform. Many believe Americans should have a choice to have their health care provided by a government-operated health plan - not that different from Medicare - and they are fighting to have that option included in the new marketplace that is being created for health plans. Those who do not want their insurance provided by the government will be able to pick one of the many private plans that will be available. But much like in the battle over Part D, insurance companies determined to protect their profit margins are fighting hard to prevent those under age 65 from having that choice.

This is really what the fight over the public plan is all about. True "government-run" health care would be accomplished through a system where the government owns all the hospitals and doctors are government employees. Such a system is represented in the United States by the health care provided to the military and military retirees, which is considered by most to be an example of some of the best health care available anywhere. Such an option is not even on the table in this debate. What supporters of a public plan option are attempting to do is give Americans the opportunity to choose a government-operated health insurance plan if they want one, rather than being forced to choose between private companies driven to generate profits for their shareholders.

I'm retired but not yet eligible for Medicare and I'm worried my former employer will eliminate my retiree health coverage. Will health care reform help me?

There are provisions in both House and Senate bills that are designed to help retirees who have health care from a former employer. There is nothing in current law that requires a company to provide insurance coverage for its active workers or its retirees. Currently few employers provide health care to their retirees, and many of those that do are either eliminating their plans or shifting more and more costs onto the backs of retirees. If health care reform is successful at slowing the growth of costs, it should make it easier for companies to continue covering their retirees. In addition, the House bills specifically provide $10 billion in subsidies to help cover part of the cost for companies that keep their retiree coverage. And the Senate is looking at allowing those aged 55 to 64 to buy into Medicare if they do not have health insurance available through their former employers. It is too early yet to tell how this issue will turn out, but clearly it is a problem Congress is attempting to correct.

Government Relations and Policy, August 2009