Medicare Monitor

Medicare Monitor

The Palm Beach Post's veteran Washington correspondent, Larry Lipman, tracks policy makers and interest groups who are shaping the future of the federal health insurance program for the elderly.

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Medicare is the federal health care system that covers about 36 million people age 65 and older, plus 7 million disabled. It has four parts:

Part A Covers inpatient hospital care as well as nursing home, home health and hospice care. Nearly all elderly and disabled Americans qualify for Part A coverage.
Financed by a 2.9 percent payroll tax divided equally between employees and employers.

Part B Covers outpatient care, doctor’s services, durable medical equipment, home health visits and preventive care. Part B coverage is voluntary, but roughly 40 million are enrolled.
Financed by beneficiary premiums and federal general revenue. Current monthly premiums are $93.50. Starting this year, individuals whose taxable income is more than $80,000 will pay a higher premium.

Part C Medicare Advantage managed care plans provide health care normally covered by Medicare Parts A and B. They may also provide some other benefits, including prescription drugs, not covered by traditional Medicare. Oart C is voluntary; about 7 million beneficiaries are enrolled.
Financed by Medicare and beneficiary premiums, which vary among plans.

Part D Medicare prescription drug plans come in two types, those that just cover prescription drugs and those that cover drugs as part of a broader managed care benefit. Part D is voluntary. About 9.2 million beneficiaries are in stand-alone drug plans and about 5.1 million are in managed care drug plans.
The plans are private and financed by Medicare and beneficiary premiums, which vary among plans.
-- Larry Lipman

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Home > Medicare Monitor > Archives > 2008 > April > 29 > Entry

Leavitt’s cut-the-cake Medicare solution

By Larry Lipman | Tuesday, April 29, 2008, 05:05 PM

Everyone familiar with Medicare’s financial situation knows something must be done. Starting in October, the federal government will begin selling its Medicare trust fund bonds to keep the hospital portion of the program solvent. By around 2019, those bonds will be exhausted.

HHS Secretary Michael O. Leavitt keynoted a forum on Medicare today and met with health reporters to give his views on Medicare’s future. Without a change in course, he says, Medicare is “drifting toward disaster.”

Three things are needed to change course, Leavitt says:

• Separate the commitment to change course from the political pain of doing so. In other words, as long as members of Congress are going to be held answerable for every change in Medicare policy, they won’t have the political courage to make necessary painful changes any time soon. So Leavitt suggests some kind of extraordinary mechanism — perhaps like the way military base closures are adopted — so that Congress can set in place a series of “triggers” for action when the problem reaches a certain point.

• Change the framework of Medicare “to make value replace volume.” As it stands now, the more procedures, office visits, prescriptions, etc., that are involved, the more everyone in the health care system is paid. Medicare even pays for mistakes that lead to further medical treatment. One way to change the payment dynamic, Leavitt says, is to introduce competition for services based on price and consumer satisfaction, similar to the Medicare Part D prescription drug program.

• Address the demographic problem in which fewer and fewer workers are paying for higher and higher Medicare costs. That probably means current beneficiaries who can afford to do so will have to pay an even greater share for their coverage. Leavitt says those who have the capacity to pay more should pay more.

Leavitt acknowledges that these changes, which are not specific Bush administration policy, aren’t likely to be implemented soon.

But he suggests that the sooner Medicare’s course is altered the better. And he chides the presidential candidates — all of them — for not spending more time talking about this issue because it’s likely to impact whomever is elected, certainly by the time a second term rolls around.

One way to change course, he suggested, is the “cut the cake” solution he and his brother used to use when there was only one piece of cake left. One brother would cut the cake, the other got the first choice.

That means the parties have to devise a solution that is so fair, both will be willing to accept the outcome.

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