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Medicare: Is Not So Cheap – Part 2

Stanley Feld M.D.,FACP,MACE

Medicare Part B plus Medi-gap is not so cheap and might not be affordable to many seniors. The promise of affordable universal healthcare with a single party payer is hard to believe if this is what is happening with Medicare premiums. However, most seniors can not afford to be without Medicare and Medi-gap. All of their retirement savings could be wiped out with a minor illness.

The magnificent thing about Medicare Part B is that each senior citizen is insurable at the same premium despite pre-existing illness. The guarantee of insurability despite pre-existing illness is a must in any healthcare reform insurance plan. The bad thing is fewer and fewer physicians are accepting Medicare because of the constant reductions in reimbursement. Therefore patient access to care is becoming restricted.

Patients are responsible for the entire retail price of the service if their physician does not accept Medicare payment. If their physicians’ do accept Medicare payment the patients are responsible for 20% of Medicare’s allowable fee. Medicare usually reduces physicians’ fee by 20-50%. Medicare reimburses the physician directly for 80% of its allowable fee. If patients have Medi-gap, it pays the remaining 20%. This means a physician’s fee for service of $100 might be reduced to a Medicare allowable fee of $70. Medicare would pay $56 dollars, Medi-gap $14 and the patient would be liable for an additional $30.

As the single party payer (Medicare) reduces payment (payment might be less than the physician’s overhead) and as Mediare’s rules become more complex and restrictive, physicians are forced to reject taking Medicare patients.

Hillary Clinton and the Democratic Party have not discussed these issues. They have not asked the patients or physicians where the problems are nor how they think they can be solved. The empty promise of universal coverage is all we hear. Barach Obama has not committed to this concept. He wants to get all the stakeholders to the table. Ms Clinton has attacked him for this stance as being weak.

It seems to me that he is the only one who believes there is more to the healthcare story than a flashy sound bite of universal insurance for all.

Medicare has been a godsend to people over 65 who do not have group insurance and are retired. People over 55 years old can not get healthcare insurance from carrier if they have any pre-existing illness without a coverage exclusion. Most are rejected outright. By the time Americans are 55 years old they have at least one preexisting illness. If they could get healthcare insurance it would be with after tax dollars.

Over 60% of Americans 60 years old have at least one risk factor for coronary artery disease. Obesity is an epidemic that has to be dealt with by providing patient incentives. It afflicts 50% of people over 60. The healthcare insurance industry does not want to assume the disease burden of obesity. It wants to pass this risk to the government.

I have pointed out that the healthcare insurance industry has stated that it wants to work with the states and the federal government to insure the uninsured. My interpretation of this statement is it wants to pass the risk on to the states while it insures healthy low risk citizens. If the federal government mandates healthcare insurance with a penalty to non covered citizens, the healthcare insurance companies would benefit by enrolling more healthy people and shunting the sicker people to the government roles. Citizen free choice would be eliminated. Hillary Clinton’s stated healthcare plan would cause this to happen.

What is the solution? Stakeholder incentives and appropriate rules of the game is the solution. Mechanism Design explains the construction of the appropriate rules. The playing field needs to be leveled for citizens to force the healthcare insurance industry, the hospitals and physicians to compete for their healthcare dollar at the best price. The government needs to remove all the artificial subsidies for secondary stakeholders, and shift subsidies to the patients benefit so that each pays a fair premium pretax premium determined by accurate means testing. Accurate means testing could result in a subsidy to many citizens. It will cost the government less if the patients owned their healthcare dollar than the ever escalating entitlement system supporting vested interests of the facilitator stakeholders.

The federal government has the power to do all of this without impinging on anyone’s freedom.

Medicare and Medicaid have failed as an entitlement. It is foolhardy to create a super Medicare or Medicaid system without further injuring our healthcare system and Americans’ ability to get good medical care.

As consumers, we stimulate the economy. Now is our chance to demand that he politicians give us control of our healthcare system. They are presently begging for our vote. We have to make it clear that they our not solving our problems. They are only going to make them worse. We must demand proper reform now.

Below are a series of blog posts I have published previously describing all the steps necessary to Repair the Healthcare System.

Ideal Medical Savings Account

The Definition of an Electronic Medical Record

The Ideal Electronic Medical Record

Medical Claims Data: The wrong measurement to control cost

Fall 2007 Summary Post- Part 1

Fall 2007 Summary Post-Part 2

Mechanism Design- Noble Prize in Economics 2007

Definition of Real Price Transparency

E-Prescriptions= Fuzzy Thinking

Inequality and Healthcare

The opinions expressed in the blog “Repairing The Healthcare System” are, mine and mine alone.

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