Slowing the Speeding Medicare Cost Train

July 19, 2011- The Medicare train continues to hurdle down the tracks towards its rendezvous with bankruptcy. Forty six million are currently on board, and 12,000 baby boomers will be joining the Medicare passenger list each day, 78 million over the next 18 years.

Obamacare was designed to slow the ride to Medicare insolvency. But that was before the 14% increase in costs since the law was enacted. It was before it was revealed Medicare utilization is 50% higher than private health-insurance utilization, even when one compensates for aging and disease. It was before President Obama, in the heat of the budget debate, said Medicare cuts were “on the table,” without being specific. It was before ARRP and the American Hospital Association weighed in saying Medicare cuts were “unacceptable.” And it was before the current budget debate, in which both sides fear being electrocuted by touching the “third rail” of American politics - seniors who vote and who are likely to swing the 2012 Presidential election.

Somehow this train of events reminds me of the title of a February 21, 2011 Robert J. Samuelson column in the Washington Post, "Who rules America? AARP."

And it was before the question was asked, “Why do Medicare Patients see Doctors so much?” The answers from Merrill Matthews, resident scholar at the Institute for Policy Innovation in Dallas, and Mark Litow, a health –care actuary, in a July 14 Wall Street Journal OP-Ed piece are:

• Lack of cost-sharing between patients and Medicare, thus insulating patients from the true costs of services. High deductibles and health savings accounts, say the authors could remedy this problem.

• The widespread use of Medicare supplemental insurance, which further insulates patients from the true costs.

. Confusion among seniors at what's actually at stake and what costs when paying Medicare bills. Simplify Medicare, assert the authors.

• ObamaCare’s promise of “free preventative care,” which further drives up spending.

• The promotion of Medicare as an “free entitlement,” which obscures the fact that patients contribute only 1/3 of what Medicare actually costs, with taxpayers and private payers taking up 2/3s of the slack. The result has been a spending explosion. Part A (hospital expenses) were projected at $9.1 billion; actual spending was $67 billion and are now nearing $500 billion.

• Fraud and abuse. The GAO, in a report released in March, says “improper payments” Medicare and Medicaid totaled about $70 billion.

Matthews and Litow conclude:

“Medicare needs to be revamped. The benefits package needs to be rationalized so seniors can tell what their financial exposure is and choose from the private sector, high deductible options, including a Health Savings Account plan. Seniors need to benefit financially from good choices. Giving them more options and control is the best way to reduce that 50% additional utilization while preserving the program for the future.”

Matthews and Litow believe “Relying on unelected bureaucrats, such as ObamaCare’s Independent Payment Advisory Board, to ratchet down Medicare price controls won’t control over-utilization.”

In the end, government cost controls will not work. They never have and never will. Only informed Medicare recipients, with a nominal “skin in the game,” and knowledge of costs at stake, can effectively control costs.