Medicine

Medicare: A lifeline, not a Ponzi scheme

In an earlier post (Medicare: We need to expand it, not cut it!, July 1, 2011), I commented on the proposals from politicians such as Wisconsin representative Paul Ryan and Connecticut Senator Joseph Lieberman to limit Medicare. I quoted economists Austin Frakt and Aaron Carroll (as cited by Paul Krugman (“Medicare saves money”, NY Times June 12, 2011), from their post on the Incidental Economist, that “…right now Americans in their early 60s without health insurance routinely delay needed care, only to become very expensive Medicare recipients once they reach 65. This pattern would be even stronger and more destructive if Medicare eligibility were delayed.” It is a stupid idea, more designed to engender the political support of people who do not think the issue through than to practically save money.

There are other similar proposals to “fix” Medicare that fit the same pattern: they superficially seem to make sense, but are actually nonsense. One of the most popular is the idea that we exclude “wealthy” seniors from Medicare, or, at least, require them to make a significant financial contribution. This contribution could consist of premiums paid to Medicare that were tied to income (or wealth, more relevant for retired people but much harder to assess accurately) or co-payments for services, again tiered to income. This seems to make sense – why not? There are many well-to-do elderly; why should currently-working people, who are struggling to make ends meet, have to pay for their care?

One reason is that the reason that Medicare is an “entitlement” because these people have paid for it in advance by their taxes during their working lives. Some of this is from the specific Medicare deduction that comes from each of our paychecks, which supports only “Part A” (coverage for hospital care), as well as from the general income tax revenue that pays for “Part B” (doctors) and “Part D” (drugs). People pay into these plans during their working lives, and draw the benefits when they need it when they are older. This is, in principle, what “saving” is about, but it goes beyond an individual retirement plan to cover everyone. This is the nature of social insurance.

Governor Perry of Texas, a Republican candidate for the presidential nomination (perhaps, if we are lucky, soon to be former candidate), called Medicare (and Social Security, vide infra) “Ponzi schemes”. : “Perry: I think every program needs to stand the sunshine of righteous scrutiny. Whether it’s Social Security, whether it’s Medicaid, whether it’s Medicare. You’ve got $115 trillion worth of unfunded liability in those three. They’re bankrupt. They’re a Ponzi scheme.” They are not. A “Ponzi” scheme involves taking one person’s property (money), and using it to pay off previous investors, who are seeking to make money on their investments. Medicare (and Social Security) are social insurance programs where the benefit is understood to be care (in the case of Medicare) or [minimal] income (in the case of Social Security). The entire beauty of both of these programs is that they involve everyone. Thus the well-to-do as well as the poor and the people in the middle have a stake in keeping the program running and effective.

If we were to exclude certain sectors of the population from receiving benefits from either of these programs, it would undermine the collective investment that we as a society have in each other. The better off, better educated, more empowered now fight for these programs because they are beneficiaries, and results in their being in place for those who are not so privileged. It is probably this very sense of mutual interdependence that makes ideological conservatives oppose them, but such opposition is short-sighted. The reason for having social insurance programs that make us interdependent is that – we are interdependent. The society, in the US (and, arguably worldwide) requires not only healthy, educated, productive workers but also consumers who are able to purchase goods and services. Billionaires like Warren Buffett call for higher taxes on the wealthy (an idea picked up on by President Obama) because they understand that a prosperous society requires contributions from everyone. We ARE in it together.

If we were to exclude only the very wealthy from benefits under these programs (say the top 1%), it would not hurt them financially, but it would hurt the rest of us because these very powerful people would no longer have a personal stake in supporting such programs. And, of course, it would save essentially no money; the corollary of the enormous concentration of wealth in a small number of people is that there are not very many of them. Thus, if they never drew a single dollar of benefit from Medicare (or Social Security) the programs would not be any better off. In order to save money, we would have to exclude a lot of people beyond the very wealthy (10%? 20%? 30%? of the population), and this would be then excluding a large section of the population, and truly reduce support.

More recently, Jane Gross writes in the NY Times about “How Medicare fails the elderly” (October 16, 2011). Her emphasis is not on excluding people from coverage, but rather on not covering services that do not enhance, and often decrease, recipients’ quality of life. Medicare pays for many services that fall into this area, and the reason has rarely to do with the desires of the patients themselves. “Of course, some may actually want everything medical science has to offer. But overwhelmingly, I’ve concluded in a decade of studying America’s elderly, it is fee-for-service doctors and Big Pharma who stand to gain the most, and adult children, with too much emotion and too little information, driving those decisions.” Among the treatments that she notes that Medicare pays for but are usually not medically indicated (especially in the old, debilitated, and demented) are feeding tubes, many forms of surgery (particularly abdominal and joint replacement) and “tight” control of Type II diabetes. All of these treatments have high risks and rarely prolong life while significantly decreasing its quality.

Gross notes that when these complications arise patients often need long-term, very expensive (she cites costs for her mother 8 years ago of $14,000 a month!) care in nursing homes, which Medicare does NOT pay for. Medicaid will, but only after the senior has exhausted all their resources (including savings house, etc., and then only in some nursing homes which are willing to take Medicaid reimbursement, and these are often not those of highest quality). Thus, by paying for the performance of procedures that do not help, Medicare leads patients into worse quality of life at high cost.

Clearly, the motivations of the drug and device makers, hospitals and physicians and nursing homes are often (in some cases usually or always) financial, but this is not the case for the family members, who mostly want to “do the best” for their parent or relative. However, given unclear guidance by their physicians, or incorrect information from any source, they may associate “doing something” with “doing the best thing”; often “doing the best thing” is not doing “something”. If Medicare did not pay for unnecessary and potentially harmful procedures, there would be little motivation among providers to do them, and it would not only save money but more important improve the health care and preserve the dignity and quality of life of people in their last years.

There is a solution to the potential bankrupting of Medicare. One: Pay for only medically necessary and indicated services. Two: revise the Medicare fee schedule to maintain the payment for primary care services but decrease excessive payment for high cost specialty services. Three: Expand Medicare to include everyone. Then we all have a stake, right now.

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