MEDICARE’S NEW BENEFIT: A TOUGH PILL TO SWALLOW

The Medicare program will finally have a prescription drug component. Whoopi!

Medicare was established to provide medical coverage for aged and disabled individuals whom the insurance companies did not want to insure. Insurance companies are in business to make money. The companies offer health insurance, hoping you’ll never get sick. They offer life insurance, hoping the policy will lapse before you die. They offer accidental death and dismemberment policies, hoping you’ll stay safe and in one piece. You get the picture.

So, Medicare is a very necessary and very essential government program. Programs such as Medicare are what makes us a great society. No, it’s not that we’re all optimistic and think we’ll be the next Bill Gates. It’s not that we built such modern wonders as the Empire State Building or the Golden Gate Bridge. It’s not even our status as the world’s leader. Our greatness springs directly from the benefits that we offer to our most vulnerable citizens.

People – well, politicians mainly – talk about the Medicare trust fund going broke. “Oh,” they exclaim, “the Baby Boomers are coming and by 2015 the trust fund will be bankrupt.”

Just yesterday, I read an article in Fortune Magazine (like many Americans I dream of being the next Bill Gates, too; it hasn’t happened yet, so …) that said the government deficit would be 44 trillion dollars by the year 2030 due to the coming of age of the Baby Boomer population. And that estimated deficit, according to the article, was very conservative. One of two main culprits for this expected deficit – the Medicare program.

Now, the government is about to pass a prescription drug component for the Medicare program, so you would think, the Medicare program will be bankrupt sooner. Right?

Probably not and here’s why. The new drug benefit doesn’t give a Medicare recipient too much of a benefit. Beginning in 2006, Medicare beneficiaries will pay an estimated $35 per month premium for the prescription drug benefit, though no one can accurately predict what the true monthly premium will be since no insurance company has ever offered a prescription drug benefit as a stand-alone feature. After meeting a $250 annual deductible, a Medicare beneficiary will be responsible for paying 25% of the cost of his prescription drugs up to $2,250; Medicare will pay the other 75%. Coverage will then cease until prescription drug costs exceed $5,100, at which point Medicare will pay 95% of the costs incurred thereafter.

In exchange for this benefit, the new amendment to the Medicare program exacts certain costs. One of those costs will be the creation of competition between private health insurance companies and the traditional Medicare program. In 2010, the government will select six metropolitan areas in which Medicare beneficiaries will be encouraged to join private health plans. Then, if the cost of providing care to beneficiaries in those areas through traditional Medicare is higher than the cost of providing care to individuals who are insured under the private plans, the Medicare enrollees will have to pay higher premiums to continue participating in traditional Medicare, giving the Medicare enrollee an incentive to join the private plans.

Obviously, the private insurance companies will cherry-pick those individuals whom they wish to have as members, covering healthy seniors. The end result, higher premiums for Medicare beneficiaries.

Other controversial portions of the new amendment: Medicare will cease providing everyone in the program the same benefits for the same price; beneficiaries who have incomes over $80,000 a year will pay higher premiums for Medicare Part B, which helps pay for doctors’ services and other outpatient care. In 2005, the yearly deductible that beneficiaries pay for outpatient care, fixed at $100 for years, will increase annually. The federal government is forbidden to negotiate with the drug companies to secure lower prescription drug prices for Medicare beneficiaries. The amount of Medicare expenditures funded out of general revenues will be capped; accordingly, within seven years, the President must recommend changes to either bring expenditures down or raise premiums.

Take my advice, you’re going to need a bigger glass of water to swallow this pill.