How to Fix Medicare? There are No Easy Answers.

The problem is too much has been promised to too many. Medicare is about to see the influx of the Baby Boomers at a time when fewer and fewer workers are contributing to Medicare. The current high unemployment just adds to the problem. The proposed HR 3200 would cut $500 billion out of Medicare, but not for the purpose of making it more solvent. Instead, the savings would just be used to insure the uninsured. This flawed approach is not honoring promises made to seniors who paid into the system. This approach needs to be thrown out. I will present some new ideas. While not all are easy to swallow, they will at least not take away from current Medicare enrollees.

We keep hearing people say that everyone is happy with Medicare, an example of government run health care. But if you are 65 or over, is there any other choice? The answer is no, and it does not provide as good coverage as the health insurance you probably had while working. By itself, it leaves you terribly exposed to financial risk. To truly protect yourself, you have to purchase supplemental coverage, either a Medicare Supplement or a Medicare Advantage plan. Medicare, by itself, has no stop loss or out–of–pocket limits on how much your share of medical expenses is, and instead of having a lifetime limit on coverage, it sets limits on maximum hospital coverage per benefit period.

How to solve some of the problems? For starters, allow private insurance companies to sell individual health insurance policies to seniors age 65 or above, but without all the state mandated benefits. I doubt many seniors need or want maternity care, for example. Allow seniors, who can afford to and want to, the choice to opt out of Medicare and purchase one of these Medicare Replacement Policies. This would allow for some seniors to purchase policies without some of the limitations in the current Medicare program, such as being limited to only Medicare approved benefits and limiting payment to providers to the Medicare approved amounts. This could reduce the number of seniors on Medicare, stretching dollars a little further.

If individual policies were available for those over 65, more options would be available. When Medicare was started in 1965 life expectancy was nowhere near as long as it is today. The age at which Medicare starts could be increased as well to reflect our longer lifespan. An approach similar to that used for Social Security could be used to gradually increase the eligibility age for Medicare to age 70.

Next, the design of Medicare itself could be simplified, making it easier for seniors to understand while greatly reducing administration costs. A simple fixed deductible for both Part A and Part B coverage with a coinsurance amount (shared expense percentage) that applies to all Medicare approved services would accomplish this. It should include eliminating special rules for certain services. The percentage to be used would be the calculated percentage that is actuarially equivalent to the current cost of Medicare services to the government. Everything would be based on a calendar year with the maximum hospital benefit per benefit period converted to an annual amount. In the end, you would end up with insurance very similar to what a person probably had while working. Part D drug plans could be designed in a manner similar to existing employee and individual drug plans as well. This would avoid confusion and provide an easier transition from individual coverage to Medicare coverage.

With a simplified Medicare design, Medicare Supplements would be easier to design and administer. Currently 12 plan designs are available, with four being deleted and two new ones added in June 2010, making a new total of 10. In reality, only three plans are needed: a low benefit plan, a mid-range benefit plan and a premium plan. These would be easy to design with simpler Medicare design and dramatically save administration costs both on the part of the government and those insurance companies offering Medicare Supplements. Right now, there is just too much paperwork. Any company offering just one Medicare Supplement has to include, in its marketing materials, about three pages describing each of the 12 plans. This is a terrible waste of money and resources.

This site authored by John – The Insurance Agent