Donnie Tatar
University of Michigan
HSM544: Health Policy and Economics

As the newly appointed chief of staff I have been tasked with responding to a proposal for reducing Medicare expenditures by enrolling participants in HMO. I understand that we have some key questions must be addressed and that we must justify our position on either economic efficiency or equity grounds. Outlined below are some of the questions that must be answered in order address this issue properly.
Is Medicare in a state of crisis?
Are you aware of the various policies that are being enacted from each state to state regarding the qualification of Medicare? Medicare is funded by the federal government and each state is responsible for operating the Medicare program as well as the local Medicaid programs. However, premiums have increased for Medicare and also, the coverage has changed in the past few years requiring people to purchase additional supplemental Medicare policies - this is difficult for elderly that have fixed incomes. If the elderly are unable to purchase Medicare, they will go uninsured. The Medicare system is double-funded. It is funded by the taxpayer (federal dollar) as well as the premiums being collected. But, in being double-funded, the coverage is still not as high as most private insurance companies making them appear with less quality.
Are radical measures necessary to preserve the program?
This is a very interesting question and you will have to take a more subjective approach to answering it. I don't believe there are radical measures that must be taken to preserve the program because it is funded through two divisions - the federal government (taxpayer) and the premiums being collected. However, the cost of providing the medical services is much higher than the cost being collected. Perhaps a more responsible approach would be to evaluate the cost of the medical services being provided and standardize a cost table among all insurance companies including Medicare. For example, a client may be seen by a physician for a regular check-up and that provider is only allowed to charge Medicare $65. If a client came to that same physician with a private insurance policy, that physician is allowed to charge the private insurance $120. What happens then is that the service under the Medicare payment is not provided in the most quality manner (although, physicians will argue this) because they are getting paid much less by Medicare rates. The physician may spend more time, energy, and commitment to a private paying client because they are getting almost twice the amount of money from the private insurance. It is a matter of motivational service-delivery. The radical measures that need to take place are increasing Medicare rates of reimbursement or mandating lower rates of private insurance to neutralize the risk of receiving poor quality services.
How is Medicare funded now?
The Centers for Medicare & Medicaid Services (CMS), a branch of the Department of Health and Human Services (HHS), is the federal agency that runs the Medicare Program and monitors Medicaid programs offered by each state. (In 2011, Medicare covered 48.7 million people. Total expenditures in 2011 were $549.1 billion. This money comes from the Medicare Trust Funds. (Medicare.Gov (2010). About OTPN. Retrieved from http://www.medicare.gov/about-us/how-medicare-is-funded/medicare-funding.html) Medicare is funded by the federal government (the taxpayer's federal taxes out of their paychecks). People may believe that social security pays for Medicare, but it doesn't. If less people are working, less money is going into the federal "pool" of money to distribute to Medicare. The nation is at an all-time high for reported unemployment - that means that there is millions of dollars not going into the fund account for Medicare. However, just as many people are seeking medical coverage from Medicare - an imbalance occurs.
Why do the elderly feel that Medicare is an insurance program, not a welfare program? Is this perception accurate?
Some elderly, in my opinion, believe that Medicare is an insurance program that they are entitled to. During the Great Society movement in the 40's-60's, various governmental programs were designed to provide citizens entitlements to human services and welfare needs. The Medicare and Medicaid coverage was designed to provide those that do not have any means to pay for health care a way in which they could maintain their health needs - a right that the government and society has deemed every person should be entitled to; their health. So, depending on the culture, upbringing, and personal philosophy of each elderly person, the question whether they feel Medicare is an insurance program or a welfare program is difficult to answer. I would suggest coming at this question from both sides of the argument and state why elderly may view Medicare as an insurance program and why the elderly would view Medicare as a welfare program. Also, a good way to look at this question is to ask for permission to go to a local nursing home or assisted living home and interview a few residents. Ask them if they view Medicare as an insurance program or welfare program? Also, I would urge you to call or make an appointment to talk to a disability or seniors and disability caseworker from your local welfare department (usually within a Department of Health and Human Services department). Go to the place where seniors sign up for Medicaid benefits and ask to talk to a caseworker or eligibility specialist. This would provide you a wealth of information regarding the perceptions of the elderly in attaining Medicare.
Should there be a Medicare program at all? Does Medicare have detrimental effects on the market for health care, or the market for health insurance?
Again, this is a personal perception question. I would suggest you craft this section from your own perception and belief system. In my opinion, I would suggest there does not need to be a Medicare program any more. Today's society is so much different than they use to be and that is why the federal government is working on a universal health care system. Many countries like Australia and England work under a universal health care system and have mitigated the concerns posed by private insurance companies and federally-funded concepts of poor quality and expense. If you were to research the universal health care philosophy in other countries, you would find that the hassles of acquiring health insurance are mostly minimized as everyone has the same coverage and same co-payments. All doctors usually get the same rate of reimbursement, and therefore provide (generally) the same quality of services across the board.
Why should the government be involved in providing insurance to the elderly?
There are a few reasons why the government should be involved in providing insurance to the elderly. First of all, this is how the program is designed currently. Medicare is a form of retirement benefits for individuals usually over the age of 65. Again, this philosophy was developed during the Great Society movement and is still ingrained in society today. The federal government is making attempts to shift the thinking that has occurred of many years regarding the entitlement factor. However, the elderly are considered a vulnerable population. Since the early 1900's, the federal government has sought to take care of vulnerable populations - groups of people that are unable to care for themselves. These groups of people include children, disabled, and the elderly. The main tenet in this question is that usually, the elderly do not have insurance after they retire because they are no longer employed by someone that offers health insurance. So, what do we do for these elderly people that have health concerns? Do we let them stay sick and fizzle away with a poor quality of life? No, the government has maintained their position on helping the vulnerable and oppressed populations - including the elderly. At this time, if you are considered part of a vulnerable or oppressed population, the government will provide your health insurance - because "right to health" is considered a human entitlement.
Are these economic effects, offset by the positive effects of the Medicare program for the elderly? What about the positive effects of caring for the elderly for society?
When thinking about this question, I would urge you to again think of the reimbursement of Medicare services. I believe that Medicare does offer positive offsets for the elderly because of the rate of the premium. Most elderly, in my opinion, are finding comfortable ways to pay for the premiums of their Medicare policies. Most elderly that are seeking medical services have long-standing, chronic medical conditions of which would cost thousands to treat on an ongoing nature. For example, an elderly person may have developed diabetes later on in their life and need ongoing medications of which may cost around $200 a month if they did not have insurance. So, yes...there are many positive effects of the Medicare program on the elderly. If that elderly person had Medicare, they may only pay a $5 co-payment for their medications. If an elderly person only makes $800 a month as a fixed income, they are much more able to afford the medications with Medicare insurance (and supplemental policies). The positive effect is huge in comparison to what someone would pay if they did not have Medicare. In fact, people that do not have insurance are usually found at hospitals seeking services because they are not required to pay anything at the hospital. If they go to a hospital and do not have insurance, the hospital cannot refuse service to them. They attain the services and then get billed (huge amounts) for the non-insured prices. After a while, if someone builds up too high of a bill they can file for medical bankruptcy. So, Medicare does provide the elderly a means to paying for services and maintaining their health needs - the most positive effect of the Medicare program on the elderly.
References:
1. Medicare.Gov (2010). About OTPN. Retrieved from http://www.medicare.gov/about-us/how-medicare-is-funded/medicare-funding.html