Health Care

WomenMatter will continuously post updates on all this and other issues as we monitor the continuing philosophical and practical debates nationwide. Please check back often for updates. Past updates are available for reference on the Healthcare Archives page.

Six Degrees of Separation: The Main Arguments Dividing Americans on Medicare

Two weighty conference reports have fallen on top of the American public. Republican leadership announced the final versions of the energy and Medicare bills almost simultaneously.

Ideally, every American would have the time and desire to read and discuss the hundreds of pages of each of these significant bills, but most of us do not have this luxury.

For counsel on the Medicare issue, many Americans have followed the lead of AARP, the largest and most influential organization of older citizens in America. AARP has been against the Medicare legislation until very recently, when the group suddenly decided to support the measure.

AARP’s change of heart

This sudden change of heart has been shocking and confusing to many of the group’s members; some have torn up their membership cards in protest. Although the Medicare conference report has not yet been published, it is doubtful that the conference report is so drastically different as to instigate AARP’s brand-new support.

AARP has decided that this bill is better than no bill at all, though the group considers the legislation to be imperfect. Is the “it’s better than nothing" attitude valid? Some argue the opposite point of view, which is that passing this bill is far worse than doing nothing at all. Who is right?

In order to make an informed decision about the Medicare legislation, one must consider the tradeoffs within the main areas of contention. Unlike AARP, WomenMatter does not reject or endorse the Medicare bill. We provide you with the necessary information so that you can decide.

Contentious Provisions

#1 The "privatization" of Medicare

Democrats are warning about the "privatization" of Medicare; what do they mean?

Currently, Medicare is available to everyone over 65. It is a fee-for-service insurance program with a relatively low monthly premium. Federal law defines the benefits available to beneficiaries, who can access services through any doctor that accepts Medicare.

If the Medicare bill were signed into law, the government’s role in healthcare for the elderly would change drastically. Instead of providing health insurance itself, the government would contribute a set amount of money towards the purchase of a private health insurance plan; this is called “premium support." Beneficiaries would research the health plans available in their area, and choose the plan that would best serve them.

Proponents of the legislation claim that this is one of the bill’s greatest strengths. It allows beneficiaries active decision making about their own healthcare. Opponents of the bill remind us that many elderly citizens are mentally infirm or extremely ill and would be unable to thoroughly research plans. How many of us feel qualified to judge the details – before we get sick.

If the structure of Medicare shifts toward private insurance companies, beneficiaries will not be the only group with a choice. Insurance companies will be able to make choices as well. They will be able to select and reject the people that they wish to receive into their plan. Over time, the sickest beneficiaries are likely to pay the highest premiums.

Yet, we cannot know the outcome of privatization. Premium support is virtually untested. The theory behind it is that once Medicare is turned over to the free market, prices will go down and healthcare quality will go up.

The tradeoff: Lower prices and higher-quality healthcare is a possibility. However, by transforming Medicare so drastically, we take the enormous risk of leaving seniors underinsured in the future.

#2 Linking premiums to income

The House version of the bill requires wealthier seniors to pay more money out-of-pocket before their drugs are covered. It has not been established that this provision is in the conference report. If it were adopted, it would be another significant change to the very nature of Medicare. Medicare has always been a social insurance program in which everyone receives the same benefits and pays the same set premiums, regardless of income.

However, the new rule would apply only to those with incomes over $100,000 a year. Many believe it is fair for such wealthy seniors to pay higher premiums. This arrangement would infuse the program with $4 billion a year.

Requiring high-income seniors to pay higher premiums is erroneously called "means testing." But according to Leif Haas, Medicare specialist at The Century Foundation, true means testing involves providing varying benefits based on income, not varying premiums.

The tradeoff: Charging wealthier seniors more helps pay for the expensive program at a time of deep deficit. However, doing so changes the character of Medicare.

#3 Health savings accounts

It is likely that the conference report creates tax-free health savings accounts. Though House and Senate negotiators initially rejected this idea, some of the most conservative lawmakers are demanding that it stay in the bill. The savings accounts would provide an estimated $167 billion in further tax relief. This provision is not essential to Medicare reform, except as a bargaining chip.

The tradeoff: Health savings accounts will provide Americans with an alternative way to plan for healthcare costs (as well as help Republicans to pass the bill). However, these accounts will drain the federal treasury of billions of future tax dollars.

#4 The role of American drug companies

Many argue that American drug companies are banking on the passage of this bill. A controversial study from Boston University suggests that passing this bill provides drug companies with $139 billion in profits over eight years.

In addition, drug companies have successfully lobbied against the re-importation of drugs from Canada, though this idea has broad appeal among both lawmakers and the American public.

Since drugs are 50% cheaper in Canada than they are in the United States, allowing the re-importation of Canadian pharmaceuticals could drastically reduce the cost of this bill. Now everyone is aware that Americans pay more and by doing so finance the global medicine market. Other countries have laws demanding price controls. We allow the market to decide. One tradeoff is that we have access to the best medicines. Another is that our very profitable drug companies are key to the health of our economy.

Citing safety concerns, Republican conferees have rejected this provision from the conference report. However, the debate over re-importation is not going to disappear. Reconsidering re-importation and drug pricing in the United States is essential to an affordable long-term prescription drug benefit for seniors.

The tradeoff: Allowing drug companies a seat at the negotiating table ensures that they will participate in the Medicare prescription drug program. However, their power in this process may be outweighing that of America’s seniors.

#5 The spending cap

The sponsors of this bill do not want to spend more than the $400 billion proposed. However, it is difficult to estimate future healthcare costs since the industry is so variable. Placing a spending cap on Medicare may result in drastically reduced benefits in the future.

Nevertheless, cost control is important. Adhering to a rigid budget may curb heavy spending on new drugs that have little or no health benefit. On the other hand, it may prevent seniors from accessing new drugs that are beneficial. The tradeoff: A spending cap will ensure that we don’t go even deeper in debt. However, we can’t predict the future. We don’t know what healthcare will cost down the road.

For more on the spending cap, click here.

#6 The donut hole

If the conference report looks anything like the House and Senate bills, seniors will have to face a wide gap in coverage, which is referred to as "the donut hole."

This means that seniors share drug costs until they reach a certain spending level (the Senate bill amount was $4,500, and the House bill $2,000). Then they have to pay all of their drug costs until catastrophic coverage kicks in (this happens in the Senate bill at $5800 and the House bill at $4,900). To many seniors, this is unacceptable. But bill sponsors argue that it is impossible to cover all drugs for all seniors for the $400 billion allotted.

The tradeoff: A donut hole allows Congress to provide some prescription drug coverage for $400 billion. However, this may mean greater out-of-pocket costs for some seniors.

Read, discuss, influence

WomenMatter has been discussing the Medicare legislation since the beginning. Read more about it by clicking here. You can also discuss this issue with other WomenMatter readers in one of our online forums. Then, let your representatives know what you think.

Posted on: 11/24/2003

click here to go to next section

return to top