My last long article was about the first privatization of Medicare. Current proposals to privatize focus on Premium support and Vouchers. This will change Medicare’s structure, what it covers, and how services are paid. The following is a quick look at the proposal. Even Fox News has qualms about this new direction. Read on:
Medicare, Specific Services and Vouchers
Medicare currently pays for specific services (defined benefit). Briefly, Medicare Part A covers hospitals, limited skilled nursing care, hospice, lab tests and home health care. Part B covers doctors and some other providers, outpatient care, home health care, durable medical equipment (such as wheelchairs) and many preventive services, such as flu shots. Medicare did not cover prescription drugs until Medicare Part D became law in 2006. Medicare Part C created Medicare Advantage (managed care) programs that combine both A and B, and often D. Medicare Advantage programs receive federal subsidies which ‘traditional’ Medicare does not. Seniors must use the plan’s doctors and hospitals or pay for services themselves. Most seniors buy a Medicare Part B supplement that covers what Medicare Parts A and B do not, such as co-payments and other services.
The proposed Vouchers give new seniors a set amount of money (premium support) so they can choose any doctor or hospital they want. This means Medicare benefits would be changed from the guaranteed benefits (services) Medicare covers now, such as hospital stays and some skilled nursing home care. Vouchers change Medicare from a “defined benefit” program to a “defined contribution ” program.
Seniors will use their own money (Voucher) to buy whatever services they want. Specific services, such as hospital care, will not necessarily be paid by Medicare as it is now. The new Vouchers are essentially Health Savings Accounts for seniors. They could work well for healthy seniors, but could work against them if they have a chronic disease such as diabetes or heart disease or face cancer. Even joint replacements can be expensive. A new hip can cost about $60,000 just for the hospital not counting physical rehabilitation.
Insurance is the Law of Large Numbers
Insurance works if there are enough healthy people who don’t use services to offset the cost of those who use services, such as cancer, heart attacks or hip replacements. The new Voucher program applies only to new seniors coming into Medicare. This is still bad news for seniors on Medicare now.
If there are not enough healthy people coming into Medicare costs will grow for seniors on Medicare now because no new healthy younger seniors will come in to offset the costs for those using services.
Fox News even shares these concerns: http://www.foxbusiness.com/markets/2017/02/04/why-seniors-hate-this-medicare-plan-fix.html
Coming Next: How Medicare is Paid For