President, National Committee to Preserve Social Security and Medicare
There's an idea gaining strength on Capitol Hill as a novel and surefire way to rein in escalating Medicare costs. It's called a government voucher and, at first blush, it sounds great. But a careful analysis uncovers a concept heavily reliant on the marketplace and fraught with problems for Medicare beneficiaries.
While I strongly believe in market forces, it nevertheless would require a huge leap of faith on the part of the nation's 36 million senior and disabled citizens to wholly trust the marketplace to offer them quality health care at an affordable price. After all, it wasn't too long ago that the marketplace didn't want seniors.
Consider that before the advent of Medicare some 30 years ago, the health insurance industry rejected most older Americans. Back then, about the only older Americans with health insurance coverage were those with employer-provided retiree health plans. Insurers knew seniors were more expensive to cover than there younger customers: they visited doctors more often, went to the hospital more frequently and used more prescription drugs. Even today, many insurers who cover seniors want only the healthiest seniors, those for whom they expect to pay few claims.
A voucher system assumes that all private health insurance plans would be open and available to seniors, particularly those with pre-existing conditions. But this is not the case today. All over America we hear stories of younger and healthier workers losing their health care coverage. Why should seniors believe that insurance companies, whose first loyalty is to their stockholders, not their policyholders, would treat them any differently?
In addition, many older Americans' experience with insurance is tied to medigap policies. For too many years, some seniors were sold worthless or multiple policies when only one was needed or they were regularly sold new policies solely to generate new commissions for insurance agents. It has taken the better part of three decades and the concerted efforts of the federal and 50 state governments to reduce fraud and abuse in the medigap insurance market to manageable proportions. It has only been with the advent of a highly regulated medigap market that seniors have been protected from the abuses of unscrupulous insurance agents eager to profit form confused or uninformed older customers.
Medicare covers all those eligible for Social Security, regardless of pre-existing conditions, and charges everyone the same premium. As currently structured, Medicare takes the worry out of finding affordable health insurance and provides unparalleled access to quality health care.
Why, then, would seniors trade in Medicare for an unknown, untested system that relies on historically anti-senior market forces for direction?
Many voucher supporters believe the system could work like the Federal Employees Health Benefits Plan, the umbrella program that offers federal employees and retirees a choice of dozens of competing plans. Unfortunately, the FEHBP is not a true example of a free market system at work.
For example, the myriad FEHBP plans actually are loathe to expand benefits beyond those offered by competing plans because they have found that if they do offer improved benefits, federal workers needing those benefits will flock to that plan and drive up its costs. One FEHBP plan found that when it increased its mental health benefit beyond the coverage offered by other plans, workers in need of mental health benefits jumped into its plan. Costs went up. Unfortunately, within a short time, the expanded benefits were reduced to those of competing plans. Over the years, benefits under FEHBP, instead of expanding actually have become more uniform.
In addition, premiums in individual plans have tended to rise as participants have gotten older. Premiums are lowest in new plans that attract the youngest and healthiest federal workers.
Another problem with vouchers is that even the most prudent senior could face considerable additional out-of-pocket expenses. Proposals under discussion would cap the value of the vouchers at a rate below medical inflation. As health are inflation continues to rise steeply, the buying power of the vouchers would erode. In a short period of time the vouchers will not be adequate to buy a health care plan as comprehensive as the current Medicare program.
Seniors then will be faced with a tough choice Ñ paying the difference out of pocket or buying a less expensive and less comprehensive policy.
For too many years, Congress has answered rising Medicare costs by simply cutting back on the rate of growth of Medicare funding. But those who would do away with Medicare in favor of vouchers are ducking their responsibilities to get to the root of the health care dilemma Ñ exactly what is it in our health are system that is driving these enormous cost increases?
Continued reductions in Medicare funding without reforming the larger health care system is not the answer. Rather, the voucher approach only shifts the burden of escalating health care costs entirely to seniors and provides no incentives for providers to hold down costs. After all, it would be the individual seniors who would be responsible for making up the difference between the value of the voucher and rapidly increasing health care costs.
Until we are willing to identify and deal with the core causes of our soaring health care costs, we cannot hope to come up with a long-term solution Ñ or at least one that reaches beyond the next election.
Martha McSteen is a former administrator of Medicare. She also served as acting commissioner of Social Security from 1983-'86.