Explore Harvard's Nieman network Nieman Fellowships Nieman Lab Nieman Reports Nieman Storyboard

Is Medicare important to Obama? To McCain?

ASK THIS | August 27, 2008

How high a priority is Medicare for Obama and McCain? Both have positions on it but reporters should try to draw out their true understanding of the issues, or lack of it. Under Bush, Medicare is being privatized and is en route to extinction. Is one candidate more likely than the other to reverse that?

By Judith Stein

Caring for our elders, disabled people and families are American values. For decades the public Medicare program has honored these values, bringing health and economic security to millions of older and disabled people and their families. The presidential candidates should make the preservation of Medicare as a vital social insurance program a top domestic priority. Here’s why.

Why is Medicare important?

People forget what life was like before Medicare. Private industry failed to insure older and disabled people. When Medicare was enacted in 1965 half of Americans aged 65 or older had no health insurance. For 43 years, Medicare has provided quality health insurance and access to healthcare for older people and, since 1972, for people with disabilities. Over time Medicare has:

  • Kept older people out of poverty;
  • Relieved the next generation of the worry and reality of having to pay their parents’ medical bills at the expense of their own needs;
  • Helped to increase life expectancy. In 1950, the average life expectancy at age 65 was another 13.9 years. By 2004, that number had increased to 18.7 years.   

What are the consequences of Medicare privatization?

Medicare was designed to be an understandable, stable, and uniform social health insurance program. However, recent developments have resulted in an increased reliance on hundreds of subsidized private plans, annual plan and benefit changes, and income-based benefits and cost-sharing. These developments confuse beneficiaries and, left unchecked, will lead to the erosion of Medicare’s community of interest and the destruction of Medicare as a dependable, valued public program.

For years Medicare has been a balanced public-private partnership. Experiments with delivering benefits through private managed care plans to save money began in the early 1980s, but medical coverage has proven more expensive under private plans than under traditional Medicare. (The Congressional Budget Office, the Government Accountability Office, Medicare Payment Advisory Commission, the Commonwealth Fund and numerous other studies have come to this same conclusion). 

The Medicare Modernization Act of 2003 provided substantial subsidies to private, so-called “Medicare Advantage” plans. These subsidies have led to an extraordinary proliferation of private plans. The subsidies to private plans amount to over $10 billion annually. Nonetheless, many plans fail to actually provide the level of coverage to beneficiaries in need that is provided by traditional Medicare. Further, plans limit access to providers available to beneficiaries in traditional Medicare, most plans are not available nationwide, and many change benefit packages and provider networks every year.

The Bush administration and many pundits would cut reimbursements to healthcare providers and reduce coverage to beneficiaries on the grounds that we “can no longer afford Medicare.” Instead of reducing beneficiary coverage and fair payments to doctors, however, the government should be cutting wasteful payments to private Medicare Advantage plans. The Congressional Budget Office estimates that equalizing the payment policies for Medicare Advantage plans with those for traditional Medicare would save Medicare at least $150 billion over the next nine years. The average payment to private plans is 13 percent more than payments to traditional Medicare. Thus it is clear that such payments do not save the Medicare program money. In fact, they threaten Medicare’s very existence.

Q. Ask McCain and Obama to spell out their positions on Medicare privatization

The next president should end Medicare subsidies to private industry. These public “earmarks” for the private insurance industry come at the expense of Medicare beneficiaries, Medicare’s future, and all taxpayers. The Presidential candidates should recognize these Medicare truths and should commit to cutting private Medicare subsidies, rather than the peoples’ benefits and valued Medicare program.

Obama’s Web site targets subsidies to Medicare Advantage plans. Obama says he would push for Medicare Part D reform through re-importation of drugs, by allowing the government to negotiate drug prices for Medicare Part D, and blocking drug companies from keeping cheap, safe generics form the market. He would also close the "Donut Hole" gap in part D coverage, and require Part D plans to disclose a yearly list of drugs used and fees paid  to all participants. The Democratic platform also includes these positions as well as pledging to cut subsidies to private Medicare Advantage plans.

McCain’s healthcare plan doesn’t get into Medicare Advantage subsidies. It states, "We must reform the payment systems in Medicaid and Medicare to compensate providers for diagnosis, prevention and care coordination. Medicaid and Medicare should not pay for preventable medical errors or mismanagement." He would also work to reduce fraud and abuse in Medicare and increase competition. For health insurance in general, McCain supports drug re-importation, preventive care, care coordination, and "competition to improve the quality of health insurance".

Reporters should bring up these subjects with the two candidates so that people can judge how sentient the issue is for them, and also to test their knowledge. The Bush administration without saying as much has begun phasing out Medicare. The positions of the presidential candidates, and Senate and House candidates also, should be fully vetted by reporters.

Q. What is the ’45 percent trigger’, what are its consequences – and what can be done about it?

Some of the vetting should deal with the so-called “45 percent trigger,” A little known provision of the Medicare Modernization Act of 2003. The provision states that if two consecutive Medicare Trustees’ Reports estimate that more than 45 percent of Medicare’s budget within a seven-year window will come from general revenues, the President must propose legislation to lower the proportion to less than 45 percent. The 2006 and 2007 Medicare Trustees’ Reports projected that general revenues would exceed the 45 percent trigger, with 2008 being the first year to “trigger” the requirement that the President submit legislation to Congress to cut Medicare expenditures. The “45 percent trigger” should be eliminated because:

  • It is entirely arbitrary and not a true reflection of the stability of the Medicare program. It was included in the law, along with the subsidies to private Medicare plans, to help bring end of Medicare as a public, social insurance program.
  • No such financing limit exists for any other governmental activity. Spending from general revenues for Medicare is no different from similar federal spending for education, housing, defense, or veterans’ programs, all of which are 100 percent financed with general revenues. Medicare funding should not be subject to special detrimental treatment.
  • It forces Medicare to rely primarily on payroll taxes and premiums rather than on income taxes that produce general revenues - placing a burden on all beneficiaries and taxpayers, and, disproportionately, on lower-income individuals.

The next president should move to repeal the Medicare 45 percent trigger provision. The presidential candidates should recognize that the 45 percent trigger is inequitable, against the public’s interest and should commit to eliminating it rather than cutting benefits for people with Medicare and payments to those who provide them with healthcare.

Posted by Tom Gibson
11/27/2008, 03:23 AM

I find Ms. Steins comments to be uninformed and damaging to people that depend on Medicare for their health care. Having worked with hundreds of beneficiaries I have found that there is a universal demand for some kind of health insurance that pays more than Medicare. Paying more than Medicare and providing preventative benefits, dental, vision, hearing aids, etc isn't free. Maybe Ms. Stein would prefer to return to a day when mammograms weren't covered as routinely as they are today or maybe she advocates returning Medicare back to the very primitive program it was in 1965. Maybe she would also like to be black and move to a Southern state?!? After all, it's all about the money right? Not meeting basic needs as we understand in the 21st century.
Maybe Ms. Stein is opposed to private insurance plans that have no deductible and an out of pocket limit because she would rather see elderly clogging the sides of our roads after an illness or an injury. After all, it's too expensive to make sure that doesn't happen as it could if you just had Original Medicare.
Maybe Ms. Stein's point is that we should just take old people out and shoot them if they don't have enough money to pay doctors that charge over $100 for a 2.4 minutes visit.

The NiemanWatchdog.org website is no longer being updated. Watchdog stories have a new home in Nieman Reports.