Let’s Be Honest – Medicare is Insolvent And Doctors Soon Won’t Accept It

 By Scott W. Atlas, M.D.

Now that campaigning is finished, it is incumbent on our elected government to face up to Medicare’s problems and implement thoughtful solutions. Pretending that Medicare is financially solvent while ignoring the facts about the declining acceptance of Medicare and the future of health care access for seniors under the ACA is worse than misguided policy, it is outright dishonesty. Instead of fixating on ideological differences, the first step is to agree about the urgency of the situation, so that we can keep Medicare for the long term in a form consistent with America’s core.

Regardless of the outcome of the 2012 elections, the facts about Medicare have not changed.

Medicare is spiraling into bankruptcy, owing to both the demographics of America and the realities about health care. Every year for the next two decades, roughly 3 to 4 million seniors become newly eligible for Medicare as the baby boomer generation ages. Elected officials of both parties do not dispute the seriousness of the problem described in the 2012 Medicare Trustees Report, which estimated Medicare’s unfunded obligations to be almost $38 trillion and a hospital insurance trust fund that will become insolvent in 2024.

That outlook does not even consider the bigger picture over the next decades coming as a consequence of the fantastic advances in modern medicine. As the newest “Global Burden of Disease” report in the Lancet just acknowledged, with increasing longevity come two very expensive consequences: more people are surviving to die of chronic diseases found only in old age.  They require expensive drugs, diagnostics, and hospital care; and more people are living with disorders that don’t kill them, but that produce disability and reduced health.

An increasing proportion of doctors are already not accepting Medicare patients, and the primary reason is low payment for services. A 2008 report by the Medicare Payment Advisory Commission, an independent federal panel, said that 29 percent of Medicare beneficiaries who were looking for a primary care doctor had a problem finding one. In the 2008 HSC national survey, more than 20 percent of primary care doctors accepted no new Medicare patients (only 4.5 percent accepted no new privately insured patients) and about 40 percent of primary care doctors and 20 percent of specialists refused most new Medicare patients. Today, in some states, more than half of doctors already do not accept new Medicare patients.

It is irresponsible to ignore this reality and frankly disingenuous to deny what is coming – the problem is about to increase dramatically. This coming year, the ObamaCare law is scheduled to markedly reduce payments to doctors and hospitals. According to the Medicare Board of Trustees, “an almost 31-percent reduction in Medicare payment rates for physician services will be implemented in 2013.”   By 2019, payments become even lower than Medicaid, a system by which doctors already lose money and therefore refuse to accept new patients.

Medicare patients will face more problems with access to care beyond finding a doctor. According to the Medicare Trustees, Medicare payment reductions under the new law will cause hospitals, nursing facilities, and home health agencies to operate at a loss- 15 percent lose money by 2019, 25 percent by 2030, and 40 percent by 2050. The Trustees Report openly acknowledged the obvious – these health care providers “would have to withdraw from serving Medicare beneficiaries, or shift substantial portions of Medicare costs to their non-Medicare, non-Medicaid payers.”

Even before any further reductions in doctor and hospital reimbursements, Medicare is already more restrictive in approving claims than comparable private insurance. Of eight insurers studied in the AMA 2012 National Health Insurance Report Card, Medicare was the third most likely to reject a claim, compared to seven comparable private insurance plans studied – improving from being the worst in 2008. This 2012 rejection rate was still more than 40 percent higher than that of the private insurers’ average. Perhaps this is why the vast majority of Medicare recipients today supplement their coverage with private insurance, a fact hidden from virtually all discussions purporting Medicare’s success.

What can our government do to help limit the damage from this great and inevitable problem of health care expenditures and increasing need for medical care, given the almost unspeakable reality that if left unchanged, Medicare expenditures will soon crowd out all other federal government budget items in the decades to come? What should guide leadership in health care reform to ensure health care access, rather than just the façade of insurance coverage, for America’s seniors?

First, our government leaders must be educated about the difference between having insurance and achieving access to medical care. We must learn from our Western European and Canadian friends, whose citizens may have government insurance coverage, but in reality they lack access to care. The truth is that health insurance does not equate with health care access. Statistics Canada stated “waiting time has been identified as a key measure of access.” Affirming 2005’s Chaoulli v. Quebec, in which Supreme Court justices famously concluded “access to a waiting list is not access to health care,” countless studies document grave consequences from prolonged waits. A growing list of European countries, including Denmark, England, Finland, Ireland, Italy, the Netherlands, Norway, Spain, and Sweden, have been forced by public outcry and laws to address unacceptable waits for care.

And, gradually, Europeans are circumventing their own systems, despite having government insurance. Half a million Swedes now use private insurance, up from 100,000 a decade ago. Almost two-thirds of British citizens earning more than $78,700 have done the same. And even their governments are beginning to understand the problem. Throughout Europe, from Britain to Denmark to Sweden, when faced with their inability to deliver access to their insured citizens, the government’s solution is increasingly to enable access to private health care. Health insurance is undoubtedly a positive, but insisting that universal insurance represents the main goal is folly, explainable as either a misunderstanding by the naïve or a false premise for deniers of the facts.

Next, in addressing exploding costs, our president and Congress must act within the guiding principle that all Americans deserve the opportunity to exercise freedom and personal choice in pursuit of health. Our government must trust that individual Americans understand what’s best for themselves. All Americans, rich and poor, want more autonomy and choice, and government can facilitate that by committing to reducing the barriers to competition and forcing information transparency about prices and quality of care.

If our government leaders truly believe in power to the people instead of insurance companies, then why not tear down the archaic rules that protect state insurance monopolies, and that prevent families from seeking better insurance value across state borders?

If our elected officials truly want to modify a system in a creative way, why not at least allow small pilot projects for purely optional premium support programs for seniors who want to find cheaper insurance more tailored to their own needs? Similar cash payments are found throughout all of the other entitlement programs, like the defined benefit of social security. Government beneficiaries don’t receive bags of groceries or clothing – all just as essential as health care – chosen by the government. Why would government forbid its seniors from choosing health insurance? More directly, we know premium support payments already work well within Medicare Part D, the prescription drug benefit, currently delivered via private plans that submit bids, while the government provides a defined contribution for Medicare beneficiaries. After seven years, the program provides strong evidence that more consumer choice and competition controls costs and benefits consumers.  It is highly satisfactory to beneficiaries, and it is under budget, running more than 40 percent below its initial estimates.

Common sense instead of strict adherence to ideology should guide costs savings. Like social security, is it not simple common sense to adjust the age of eligibility for programs for the elderly accordingly? We know that life expectancy of Americans has risen almost a full 10 years since the inception of Medicare. Given this administration’s focus on having financially successful Americans pay more to support the system, as a start, why not delay Medicare eligibility for financially successful seniors? After all, there is a body of scientific literature showing that more affluent people live longer and have better health. Perhaps when cooler heads prevail, a general adjustment can be agreed upon for all beneficiaries.

And how about removing at least one of the most egregious job-killing aspects of ObamaCare, so that our economy grows to support the most important entitlement programs like Medicare? Maybe we can start with the medical device tax on revenues, not just profits, that is already destroying high-paying jobs for Americans and moving them overseas. Directly accounting for more than 400,000 high-paying US jobs of the sort our young people seek, some of America’s most innovative companies in this sector, like Boston Scientific, Michigan’s Stryker, Indiana’s Cook Medical, San Diego’s NuVasive and others are already eliminating thousands of jobs and expanding operations in other countries directly because of ACA’s taxes. And as CEO Mark Waite of Lighthouse Imaging in Maine stated “”This [tax] will end up making the cost of goods higher, and since most of these medical devices are required, as opposed to being optional, that cost gets passed on to the consumer and the cost of care goes up.” And it’s not just jobs – our seniors depend on continuing innovation in medical devices for diagnosis and treatment of the diseases predicted to increase in prevalence as people live longer.

The 2012 election is over. But the problems with Medicare have not changed and will only worsen with time. President Obama and Congress have more than just an opportunity; they have a profound responsibility to actually solve this country’s problems instead of repeating their own theories and beliefs. Medicare is a perfect place to start the work of governing by compromise.

Scott W. Atlas, MD is the David and Joan Traitel Senior Fellow at the Hoover Institution of Stanford University, and author of the book In Excellent Health: Setting the Record Straight on America’s Health Care (Hoover Press, 2011).

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