Catastrophic Medicare Reform

Everyone else thinks that Medicare Advantage is DOA.  Democrats hate it because private insurers are involved.  It costs more than traditional Medicare.  Only 25% of seniors are on it.  "Overpayments" to insurers cost more than $15 billion a year.  Isn't that a big, fat, target?

A few notes:  first, the "overpayments" provide extra benefits.  The program is growing.  And patient satisfaction between Medicare Advantage and Traditional Medicare is similar.  Opponents argue that this means Medicare Advantage won't be missed.  This is like saying that if you made happy Escalade owners switch cars with happy Prius owners, neither one would care, because hey, they're both happy with their current cars! 

But mostly, I look to the history of Cat Care, aka the Medicare Catastrophic Coverage Act of 1988.  Unlike killing Medicare Advantage, this enjoyed broad bipartisan support.  Democrats liked expanding coverage for seniors and the disabled.  Republicans were happy as long as you paid for it, and thought it would boost their image with seniors.  The AARP gave it the big thumbs up.   All sides had to stage a dramatic retreat a year later because seniors screamed bloody murder over the premiums.  The benefits were actually pretty useful, but deficit neutrality was political suicide.  The post mortem strikes some familiar notes:

Mr. Reagan stipulated that the program would be financed entirely by the elderly, who would pay a flat fee of $4.92 a month. ''We were forced to accept the premise that Reagan insisted upon: financing entirely by the elderly,'' recalled Representative Henry A, Waxman, the California Democrat who is chairman of the health subcommittee of the Energy and Commerce Committee.

Long-term nursing care was what the elderly wanted. But that was financially out of reach; the annual cost was estimated at $20 billion or more, doubling within a few years. The cost of the expanded hospital and doctor coverage proposed by Secretary Bowen was much more modest.

Indeed, the proposal was too modest for many. It was the first major health care bill to come before Congress in years, and advocates of health programs seized on it. ''The bill became the vehicle for the deferred agenda in health care,'' said John Rother, legislative director of the American Association of Retired Persons, the major lobbyist for the bill. ''It was the health policy community seeing this as a way to fix all their problems.'' Mr. Burke, now a health policy consultant, added, ''Congress went on a feeding frenzy.''

The late Representative Claude Pepper, the Florida Democrat who was chairman of the Committee on Aging, and Mr. Waxman were demanding protection for the cost of long-term care. To induce them to drop that demand, the House leadership agreed to support an expensive prescription drug benefit. Other additions followed. The Senate voted coverage for mammography screening and proctoscopic examinations for the elderly and disabled, as well as for certain drugs at home, hospice care and a program to provide help for those who cared for sick relatives at home. The House voted to extend nursing home benefits from 100 days to 150 days and eliminated the requirement that patients spend at least three days in a hospital before becoming entitled to the benefit. It added a program to protect a spouse from becoming bankrupt from the costs of a husband or wife in a nursing home, and a provision having nothing to do with the elderly: a requirement that states provide Medicaid benefits for poor pregnant women and infants under the age of 1.

''When the original Reagan proposal came to Congress,'' Mr. Waxman said, ''all elderly groups were united in opposition. But when other benefits were added, the elderly thought that on balance it was a step in the right direction. But it was a step with plenty of reservations.''

The total cost from 1989 through 1993 was initially estimated at $31 billion. The flat premium of $4.92 proposed by President Reagan became a fee that increased from $4 in the 1988 fiscal year to $10.20 in 1993. And Congressional leaders realized that the flat fee could not raise enough money to finance the program, so Congress enacted a surtax, to be added to the income tax bills of the wealthiest Americans aged 65 and older.

The Administration balked at the new benefits added by Congress. ''We wanted the President to veto this bill,'' recalled Mr. Burke, then Secretary Bowen's chief of staff. ''Unfortunately, this was not the President's strongest time. We didn't count on a guy named Ollie North and the Iran-contra scandal.''

President Reagan signed the bill on July 1, 1988, at the behest of Vice President George Bush, then in the middle of his Presidential campaign.

The end result?

At first, the Senate and House leaders minimized the protests and said they would not revise the program at all. But by spring, the flood of mail and phone calls became too much to ignore. Critics called the leadership arrogant and out of touch with their consituents.

To ease the protests of the elderly, Senator Lloyd Bentsen, the Texas Democrat who is chairman of the Finance Committee, said the surtax could be cut because revenue was going to be greater than needed to finance the program. But he quickly ate his words when the Congressional Budget Office increased the 1989-93 estimate from $31 billion to $48 billion.

Responding to constituents, the House Ways and Means Committee spent three weeks developing a compromise intended to end the protests and salvage the program. It would have cut the surtax in half, increased the flat fee and retained most of the benefits. But last week the House ignored the committee and the Democratic leadership, and voted to repeal the program.

Taking anything at all from seniors is extraordinarily difficult.  They have a lot of time on their hands, and they use it to vote. The AARP blessing is not the all-powerful talismanic protection that many seem to imagine.  Even if you pass Medicare Advantage cuts, my sense is that this will survive just as long as it takes for an insurance company to mail out notices to its Medicare Advantage patients, regretfully explaining that the payment cuts mean they will no longer be able to offer the following benefits . . .

I don't think that, in the end, Congress is going to be able to take much money out of Medicare.  This is not something I'm happy about--it's something I've been lamenting for a decade or so.  But reforming senior entitlements has always looked difficult.  In the wake of Social Security reform, it's starting to look damn near impossible.