Fiddling with Medicare is not for the faint of heart. In 1989, Illinois Democratic Congressman Dan Rostenkowski supported a law raising premiums for some Medicare recipients to fund a new benefit for those with long-term illnesses. Furious seniors surrounded his car one day in Chicago, hitting it with picket signs, then chased the Congressman on foot down the street. The law was repealed months later.
Medicare, introduced into law in 1965 and now covering 38 million, is one of the most popular social programs in U.S. history, which is why the health reform legislation, in its early stages, will not fundamentally change the way the program operates. Americans 65 and older will continue to receive comprehensive health insurance; doctors and hospitals will continue to be paid per procedure. Those who wrote the new law insist that the $500 billion in cuts to the program over the next 10 years — out of the total $6.1 trillion expected to be spent — will come largely from the elimination of waste in the system and from small but widespread reductions in reimbursements to hospitals and doctors. Not surprisingly, seniors are skeptical.
But if there are to be far-reaching changes in the way medicine is practiced in this country, Medicare will have to drive them. When it comes to purchasing health care services, Medicare has the buying power that Texas does in the textbook market. "Medicare has to go first," says Len Nichols, director of the Center for Health Policy Research and Ethics at George Mason University. "It's the only buyer [in the health care market] with enough power. It's the only buyer big enough to make the hospitals pay attention."
The huge government program also gives health policymakers a window into what is working and what isn't. "Medicare is in a position to be a platform for developing and implementing new approaches," says Stuart Guterman, a former Medicare official and a policy expert at the Commonwealth Fund, a nonpartisan research organization. "It's perhaps the thing in the health care legislation that holds the most hope for the future."
The new law also addresses some problems with the current system. It begins by phasing out the wasteful subsidies that go to private insurers that contract with the federal government to provide Medicare-type benefits to seniors. Some 10 million elderly Americans get coverage from these Medicare Advantage plans, which often require lower co-payments than traditional Medicare and provide extra benefits like eye care, hearing aids and even gym memberships. These extra benefits, however, come at an extra cost, and experts say the government pays about 14% more for each Medicare Advantage beneficiary than for a traditional Medicare patient. These overpayments will be gradually ended beginning in 2011, and seniors enrolled in Medicare Advantage will feel the pinch as insurers try to find a way to continue coverage without this subsidization. (Guaranteed Medicare benefits as defined by federal law will not be changed.)