Medicare: Is America the Next GM?
In the 1990s, it became increasingly clear that General Motors was in gradual decline. Yet, with the right leadership, GM still had time to restructure its staggering pension and healthcare obligations. Feckless leadership chose to pass these problems to the next generation - leading to GM's bankruptcy in 2009. America is in an eerily similar position. Like GM, America is burdened by overwhelming pension and healthcare obligations - over $50 trillion worth. Instead of restructuring these obligations, President Barrack Obama wants to expand America's biggest entitlement program: Medicare.
Like GM, America has a medical system it cannot afford and that allocates medical services poorly. At $34 trillion, future Medicare obligations are over $500,000 for an American family of four. If left unchecked, by 2050, Medicare will consume about 20 percent of GDP -- greater than America's total tax receipts. Not surprisingly, America spends more on health care than any other nation. In some respects, this spending is not in vain. America has the most advanced healthcare system in the world. Yet, America's healthcare system ranks low among developed nations and barely in the top quartile among all nations in terms of overall effectiveness. Accordingly, America should review its healthcare system and devise a better system to allocate medical services under Medicare.
There are two areas that America needs to target. The first is the breadth of Medicare. The second is how our tax system creates an incentive to "overbuy" medical insurance.
Medicare covers the wealthy and poor alike. Accordingly, the first step should be to narrow the focus of Medicare, not expand it. The Medicare/Medicaid system should be revamped to provide catastrophic healthcare for the poor. The change would require two steps. First, Medicare should only cover medical emergencies above a certain dollar amount (say, $15,000). However, to cover the initial $15,000 in costs, people would be required to carry a minimum health-care insurance policy with a private carrier. The federal government would mandate that the states establish a regime that would provide all citizens (particular poorer ones) access to such policies. States would, thus, require their citizens to carry "minimum liability health" (MLH) policies, similar to minimum liability car insurance required by many states. For poorer citizens, Medicare would pay for costs that exceed MLH policy limits; the wealthy would have private policies that provide comprehensive coverage. Thus, Medicare would be means tested and only the poor would be eligible for the catastrophic coverage provided by it. Wealthier Americans would either have to carry insurance above the minimum policy levels or pay for their medical care out of their own resources.
Tennessee currently has a minimum health-care insurance program similar to the one proposed. Tennessee's plan is premised on the idea that the amount of minimum insurance should be low enough that it is not cost prohibitive, but high enough to cover most medical incidents. The CoverTN plan provides $15,000 of insurance ($25,000 for families) and covers a majority of medical incidents in a given year. Doctor visits and many drugs are covered as well, with a modest co-pay. The cost for a young adult in good health (nonsmoker) is about $120 per month; the employee pays less than $40 per month. The remainder is split between the state and the person's employer. My plan would call for all Americans to carry a policy similar to the CoverTN. However, I would also impose a relatively modest deductible. Many might complain that this would be a significant burden on the poor; however, car insurance is less important than medical insurance and almost all auto insurance policies, including the ones bought by the poor, have a deductible to insure that the consumer comes out of pocket for at least something in the event of an accident. In the case of an MLH policy, a modest deductible ensures that every citizen bears at least some portion of the cost of healthcare services directly out of pocket, resulting in a more efficient allocation of medical services. This is something sorely needed in the current system.
The total cost of such a policy would be less than the CoverTN plan, given the deductible. Assuming a similar split between the state, employer, and worker, the total cost to an American earning the minimum wage would be about 6% of his or her pre-tax earnings, including the deductible. The unemployed and very poor would be eligible for further assistance by the state to cover premiums and the deductible, as is the case in Tennessee.
Medicare would thus be converted into a catastrophic regime covering the poor after the $15,000 policies ($25,000 for families) were exhausted. Accordingly, Medicare would be a means-tested entitlement program, designed to provide poorer Americans with a minimal level of catastrophic medical care. The Medicare system would be supported by tax dollars. Congress would establish an annual budget for Medicare that targets a particular percentage of GDP (e.g., 5% of GDP). The government would determine the level of benefits that could be provided based on the Medicare budget, requiring difficult decisions on the part of US policymakers. However, given means-testing and coverage provided by the $15,000 policies, the scope of Medicare coverage for poorer Americans could be quite expansive.
Most Americans, of course, would keep their current medical insurance. This is a positive, since most insured Americans are happy with their medical coverage. But, in addition to providing for their own medical insurance or costs in old age, more affluent Americans would also be taxed on their medical insurance benefits, as suggested by former President George W. Bush.
Under current law, employers can deduct insurance premiums paid on behalf of employees, but employees do not include these benefits as compensation. Thus, the US Treasury loses out on significant tax revenues. Worse yet, by providing this tax subsidy, our tax laws encourage Americans to "overbuy" insurance and arguably overuse medical services.
To encourage a more efficient allocation of medical services, Americans should be taxed on any employer medical subsidies above that of the MLH policy. This would eliminate the incentive on the part of workers to overbuy insurance and raise much-needed tax dollars, which could be used to support a leaner Medicare program.
By re-sizing our Medicare system to one we can afford, targeting Medicare to cover the neediest Americans and eliminating tax subsidies that encourage middle income Americans to overuse medical services, America can avoid the fate of GM and maintain its competitive position for decades to come.
Stan Dorn: More Right-Wing Distortions on Health Reform
Now that the summer's "death panel" rumors about health reform legislation have been thoroughly debunked, right-wing extremists are resorting to other distortions in their fight against progressive change.
Bill Moyers and Michael Winship: In Washington, the Revolving Door Is Hazardous to Your Health
You can't tell the players without a scorecard in the old Washington shell game. Lobbyist out, lobbyist in. They've been plowing this ground for years, and the soil has never been so fertile.
Bill Mann: Insurance-Company Racketeers Have Overplayed Their Hand
The insurance companies have overplayed their hand this time, one suspects. I wouldn't want to play poker against the Chicago pols now in the White House.
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you seem to be assuming that there's a direct link between the amount of coverage people have and the amount of care they consume. then you logically suggest that if they had less coverage, they'd consume less. and while there's ample evidence that the cost of insurance is driven by consumption patterns, there's little that suggests people who are insured consume more and a lot, detailed in the Dartmouth studies, confirming that what you get seems to largely depend on where you live. before embracing any such radical change, it would be good to know what evidence you have about consumption patterns.
This article seems to completely ignore the several foreign countries that are doing very well with single payer or similar systems.
Here's a counter-intuitive idea: Expand Medicare for all. Then allow states to opt-out.
If Alabama chooses not to participate, fine. After all, they are getting back $1.66 for every dollar they put in, so they would just do the rest of us a favor. Same goes for the other red states.
A common misconception is that the red states are paying higher taxes than those in blue states. In fact, blue states carry the red ones.
Read Brett Arend's article in Market Watch.
http://www
The red states don't deal in reality and like this article, it's too easy to project on Medicare instead of focusing on the contributing factors of companies who have cut jobs in America to help fund medicare.
I learned today, my husband's software company was told awhile ago to not hire any North Americans just Asians and Indians. This company has it's headquarters in California. His brother's company a huge well known company also located in California, which I noticed was a big winner in the rally on wall street yesterday, also was told during the summer not to hire any North Americans. WTF!
Medicare isn't the problem, it's corporate america that has bought our government and working against Americans in their own country.
It should be treasonous to have companies work against American workers but allowed to use our country for their own benefit.
Medicare should be exteneded to all Americans. We need to get rid of the corporate terrorists that have destroyed our democracy and destroying us economically.
Faved .. my thoughts exactly! Until we get the greed out of the system (financial, corporate and insurance) we will continue to see the same tactic used against us until we say ENOUGH! That was part of the message Americans tried to deliver in the '08 election.
I would like to see an initiative added to all ballots during the '10 election BANNING corporate donations to ALL politicians OR a requirement that all donations be put in one big pot to be divided equally to fund ALL (incumbents and wannabes) campaigns with a ban on personal spending. Let's level the playing field for elections and may the best person win, regardless of party affiliation! NO MORE SPECIAL INTERESTS! We also need to limit the election cycle, it is way too long.
Medicare costs rise because the health insurance industry drives healthcare costs up. Despite this, Medicare is better at containing costs than for-profit private healthcare insurance.
Between 1970 and 2000, Medicare costs increased by a factor of 16; private healthcare insurance costs for the same services increased by a factor of 25. This, despite the fact that Medicare supports older, sicker, more medically complex patients while private healthcare can pick and choose their customers and still denies 20% of all claims! Yet the author asserts we cannot afford Medicare?
We need a strong public option now, as a competitive cost containment measure. A great way to do it would be to expand Medicare to those not currently covered, at cost. Let the insurance companies continue to compete at the upper end of the market, but let's take life-and-death decisions out of the hands of those whose sole consideration is the profit motive.
Could the increasing costs of medical care in the United States have anything at all to do with increases in doctor's fees? What is the comparison between, say, inflation and doctor's fees in the past several years? Have doctor's fees outstripped inflation? Or vice versa? How many doctors with at least five years experience draw down in excess of a million dollars a year? How does all this compare with years past?
Just asking.
A COUNTRY IS NOT A CORPORATION.
America spends more on healthcare than any other nation because of greedy in$urance corporations.
Take your neocon corporate propaganda and put it somewhere without solar illumination.
I don't suppose balooning costs of doctors visits have anything to do with it. Hmmmm?
I could have gotten my glasses replaced for $380 but because I was required to go to an in-network optometrist, my total bill was $680. Please explain to me why a for-profit insurance company is such a good idea.
Resizing Medicare will not be necessary if American health care costs were equivalent to those in other industrialized nations, e.g. half. To blame GM for not managing its health care costs is tantamount to blaming Congress for not regulating health care. And, to ask Americans to further absorb the excesses of health care monopolies, through curtailed benefits/dollar, is unacceptable.
We should "restructure" medicare so that our elderly have to pay private insurers? Really? How about we "restucture" medicaire so that it has young healthy people in the risk pool? Medicare is the private insurance industries wet dream. Take older people who have more health problems and take them out of the private risk pool. What a great idea for the insurance companies. We need everybody, young and old in the same risk pool to spread the expense. You know, if we could get an average $10 per week from the 45 million un-insured in this country that would be an additonal $450 million a week. How's that? All the health care insurance industry does is pay the bills. For this they rack up 30%? The CEO of United Health makes $34,000 per hour! How about that? I'm sure if we had one agency that paid all the medical bills they could trim at least 15% off of the overhead. We could also use the buying power of 480 million Americans to negotiate better prices on prescriptions. How about that? The health care industrial complex is not the answer, it is the problem.
"I'm sure if we had one agency that paid all the medical bills they could trim at least 15% off of the overhead."
I think 15% is not ambitious enough. Medicare's administrative costs are currently 2-3%, compared to the 30% costs of private insurers. So eliminating the private insurance bureacracy alone could knock roughly 28% off of health care costs.
That's the way it's done, isn't it Mr Sherman? Start small; make the changes sound not too bad; hold up the spectre of Medicare disappearing altogether if the changes aren't adopted; then stand back and see how high the trial balloon flies before it's shot down. Then try again, and again, and again, until the people become so disoriented they eventually stop trying to shoot it down. Then you've got 'em right where you want 'em. A great many people receiving Medicare have just retired and would have to opt for COBRA if they had to maintain that little itty bitty 15k out-of-pocket - or something just as expensive as COBRA. This would be simply the first step in the health insurance industry's attempt to capture the entire market. After all, Medicare is the competition. Wipe out the competition, and, bingo, you've got it all. Because you know very well that once Medicare is redesigned, the particulars - such as helping "the poor" get and pay for private insurance - can change at will. It's not the particulars that matter; the redesign is all that counts.
If you can read numbers you can see the US is way worse than GM. The sad fact is GM shoulda died years ago. Ford and Chrysler needs to deeply cut the # of vehicles they produce and concentrate on maybe 10 vehicles tops. Actaully Ford and Chryler should merge and GM should be allowed to die. A shame too casue they are finally producing decent cars. GM Has bigger and uglier debt they will never get out from under. Ever.
IMHO, for-profit HC insurance is a huge part of why GM, Ford and Chrysler failed. From the time the for-profit health care started raising rates they continued taking bigger and bigger bites out of these companies bottom line requiring them to become less and less profitable. To maintain a bottom line, the car companies started cutting pensions and benefits and taking more for the CEOs paycheck at the expense of the workforce that actually builds the product. When the neo-cons took power everything was turned upside down to the benefit of the 2%ers and corporations at the expense of the workforce.
The Rand study found only 40% of healthcare that was delivered was necessary and appropriate. The rest of medical care was over-treatment, under-treatment and inappropriate treatment. So there we have the "waste, fraud and abuse" by PROVIDERS (hospitals and doctors). Then there is "waste, fraud and abuse" by INSURANCE companies. Their 15-30% overhead cost has little to do with delivering care. There is LITTLE "waste, fraud and abuse" by the government; whose Medicare overhead cost is only 4%.
It is a myth that private insurance makes-up for Medicare with cost-shifting. The inefficienices of hosptials in addition to their 25% overhead cost makes healthcare in America costly and inefficient. Medicare is not the problem, though everybody loves to blame it. The problem is with our supposedly private-enterprise health delivery system that is guaranteed a profit however iefficient they may be.
Sort of - there are a lot of problems with Medicare - like the different re-imbursement rates for different geographical areas. For instance, Minnesota has a relatively low re-imbursement rate. The non-profit Mayo Clinic pretty much accepts all comers and is generally pretty efficient. But to compensate for low Medicare re-imbursement rates, it simply sets its standard prices higher and negotiates harder with insurance companies. The insurance companies aren't doing the cost shifting, but the cost of insurance goes up as a result.
And no entity is guaranteed a profit - part of the problem with our health care system is that many entities from providers (hospitals, clinics, etc.) have failed over the last few decades as have insurance companies.
I agree, however I also believe NOBODY should make a profit off other people's pain and misery. That is what the for-profit HC insurance industry is doing now. Don't want the government between you and your doctor but it's OK for the HC industry to be between you and your doctor?
The whole problem started when the HC industry was created and the insurance companies saw how much money came into the coffers from premiums paid by consumers. All that money ignited the greed of the CEOs etc. to get a piece of the pot which is why we have the problems we are now facing. It is all based on greed! It is also why W tried so hard to privatize Social Security, a big pot of money that the financial industry could not get their hands on. Can you imagine where our seniors would be today if Social Security had been in the stock market when the house of cards collapsed?
You do not address that a large portion of tests are performed as "lawsuit prevention". These tests atre run for the 1 in 850 chance something might be found. If the test is not recommended the doctor can be sued if that one case occurs. Since the Doctors do not have pay for the tests it is a CYA test to keep lawyers out of their business.
OK, lets discuss malpractice insurance. Malpractice insurance rates have skyrocketed for ALL doctors no matter the doctors track record. Its like charging higher rates for a particular vehicle because young, inexperienced drive them more (actually happened to my husband when he was in his 30's). When lawsuits amount to just 2% of HC issues, I would say that old argument is ridiculous!
Medicare started going broke when Reagan began borrowing from it - and from the Social Security Trust fund, which is also facing a dire future.
Reagan didn't start the borrowing from Social security, LBJ started that to fund the Viet Nam war and the the Great Society.
LBJ borrowed from the federal employee retirement.
medicare and it's recipients are on the road to death, but dems don't care. Especially the young.
All of us are on the road to death, some people just started earlier than others.
If it were a company, it's creditors would already have called for a change in management and asked for their own on the board of directors - since 2001 or thereabouts.
not sure the commentator understands GM. or Medicare either. GM's problems dated from long before the 1990s. go back to the 1980s. thats when they stopped escrowing enough money for pensions. had they done that they never would have had a pension problem. but that would have cost executives some bonuses back then. as for medicare's problem? its also shares the same problem the private insurers have. the cost of care has been going up even with the great recession in full force. it now costs the country 2.5 trillion up 1.1 trillion in one decade, which means it will hit 5 trillion in the next decade or sooner . that is unsustainable for either system. and that happens if we do nothing. and why is it only the US has this problem in this scope today? most other developed countries with smaller economies can afford health care. not so here. and yes Medicare has to take all comers, not like private insurance which works hard to either deny coverage or claims after the fact. and they spend more on administration too. and its cover the elderly who by definition are going to need more care.
GM agreed to pension plans that were unsustainable, period.
You are wrong with respect to the pensions at GM. It was the management and their decisions that proved to be the undoing of GM.
For years they had underfunded and used as a tool, the overly optimistic expected returns on their pension plans to hide the issue [management estimates]. Instead, they as company management chose to pay dividends to their shareholders even as they lost market share and incurred massive financial losses.
Then there is the curious case of Ford, which by the way had the same agreed to pensions (under pattern bargaining) executive and other pensions were similar as well. Ford is surviving just fine. Unlike GM, Ford has been more realistic/honest about funding their legal obligations.
To state that the pension liabilities were unsustainable is just flat out wrong.
GM's problems started about 1950-52. Along with most US auto makers, they failed to respond to changing market conditions, and cast their lot with satisfying Wall Street instead of building cars for Main Street. Marketing and Investor Relations departments made product-mix decisions, after clearing with Accounting. Engineering and Design, and Production Engineering came last. So bean-counters and shills for Wall Street made the decisions that should have been made elsewhere in the companies. Right-wingers like to blame workers and unions for the problems, but the real fault lies/lay with top management, who bet on the wrong horse, consistently, year after year, losing market share to foreign competition, while tanking the quality of domestic products.
Now, this guy's prescription for Medicare/Medicaid is BS from the get-go, and obviously is premised on retaining the controlling position of for-profit insurance companies. The appropriate "fix" for Medicare is to remove the cap on FICA/Medicare earnings and perhaps raise the FICA/Medicare tax rate by 0.5 - 1%. Medicare premiums could probably stay as they are, and remain graduated by income level. Merge Medicare/Medicaid and open eligibility to anyone who wants it. Enact both employer and individual mandates that cover everyone. As a sop to "free marketeers," leave for-profits in business, but revoke anti-trust immunity. Anyone who wanted to could buy those policies. Few would want to, so we could thus let for-profits die a natural death.
A great idea ... removing the cap on FICA/Medicare and the anti-trust waiver would take care of the discrepancy in the funding pool and the "legal" price-fixing practiced by the HC industry!
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