08/31/2010 11:35 pm ET | Updated May 25, 2011

The Downside of Medicare--And Alternatives

Those of us of a certain age sing the praises of Medicare, which thanks to the recently passed health reforms according to the latest report of the trustees, has a new lease on life. It will serve the needs of upwards of 45 million disabled and people over 65 for longer than some banks and businesses will be around.

That is to say, the life of the Hospital Insurance Trust Fund has been extended 12 years to 2029. That fund, if you don't know, pays for Medicare Part A, which includes hospitalization, and rehabilitation or skilled nursing care, after, say, an accident or surgery, and some home care.

In addition, the Obama administration's bean counters estimate that the new health care overhaul, Medicare Part B -which pays part of the cost of labs and physician visits- will save $8 billion by the end of next year and a whopping $575 billion over the next ten years. That's something people over 65 and those approaching retirement to celebrate. Medicare will be there when employment benefits run out.

But Medicare, which was passed 45 years ago, is far from the universal health care that we one day hope to have. Unless a beneficiary has supplementary coverage from a former employer, Medicare's deductibles and premiums or the Medigap policies to cover those costs have gotten expensive.

If you don't yet qualify for Social Security (or haven't had 40 or more quarters of Medicare covered employment) Part A's premium (normally free) can cost from $254 to $461 a month. A hospital stay will cost $1,100 for up to 60 days, $275 a day for days 61-90 and $550 a day after that.

Part B, as you know, costs most beneficiaries $96.40 a month, but much more if you are a bit affluent because Medicare George W. Bush instituted means testing for the first time. It also carries a yearly deductible of $155, which goes up every year. Part B covers 80 percent of the bills, with those out-of-pocket costs going up. And Part D is an added expense if you need prescription drugs and fall victim to the doughnut hole. Medicare is saving that $8 billion a year, by cutting Medicare Advantage for 10 million beneficiaries. That's the right move, in my view, but it's an indication that Medicare penalizes some people who were hoping to get more coverage.

We could have done better than Medicare or the cumbersome health reforms, most of which won't take effect until 2014, if the nation wasn't so stuck in an ideological rut. One great alternative is called socialized medicine and it's practiced right here in the U.S.--the Veterans Administration hospitals and health services. And its beneficiaries, non-socialists all, have included the four star generals now running our wars as well as Sen. John McCain and many members of Congress. Although they are not run by the VA, among the socialized institutions that have tended to the needs of presidents as well as lawmakers, are Walter Reed Hospital, in Washington, run by the Army, and the Bethesda Naval Hospital in the Maryland suburbs.

A few years ago millions of Americans and I were beneficiaries of the VA health system when it developed, along with Merck and California researchers, an effective vaccine for the dreaded shingles. That was just one of the innovations credited to the VA in a new edition of a book, The Best Care Anywhere, with the subtitle, "Why VA Healthcare Is Better than Yours." Written by Phillip Longman, a professional demographer, and a fellow at the New America Foundation and the Washington Monthly, the book tells the story of the quality revolution launched by Dr. Ken Kizer when he took over the VA health system in 1994.

According to the Century Foundation's Health Beat blog, Longman's book includes "eye-popping evidence" based on peer-reviewed research "that when it comes to everything from outcomes to patient satisfaction and patient safety, the VA out performs. Most people don't associate the VA with innovation. But a majority of its doctors have faculty appointments at academic institutions, one reason that the VA is on the cutting edge of evidence-based, patient centered medicine." Over the years, Longman reports, "the VA has been responsible for developing the CT-scanner, the first artificial kidney, the cardiac pacemaker, the first successful liver transplant, the nicotine patch," and the shingles vaccine.

The VA installed the VistA software program, the centerpiece of the VA's electronic medical record system, which is now used elsewhere. With the use of the software, Longman writes that the VA system, in which everyone -doctors, researchers, nurses and technicians work for the VA- "is the only health care provider in the U.S. whose cost per patient has been holding steady in recent years." Dr. Donald Berwick, the new head of the Centers for Medicare and Medicaid Services wrote on the back cover of Longman's book, "The improvement of the VA health care system in the past decade is one of the most impressive stories of large-scale change." Who says government can't do anything right?

In this case (as in many civilized nations), socialized medicine works, but it's doubtful that the VA system will serve as a model for health reform in the U.S. We blindly reject "socialism" without knowing what it is. But we veterans know how it can be helpful in obtaining good treatment and cheap prescription drugs. Unfortunately, budget cuts over the last eight years have forced the VA to sharply limit eligibility for its health system.

While searching for alternatives to Medicare and the inadequate health reforms, I came across a paper published earlier this month on "the impact of universal national health insurance on population health" in Taiwan, of all places, a successful bastion of free enterprise on the doorstep of communist China.

Taiwan established its National Health Insurance in 1995, which covers more than 98 percent of Taiwanese, at the cost of small co-payments. In the years after the system became effective, the paper reported, deaths from "causes amenable to health care" declined by nearly six percent a year. The decline was highest among the young and the old and was "associated with substantial reductions in deaths from circulatory disorders for men, whilst an earlier upward trend in female cancer deaths was reversed."

The U.S. might have had something similar to Taiwan's NHI, Medicare For All, except for the timidity of Barack Obama, who did not have the courage of his own convictions, and the ignorance of conservative Republicans and Democrats who worried more about their political futures than the health care of their constituents. Republicans would have had trouble attacking "Medicare For All." It's easier to call for the repeal of the confusing "Obama care."

We pay for this ideological narrowness with lives; in contrast to the good news of Taiwan's NHI, the U.S. has the worst rate of amenable mortality among 19 industrialized nations, with more than 100,000 deaths per year from disorders amenable to health care.

Write to Friedman also writes for