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Monday, September 12, 2005

Medicare B - Changing the Math so it Works for Everyone

As anyone who is on Medicare can tell you, it isn't perfect. One of the things that is wrong with Medicare is that doctors don't like it. The reason is simple - Medicare doesn't pay as much for services rendered as do other types of insurance. Face it, if you were a doctor, you wouldn't want to get paid less for seeing patients that are almost guaranteed to need more from you.

The problem with trying to pay doctors more under the current system of Medicare B funding is that it ends up costing both recipients and the federal government more. This is not unique to Medicare, though, it is the way every single insurance company in the world works. If you are going to pay out money; then you must bring money in. So the answer is not the one uber-conservative think tanks are trying to push - the abolition of Medicare. Doing so would do a combination of two things: 1) raise the price of other insurance as those who no longer have Medicare coverage flock to private insurers; and 2) ensure that those who can't pay for private insurance simply do without any health care coverage at all.

But this line of thinking only works so long as you remain in the tight little "Medicare as it now operates" box. That's the sort of failed thinking that has led to this crisis in the first place (if you don't think it's a real crisis, read the background links listed above). What we must do is to use some creativity and put ideology aside. We have to break out of the tiny Medicare box.

The policy intiative I have been arguing for is to allow everyone to buy into Medicare B at full cost. Currently, that cost for recipients is at $78.20 per month. That reflects only 25% of the total cost, though. The full buy-in cost would be $312.80 per month, or $3,753.60 per year for one person. It isn't chump change, but it isn't a horrible price, either. It is squarely within the price range of many of the 32% of the self-employed without health insurance. It is definitely within the range of the 68% of those who already pay someone else for it. In other words, there is a distinctive segment of society that would directly benefit from this idea and are simply waiting on the ability to use it.

According to the Bureau of Labor Statistics, that would mean some eight-and-a-half million people ready (possibly) to buy into Medicare B. If only half of those bought into Medicare B, that would be an increased revenue of some $1.3 billion per month - more than $15 billion per year. Since the government already allows self-employed persons to write off up to sixty-five percent of their health care premium, the loss in revenue would be marginal. The gain to Medicare, however, would be enormous.

Medicare B is, by law, revenue neutral. That means that an increase in spending - such as that caused by increasing pay to doctors - results in an increase in payments from recipients and the federal government. The good news is that the equation works in reverse as well. If more money comes in than is used; then premiums go down. The savings from lower payments into Medicare B for the government would more than pay for the loss of revenues that the thirty-five percent of healthcare premiums that isn't deductable would bring in. In other words - the government saves money.

Let's say for argument that premiums could be brought down by $10 per month. That would save seniors money. It would also save the people who buy-in even more money - $40 per month more, to be exact. So everyone saves money. The poor old doctors, though, are left holding the medical bag and getting paid less than what they (arguably) deserve.

Again, the answer is simple. Rather than dedicating all of the reductions to lowering premiums, why not give half of it back to doctors in the form of higher payments? Wow. That was hard. As Emeril Lagasse says, "This ain't no rocket science here." So elders only save $5 per month and buy-ins only save $20 per month. Wah. Guess what? You've still strengthened the system.

Allowing doctors to benefit (albeit in a round-about way) from keeping costs down actually gets everyone on the same side of the boat. The doctor says, "I can give you this new drug that costs the system $50 per pill and get no increase this year, or I can give you this perfectly good $0.50 pill and actually help make myself more money." That's called "using self-interest" to drive the system.

This is only using the fairly small percentage of Americans who are self-employed as an example. There are many people who work full time and have no health insurance. Every week, Medicare tax is taken out of their paycheck to pay for healthcare they may never live to receive themselves. That's wrong. They should be allowed to buy-in to Medicare B along with everyone else. Based on the working principles of insurance that every health insurer in the country already uses, this will only pump more money into the system and bring the cost down even more.

This is not a national health care system. It is an option for those who want to use it - totally voluntary. If people are allowed to use pre-tax dollars to buy their insurance through Medicare B (like they are for every other health care plan); then the enrollment will only be higher - which is good for the system. It is not "big gubmint" deciding what health care you should have. It is simply the government of the people and by the people working for the people.

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