Target providers’ sense of entitlement
Americans are paying more for Medicare, but where is that money going?
Springtime in Washington brings the annual federal budget ritual. This year, President Barack Obama’s budget for 2014 included a proposal to increase Medicare premiums for higher-income seniors. Other ideas to sustain Medicare are cross-pollinating across the political aisle.
Both Republicans and Democrats have discussed raising the Medicare eligibility age from 65 to 67.
Whatever the White House and Congress decide, Americans need to be prepared for sticker shock when they enroll in Medicare.
A growing share of many older Americans’ Social Security income is being consumed by Medicare premiums and copayments, according to the fine print in the Medicare trustees report.
About 27% of a senior’s Social Security check, on average, was used in 2011 to pay for premiums and copayments for Part B physi- cian services and Part D prescription drugs.
By 2084, 46% of Social Security income will be consumed by Medicare parts B and D. These amounts don’t include cost-sharing for Medicare Part A hospital care.
In the late 1960s, only about 6% of a senior’s Social Security check was spent on premiums and copayments for Part B. Part D didn’t exist then.
Nothing has stopped the cost of healthcare from swallowing older Americans’ income. In fact, if Obama’s proposal to reduce annual costof-living adjustments for Social Security takes effect, Medicare costs will consume an even larger share of shrinking Social Security checks.
Where does all this money for Medicare go? Most people think of Medicare as an entitlement for seniors. It is also big business. The healthcare industry relies on Medicare for nearly $600 billion in annual revenue. In 1965, when Medicare was created, no healthcare companies were on the Fortune 100 list. Now there are 15.
According to the Institute of Medicine, 30%
of healthcare spending is wasted and doesn’t add to the health of the public. Last month, during a speech to healthcare leaders in Maine, I told the true story of a surgeon who wanted to be a good steward of resources. He asked his hospital about the cost of supplies in his operating room and found that he didn’t need half of what had been purchased. About 10%, worth $70,000, had expired and had to be thrown away.
After the speech, a member of the audience described the discarding of massive amounts of unused hospital supplies that would fill a large swath of a basketball court. Later, a professor in a school of pharmacy said students are required to witness the periodic disposal of mountains of unused prescription drugs.
This type of waste occurs not just because of poor buying decisions by hospitals. The multibillion-dollar market for hospital supplies and equipment is ripe for transparency.
As for healthcare fraud, if 10% of Medicare spending, or nearly $60 billion, is frittered away each year, this amount is equivalent to the lifetime Medicare payroll tax contributions of hundreds of thousands of Americans who worked hard to earn that money.
Democratic and Republican proposals to sustain Medicare require the public to pay more. Why should we?
Seniors’ entitlement to Medicare is not the reason that the program is headed for the fiscal cliff. The healthcare industry’s sense of entitlement to Medicare’s money is the problem.
Excessive prices that incite dismay among the public are a manifestation of the entitlement mentality. So is the overuse of tests and treatment whose purpose is to meet productivity targets.
While some Republicans allege that Medicare fosters a culture of dependence among seniors on government, elected officials turn a blind eye to the real culture of dependence that the healthcare sector has on Medicare.
Conscientious healthcare leaders are caught between their professional responsibilities and their role as private citizens. At work, they wit- ness the profligacy and feel powerless to change course. At home, they know that the consequences of inaction are dire.
The Medicare debate in Washington should not be about raising premiums or the eligibility age. These proposals would cement and perpetuate misallocation of the public’s money.
Rather, the debate should be about reducing the healthcare industry’s dependence on the waning good will and blind generosity of the public.
The misallocation of public resources can be corrected only with an informed citizenry that knows where their money is going, who is getting it and how it is being used.
This is the first step to preserve and protect Medicare for the people it was meant to serve.
Medicare is an entitlement
and big business.
Rosemary Gibson is principal author of Medicare Meltdown: How Wall Street and
Washington are Ruining Medicare and
How to Fix It.