Medicare’s Sickly Reforms

The Bush administration says its newly announced 17% increase in next year’s Medicare premiums, on top of the 13.5% hike it imposed this year, will actually help seniors. “Medicare beneficiaries are ... paying a little more in premiums,” said Medicare/Medicaid head Dr. Mark McClellan, “but they’re getting more savings.”

McClellan’s assumption is, to put it politely, hypothetical.

It rests on the notion that by spending modestly on two major healthcare reforms -- adding a prescription drug benefit to Medicare and moving more seniors into managed care -- the government will be able to save heavily in the next decade. The administration designed both programs, however, in ways that will multiply healthcare spending, meaning seniors may be socked with steep premium hikes long into the future.

The prescription drug benefit, for instance, makes it illegal for Medicare to negotiate drug prices with manufacturers. This is no way to restrain costs. Even more harebrained is the administration’s notion that it will save money by resurrecting Medicare Plus Choice, a program from the early 1990s that lured many from traditional Medicare into managed care by promising more benefits. Many Medicare Plus Choice programs ended the added benefits soon after inception or went out of business. The administration has done little more than change the program’s name to Medicare Advantage.

President Bush proposes to give Medicare Advantage plans a 6.6% payment increase in 2005, on top of the 10.3% jump the administration gave them earlier this year. This despite a recent conclusion by the Medicare Payment Advisory Commission that the government already pays Medicare managed-care plans 7% more than it would cost to treat the same patients in the traditional Medicare program.

The country needs an honest dialogue about how to control Medicare spending, which can be reined in only through such controversial measures as reducing benefits or imposing a sliding scale on premiums, with the wealthy paying higher deductibles than the poor. Bush, however, has yet to confront such hard truths, and rival John F. Kerry hasn’t been much better.

The timing of the Medicare premium hike announcement -- late Friday afternoon before a holiday weekend, after Bush experienced a substantial bounce from the Republican convention -- was clearly a political maneuver intended to bury the story. Not even Hurricane Frances, however, will be enough to distract angry seniors from the increasingly obvious failure of both political parties to reform Medicare responsibly.