As Congress works out a budget deal, Americans should
consider carefully how this deal will affect their Medicare
choices. As it stands, the current budget bills (S. 947/H.R.
2015) create a new Medicare Part-C program. Congress says
the new Medicare program gives seniors more choices. But
upon closer examination, the program favors traditional
Medicare and doctor networks, while restricting seniors'
ability to choose a Medical Savings Account (MSA).
On average, Medicare paid more than $5,000 per beneficiary
during 1996. The MSA option would allow seniors to use
that money to purchase a lower-cost catastrophic insurance
plan, and then place remaining funds in an MSA. Those
funds could be used to pay for any health care expense
that is currently tax deductible.
How would the budget deal affect seniors' Medicare choices?
At first glance, the Medicare program being proposed in
the budget deal looks good. Most of the 37 million seniors
could choose among the following types of health plans:
traditional fee-for-service Medicare, Health Maintenance
Organizations (HMOs), Preferred Provider Organizations
(PPOs), or newly created Provider Sponsored Organizations
While nearly all seniors can choose those health plans,
Congress is severely limiting the number of seniors who
can open MSAs. Of 37 million Medicare beneficiaries, the
House bill permits only 500,000 to open MSAs; the Senate
bill restricts the MSA option to 100,000.
Congress is making a big mistake by restricting the
MSA option. Other Medicare options do not give seniors
an incentive to lower costs. Also, traditional Medicare
does not provide "insurance" in the true sense of the
word. No federal health insurance company assumes the
financial risks of Medicare beneficiaries. Instead, Medicare
is a "pay as you go" system whereby today's workers pay
for seniors' medical bills. To that end, taxpayers are
the ones who bear the financial risks - not a health insurance
company. It is no wonder Medicare costs have grown out
of control, while government interventions have failed
to reduce Medicare costs for the past 30 years.
Now the 105th Congress is attempting to control costs
by giving Medicare dollars directly to physician networks.
They're selling this proposal as "increased Medicare choices."
But the proposed Medicare program won't encourage seniors
to become cost-conscious. Instead, it shifts Medicare
dollars away from insurance companies and gives money
directly to doctors and hospitals through "Provider Sponsored
Organizations." PSOs are similar to HMOs, except they
are owned and operated by physicians and hospital networks.
PSOs have strong support from the American Medical Association
and the American Hospital Association. However, insurance
companies and consumer groups charge that Congress is
granting PSOs unfair advantages, such as exemption from
existing state regulations. Such exemption would allow
PSOs to maintain lower financial reserves compared with
other health plans. That could subject seniors to greater
Another way Congress is considering controlling Medicare
costs is by charging greater Medicare premiums to higher-income
beneficiaries. But why should those who paid higher Medicare
taxes have to pay even more when they retire? After all,
there is no cap on the current 2.9 percent Medicare payroll
tax. That means higher-income seniors already paid more
for Medicare, but they receive the same medical benefits
as every other Medicare beneficiary. Forcing higher-income
seniors to pay more for their "insurance" will do nothing
to reduce Medicare costs. Neither will shifting health
care dollars from insurance companies to doctors and hospitals.
But expanding the MSA option would.
The best way to control Medicare costs is to place health
care dollars back in the hands of seniors. That is why
Congress should give the MSA option to all seniors, and
let them decide for themselves how to spend their Medicare