Miami, FL
For more than three decades, Medicare has been the cornerstone of health security for the nation's elderly. Medicare was created in 1965 to address a crisis among older Americans: at the very moment in their lives when health care needs were rising and incomes falling, many senior citizens simply could not afford private health insurance, which was more costly for them than for younger individuals. The nation's response to this crisis was to create a publicly administered social insurance program, Medicare, to which all taxpayers would contribute and which, in turn, would guarantee access to health care for the elderly.
Medicare has delivered on its promise. Today, virtually all older Americans have access to health care, compared with just over 50 percent in 1966. Medicare has played a central role in reducing poverty among the elderly by almost two-thirds; in extending life expectancy and improving the qualify of life for seniors; in enhancing access to home health care and hospice treatment, often less costly and more dignified care options than hospitalization; and in providing crucial financial support to vital medical facilities--renal dialysis centers, home health care agencies, hospices, teaching hospitals and certain urban and rural hospitals--that treat otherwise unserved or under-served populations. Since 1972, Medicare has provided access to health care for certain disabled individuals. Medicare has achieved all this in an efficient and cost-effective manner: the program's costs per enrollee, payments for services, and hospital and physician reimbursement rates have generally been lower than or equal to the private sector's. Last year, Medicare's growth rate was an unusually small 1.5 percent, considerably less than the private market. And administrative expenses are less than 2 percent of total Medicare outlays, compared with an average of about 17 percent among private insurers.
Medicare works, but it faces financial and other problems that must be addressed if it is to continue to deliver on its promise of ensuring affordable, high quality health care. Aging of the population and the baby boom retirement explosion beginning in 2010 will require ever-growing federal outlays to meet Medicare costs. Absent changes, Medicare's Part A (Hospital Insurance) Trust Fund is projected to become insolvent in 2008. The Medicare benefits package needs updating to focus on outpatient care and other senior health needs. For example, Medicare does not cover prescription drugs or long-term care. Health care costs also remain prohibitive for many seniors: Medicare picks up the tab for only about half of total costs, and program beneficiaries spend 19 percent of their income on health care (even excluding nursing home costs), a figure similar to the percentage seniors spent before the program was created.
Congress created the National Bipartisan Commission on the Future of Medicare in 1997 to address these problems and recommend solutions by March 1, 1999. The challenge is to find reform solutions that will both ensure Medicare's solvency, through a combination of new resources and costs-savings measures, and improve benefits. While the Commission's work is not complete, Co-Chairman John Breaux is advocating radical reform--"premium support"-- that would fundamentally restructure Medicare, eliminating the existing entitlement and replacing it with a voucher system. The AFL-CIO strongly opposes the Breaux voucher plan.
Under the Breaux plan, the government would make only a capped defined contribution to individuals for their use in purchasing traditional Medicare fee-for-service coverage or private insurance coverage. This voucher system would encourage private insurers to cherry pick among beneficiaries: to structure benefits packages, and corresponding low premiums, to attract only the youngest, healthiest seniors; or to offer more comprehensive coverage affordable only to the affluent. Low- to moderate-income seniors would be the most likely to need health coverage they could not afford to buy in the private market, or to be forced into low-cost plans that did not meet their health needs. Medicare would be left with a disproportionately poorer, older and sicker participant pool, driving up overall program costs and eventually increasing premiums for participants. Rather than save money and improve care, the voucher system would inordinately burden the traditional Medicare program and limit options for many seniors.
The AFL-CIO also opposes Senator Breaux's proposals to raise the eligibility age for Medicare coverage from 65 to 67 and to shift funding for Graduate Medical Education (GME) and Disproportionate Share Hospitals (DSH) from Medicare to the general budget. The former change will exacerbate an existing problem, the lack of health care coverage for early retirees, and will add to the growing numbers of uninsured. The latter would undermine the nation's strong safety net hospital system. Many public and teaching hospitals face daunting financial challenges, including the burden of treating large numbers of uninsured and under-insured patients combined with difficulties in attracting privately insured patients. Removing the stable, predictable funding guaranteed by retaining GME and DSH in Medicare will exacerbate these problems, undermining hospitals' ability to serve the needy or maintain teaching programs.
The AFL-CIO believes that the principles for Medicare reform recently outlined by President Clinton, which aim at maintaining and strengthening a strong and effective publicly administered program, point in the right direction. Dedicating 15 percent of the budget surplus over the next 15 years to shoring up the Medicare Trust Fund, as the President has proposed, will ensure the Fund's solvency until 2020 and give the country time to develop a long-term response that balances retiree health care needs and costs. We concur with the President that better management, payment, clinical and competitive practices can achieve cost-savings for Medicare while maintaining quality; and that any reform must provide for a modernized, well-defined benefits package that does not impose excessive new cost burdens on participants, strengthens protections for low-income beneficiaries, and assures continued access to a viable traditional Medicare program. Beyond these principles outlined by the President, the AFL-CIO believes that additional concerns--buy-in options for early retirees and displaced older workers and prescription drug and long-term care coverage, for example--must also be on the table in the upcoming Medicare reform debates.
Ensuring Medicare's long-term solvency while expanding benefits and improving quality without significantly raising participants' costs or restricting access will be difficult. But this challenge is not unlike what the nation faced in enacting Medicare in the first instance or in meeting many other pressing social needs. Working families support Medicare, and they trust the program to provide treatment and care for the elderly and disabled. They deserve reforms that will preserve, protect and improve this program for all Americans, now and in the future.