Chicago, Ill.
In 1965, President Lyndon Johnson created Medicare to bring affordable, high quality health care and economic security to America’s seniors. At the time, the private insurance market was not meeting the health care needs of retired Americans, and medical bills were forcing many into poverty after a lifetime of hard work. The concept behind Medicare was simple and effective: provide the same affordable, comprehensive set of benefits to all beneficiaries through a single public insurance pool.
For nearly four decades, Medicare has fulfilled its original mission, providing a solid health care foundation for seniors and, since 1972, individuals with disabilities younger than 65. The program has adapted well to an ever-changing health care system and dramatic shifts in demographics. In addition, the program has become a national leader in providing cost-effective quality care. Medicare’s achievements are manifest and manifold:
- Its benefits are delivered at a fraction of the administrative costs incurred by private plans.
- As one of the largest health care purchasers in the country, it is able to negotiate substantial cost savings on medical services and pharmaceuticals.
- It has amassed a commendable record in reducing waste, fraud and abuse.
- Its innovations in areas such as quality measurement, preventive care, patient safety, and disease management, are pioneering changes in health care purchasing that hold the promise of reining-in out-of-control health costs at the same time as improving quality care.
As we look proudly on the first 38 years of Medicare, we also recognize the urgency of responding to immediate and long-term needs for reform and modernization. The country is experiencing the worst health care inflation in its history; national health care spending has doubled over the past four years. Medicare enrollment will double over the next 75 years. Spending by seniors currently accounts for 43 cents out of every dollar spent on prescription drugs, even though the elderly make up only 13 percent of the population; senior drug spending is expected to increase six-fold over the next 10 years. Recent cost and income projections indicate that Medicare is unprepared to meet its financial obligations when the baby boomers retire.
Health coverage for retirees is in serious jeopardy, as employers shed coverage right and left. The Medicare managed care program has dropped more than 2 million beneficiaries from plans during the past four years, and many plans have eliminated or reduced drug coverage.
Unfortunately, proposals to “reform” Medicare recently passed by the U.S. Senate and House of Representatives and endorsed by President Bush ignore much of what needs fixing while trying to fix what isn’t broken. Unless they are substantially changed before final passage, these proposals, now before a House-Senate conference committee, would provide only modest assistance to many seniors desperate for relief from crushing medical and drug bills and could actually reduce retirement health protections for millions who now have coverage under employment-based plans. At their worst, these plans amount to giant social experiments of right-wing ideas that are untested in Medicare but already discredited in private plans. Specifically:
- The proposals would place beneficiaries’ drug coverage in the hands of private insurers, HMOs and pharmaceutical companies.
- Beneficiaries would be forced to choose between remaining in the traditional Medicare program with an unreliable stand-alone drug benefit (i.e. insurers would be able to decide how much to charge, what drugs to cover and even whether or not to offer coverage in a given area) or enrolling in a private managed care plan that can pull out of the market and reduce coverage every year.
- The already reeling system of employer-provided retiree health benefits would be further compromised by formulas for catastrophic coverage that would ignore what employers pay toward retiree drug coverage. According to the Congressional Budget Office, these provisions would cause more than 4 million retirees to lose their employer-sponsored health benefits.
- The program’s core mission is further threatened by provisions for income-based premiums for catastrophic coverage and the House’s privatization proposal, which would require competition between private plans and traditional Medicare a few years after startup.
- Many seniors would continue to face enormous out-of-pocket drug costs due to provisions that provide no drug coverage between an initial spending limit ($4,500 in the Senate bill and $2,000 in the House bill) and the catastrophic cap ($5,813 in the Senate bill and $3,500 in the House), require beneficiary payments for home health and laboratory services, and index contributions to the annual increases in prescription drug costs.
- Finally, the same reform proponents who seek to limit program costs on the backs of beneficiaries through higher co-pays and deductibles are resisting steps to contain skyrocketing drug costs. They oppose pending cost containment proposals to allow drug reimportation, increase access to generics and require disclosure of pharmaceutical benefit manager prescription drug pricing methods.
Ensuring that all seniors and beneficiaries with disabilities have access to affordable, comprehensive benefits requires a guaranteed, affordable drug benefit and a Medicare program that is administered by the public for the public. The AFL-CIO will continue to fight for long overdue reforms to make Medicare more responsive to the needs of America’s seniors and their families. At the same time, we will oppose any effort by Congress to hold hostage a much-needed prescription drug benefit in order to achieve fundamental changes to traditional Medicare that would undermine the program and threaten the well being America’s seniors.
To these ends, the AFL-CIO calls on all unions to join in grassroots mobilization work this month while Congress is in recess, through aggressive union participation in town hall meetings and “accountability sessions” with members of Congress, and starting next month with strong lobby efforts in Washington, D.C. Our message through this period will be that members of Congress must reject any proposal from the Medicare conference committee that does not correct massive problems with the House and Senate passed bills.