Policy & Regulation News

As Medicare Turns 50, Does It Still Make Financial Sense?

By Sara Heath

As Medicare’s 50th birthday approaches, critics begin to question whether the program should be rescued and updated for today’s health economy, or if it should be phased out and eventually dissolved, according to a news release. The program has been deteriorating for years, says the release. According to Twila Brase, R.N. and president and co-founder of the Citizen’s Council for Health Freedom (CCHF), is in need of “an escape plan, not a rescue plan.”

- Any solution for the Medicare crisis must be based on American principle of individual freedom and personal responsibility. But before we even try to rescue it, we must ask ourselves, ‘Is it even worth saving?’” says Brase.

medicare spending

Brase gives three arguments as to why Medicare should be phased out: the false promises it makes beneficiaries regarding its costs, its deficiency of funds, and the amount of bureaucracy associated with the program.

• Medicare is a Ponzi scheme. The first recipients received their promised benefits in full. For example, in 1966, nearly 20 million people entered the program without paying a dime. Today’s recipients have seen the promise falter. According to author Sue Blevins in “Medicare’s Midlife Crisis,” seniors are paying almost as much out of pocket now as they were before Medicare began. And for future recipients, the working young, the promise is made of air. Medicare insolvency is expected in 2030.

• Medicare has always been severely under-funded. Consider the 1.45 percent payroll tax that funds Medicare Part A (hospitalization insurance). After 45 years of work, a person earning $35,000 a year has contributed only $22,837 for what could be 15, 20, 30 or more years of Medicare in-patient services. Moreover, nonworking spouses pay nothing into the program but are still entitled to receive benefits.

• Medicare is big government at its worst. Fifty years of entitlement spending has led to an enormous federal bureaucracy, a blizzard of paperwork requirements, bureaucratic controls on the practice of medicine, more than 130,000 pages of oppressive Medicare regulations, numerous reimbursement-based rationing strategies, the nationwide imposition of managed care and a national budget crisis.

According to Brase, the amount beneficiaries pay for Medicare has been rising since the program’s start, to the point that they now pay as much as they would had the program never begun. Brase provides two arguments for why Medicare no longer makes financial sense. The first is the growing numbers of people expected to participate in Medicare in the coming years. She says that  The second is the underfunding accrued by the 1.45 percent payroll tax which funds Part A of the program. Add in the red tape of a governmental program and Brase concludes that the program is not worth saving at all.

Doing away with Medicare is not an easy or a popular choice, especially considering the program’s supporters. In addition to Medicare’s beneficiaries who may not want to see it eventually be dissolved, many businesses have interests in Medicare.

However, Brase answers this argument with five negative, and alarming, components to Medicare. For starters, patients may not pay cash for treatment that is not covered by Medicare, unless the doctor agrees not to receive Medicare payments for two years. Additionally, individuals who choose not to enroll in Medicare are denied all Social Security benefits, and those who disenroll from Medicare must pay back any Social Security benefits they have already received.

Furthermore, she says, Medicare gives huge advantages to HMOs. It pays 18 percent more for those seniors enrolled in Medicare HMO, as well as provides bonuses to doctors who comply with HMO treatment directives.

Brase also continues to emphasize the point that Medicare funds are growing smaller, while the number of beneficiaries is only growing larger. Because of this, healthcare rationing is a likely course in the future.

• Congress prohibits Medicare patients from paying cash to receive treatment denied by Medicare, unless the doctor agrees not to take Medicare payments for two years.

• Citizens who refuse to sign up for Medicare Part A (hospitalization) lose all Social Security benefits. Citizens who disenroll must repay benefits received.

• Congress is paying Medicare HMOs (Medicare Advantage) 18 percent more per senior than what is paid through traditional Medicare, perhaps to entice seniors to HMOs.

• Congress has begun paying Medicare bonuses to doctors who comply with government and HMO treatment directives.

• Imagine the future. As seniors flood into Medicare, scarce federal dollars will become scarcer. Health care rationing will likely, by necessity, be instituted.

The solution to these problems is not to remedy the program, because that would simply be a temporary fix, Brase says.

“While some fixes could temporarily relieve Medicare’s budget woes, it may unfortunately distract Congress from implementing more effective, long-term, life-affirming measures, such as repealing the Medicare prohibition against cash payments, mandating that health insurers offer lifetime insurance policies, and allowing and encouraging voluntary Medicare disenrollment without penalty,” she says.

However, the most long-term and effective solution Brase offers is the gradual exit strategy from the Medicare program.

“The real question is not whether to save Medicare, which is still flawed after all these years, but how to rescue those dependent on Medicare while building a bright Medicare-free future for all Americans,” Brase said.