Medicare for More

The next administration will have an historic opportunity to reform the American health care system. The federal government might actually do something about the fact that 45 million Americans are uninsured, that health care costs are soaring (with spending on Medicare and Medicaid alone now accounting for 4.6% of GDP and on track to reach 20% by 2050), and that despite our extraordinary level of expenditure on health care, the U.S. ranks in last place among 19 industrialized nations in terms of quality of care (see my posting ‘F’ is for Failure on 7/22/08). Unfortunately, neither Obama nor McCain has put forward a plan that is likely to solve our problems.

What would fix the situation would be to expand Medicare to cover all Americans, as proposed by Senator Edward Kennedy (see “Kennedy and Dingell Fight for Medicare for All,” http:/kennedy.senate.gov/newsroom/press). This approach has the potential to insure everyone while reducing costs and enhancing quality. And it would finally bring the U.S. in line with all other developed nations: countries such as Australia, England, France, Germany, and Canada all provide some form of mandatory universal health insurance for their citizens. They also all have lower infant mortality rates, lower rates of preventable death in people under 75—at a per capita cost half that of the U.S.

When Congress created the Medicare program in 1965, it acted in the belief that older people were somehow exceptional—they were sicker, they lived on fixed incomes, and they did not have employer-based health insurance. While some physicians, politicians, and economists hoped that Medicare would be the wedge opening the door to health insurance for all, Medicare was passed precisely because it did not promise mandatory health insurance (see the chapter, “Medicare for the Middle Class” in David Rothman’s insightful book, Beginnings Count: The Technological Imperative in American Health Care, NY: Oxford University Press, 1997). Single payer insurance was touted then and continues to be seen today as “socialized medicine,” but the expansion of Medicare does not imply a government-run system. While Medicare is publicly financed, it is a private health care system administered by private intermediaries that gives patients an extensive array of choices of physicians and hospitals.

Ironically, there is one part of the health care system in which government is actually in the business of providing medical care, and it’s a part of U.S. health care that McCain vigorously supports. That’s the Veterans Health Administration. The VHA operates the largest integrated health care system in America, which includes hospitals, outpatient clinics, nursing homes, and rehabilitation facilities. A uniform medical benefits package is available to all veterans and covers primary care, outpatient and inpatient services, and prescription drugs. Additional benefits, such as nursing home care and dental care, are available to some vets, depending on their “priority level.” The VA system is known for its pioneering work in managing chronic conditions, for its comprehensive electronic medical record, and for other quality improvement measures.

No one is recommending expansion of the VA system—it’s just not a politically tenable solution. But expanding Medicare, while clearly a difficult sell, would make a great deal of sense. Medicare is far more efficient than private health insurance plans: Medicare’s overhead is about 2%, whereas private insurers take an average of 13% of premium dollars for overhead and profit, with large managed care plans taking as much as 30% (see David Himmelstein and Steffie Woollhandler, “Why the US Needs a Single Payer Health System,” www.pnhp.org/facts/why_the_us_needs_a_single_payer_health_systemphp). Not only would it be simple and efficient, but paradoxically, the existing Medicare program would do a better job serving the non-elderly than it does with those it currently covers.

Medicare was established to cover acute, time-limited illness. By far the largest component of Medicare expenses continues to be for hospitalization. Of the $402 billion spent by Medicare in 2006, 29% went to inpatient care, compared to 15% for physicians, 12% for outpatient drugs, and 3% for home health care (see the MedPac report, www.medpac.gov/documents/Jun07DataBook_Entire_report.pdf). Medicare was designed to address a disease such as pneumonia in which the patient rapidly develops a significant illness, is hospitalized for a week or so (covered after a deductible), and is then discharged home to complete his treatment by taking a few days’ worth of oral antibiotics. By contrast, the typical Medicare patient today has multiple chronic conditions, which are best cared for using a model of chronic disease management: 75% of the elderly have at least one chronic disease and 50% have two or more chronic illnesses. While the Medicare Modernization Act of 2003 addressed some of the needs of today’s older patients, principally by offering a prescription drug plan, the program is still heavily weighted toward the treatment of acute illness. Its incentives, for example, promote hospital care rather than treatment in the home or the nursing home (see chapter 4, “The Trouble with Medicare,” in my book, The Denial of Aging: Perpetual Youth, Eternal Life, and Other Dangerous Fantasies, Cambridge, MA: Harvard University Press, 2006). But this focus on acute care is precisely what most younger, healthier patients need. Some middle aged individuals have congestive heart failure or chronic obstructive pulmonary disease and similarly, some children suffer from chronic conditions such as asthma or diabetes; the majority do not.

The most rational approach to American health care reform is to offer Medicare to everyone, perhaps the existing plan for younger Americans and a modified version for the elderly and the disabled. The U.S. should guarantee health insurance by providing a basic insurance plan (Medicare) paid for out of tax revenues. Patients could choose to exchange their Medicare benefit for a private plan or to supplement their basic plan with a more comprehensive plan for which they would pay directly. A new, expanded Medicare program would be ideally positioned to address the other pressing issue that both Congress and the presidential candidates have largely ignored—the soaring costs of care (see my blog posting, “Going for Broke” on 12/28/2007) by controlling what medical interventions it is willing to cover and how much it will pay for them.