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Friday, November 20, 2009


Rationing Issues with the Reid Senate Bill:
With the various concerns related to rationing and euthanasia, we will post a series of concerns - the following analysis being one among several.

Price Controls (Medicare)

The Reid bill includes the House provision that would effectively allow the Centers for Medicaid and Medicare Services (CMS) to bar senior citizens from adding their own money, if they choose, to the government contribution to get private-fee-for-service Medicare Advantage (MA) plans less likely to ration life-saving treatment.

Medicare—the government program that provides health insurance to older people in the United States—faces grave fiscal problems as the baby boom generation ages. Medicare is financed by payroll taxes, which means that those now working are paying for the health care of those now retired. As the baby boom generation moves from middle into old age, the proportion of the retired population will increase, while the proportion of the working population will decrease. The consequence is that the amount of money available for each Medicare beneficiary, when adjusted for health care inflation, will shrink.

Three alternatives exist.

In theory, taxes could be increased dramatically to make up the shortfall – an unlikely and politically difficult proposition. The second alternative—to put it bluntly but accurately—is rationing. Less money available per senior citizen would mean less treatment, including less of the treatments necessary to prevent death. For want of treatment, many people whose lives could have been saved by medical treatment will perish against their will. The third alternative is that, as the government contribution decreases, the shortfall could be made up by payments from older people themselves, so that their Medicare health insurance premium could voluntarily be financed partly by the government and partly from their own income and savings.
What most people do not realize is that, as a result of legislative changes in 1997 and 2003, supported by the National Right to Life Committee, this third alternative is now law. Under the title of “private fee-for-service plans,” there is an option in Medicare under which senior citizens can choose health insurance whose value is not limited by what the government may pay toward it. These plans can set premiums and reimbursement rates for providers without upward limits set by government regulation.

This means that such plans will not be forced to ration treatment, as long as senior citizens choose to pay more for them. This option means that Medicare can operate in such a way that whatever the government provides serves as the floor, not the ceiling, for what health care senior citizens can get. As government contributions sink, private fee-for-service plans can provide a way to escape rationing. For more on the background of this program see here.

Medicare covers everyone of retirement age, regardless of income or assets. Yet, because of budget constraints, the Medicare reimbursement rates for health care providers tend to be below the cost of giving the care—a deficit that can only accelerate as cost pressures on Medicare increase with the retirement of the baby boomers. This means that providers engage in “cost shifting” by using funds they receive in payment for treating insured working people to help make up for what the providers lose when treating retirees under Medicare. Thus, comparatively low-income workers often effectively subsidize higher-income retirees.

However, when middle-income retirees are free voluntarily to add their own money on top of the government contribution, through a private fee-for-service plan, they stop being the beneficiaries of cost-shifting and become contributors to it.

This program faces elimination in the Reid bill. Section 3209 indirectly amends the section in existing law allowing private fee-for-service plans to set their premiums without approval by CMS to say, “Nothing in this section shall be construed as requiring the Secretary to accept any or every bid submitted by an MA organization under this subsection.” [1] This allows CMS to refuse to allow private-fee-for-service plans that charge what CMS regards as premiums that are too high – or, literally, allows CMS to refuse to allow private-fee-for-service plans (or any other MA plans) altogether, for any reason or no reason.

With this dangerous provision in the Reid bill will eliminate the only way that seniors have to escape rationing - taking away their right to spend their own money to save their own lives.

[1] At page 920

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