"Medicare As We Know It" No Longer Exists

The Democratic political party in the United States has been tied up in knots for the last few months because one of its members, Senator Wyden of Oregon, joined with a Republican to propose a no-nonsense, no-politics reform of Medicare.  Medicare will run out of money in from five to 15 years depending on which estimate you read, which is why some kind of reform is needed. No one from President Obama to Rand Paul disagrees that Medicare has to be restructured and/or refinanced but everyone disagrees on how. 

The lines seem to be drawn between

• A group of experts that wants to keep "Medicare as we know it," loosely defined as Medicare Parts A and B, the remnants of original mid-1960s Medicare law
• A group of experts that favors the "choice" approach found in the newer Parts of Medicare, Parts C and D, which give most seniors extensive options concerning what kind of healthcare insurance they will take. This is the basis of the current bi-partisan/no-politics Wyden/Ryan approach mentioned above. (However, seniors still have to sign up for Medicare Parts A and B and pay any monthly premium due before they are able to exercise the choices in Medicare Parts C and D and in the private market.)

The experts who favor "Medicare as we know it" seem to be intentionally trying to fool seniors and other citizens who have not yet reached Medicare age and do not know the ins and outs of senior-citizen healthcare insurance. According to  Marilyn Werber Serafini of Kaiser Health News, one  expert, Jonathan Gruber of MIT, said

 “The real question is what would ("Medicare as we know it" as a choice) cost and whether seniors would pay more out of pocket than they do now"

Assuming he was quoted correctly, what does the expert mean by out of pocket (OOP) costs that seniors pay now?  Is he referring to the OOP expense of one of the fewer than 10% of seniors that actually depend only on "Medicare as we know it" or to the OOP expense of the more than 90% of us that depend on some other alternative for our senior healthcare insurance?

 

Those that stick with "Medicare as we know it" pay relatively little (if they had 10 years of Social Security earnings) but run a tremendous OOP expense risk. That's why:

• 75% of seniors pay $100 a month in OOP for Medicare Parts A and B and another monthly amount for retiree insurance and/or Medicare Part C. We choose from a wide range of options with the usual trade-off of higher premiums/lower co-pays and vice versa to suit our needs. But overall these are the least expensive OOP approaches to senior healthcare insurance. (They are also close to what Wyden/Ryan proposes.)
• Another 15% or more of us seniors select the approach of buying four different policies -- A, B, D and Medigap  -- and paying a separate monthly premium for each.  This is the second most expensive approach in terms of OOP but it is often the only choice depending on available provider networks and whether or not your county offers good Part C options or your former employer offers retiree insurance.
• Less than 10% of us seniors depend on "Medicare as we know it" because it is potentially the most expensive OOP approach to senior healthcare insurance. The cost (again if you have worked 10 years under Social Security) is only $100 a month -- not counting the 40 years of Medicare taxes you paid -- but this insurance has lifetime limits (that is, no catastrophic coverage), no drug/annual-physical/vision/dental coverage, as much as $8000 a year in hospital inpatient co-pays, and unlimited outpatient/doctor co-pays every year.  

Despite the group that is apparently politically tied to "Medicare as we know it," that insurance is just plain terrible and seniors abandoned it long ago. Medigap policies became popular immediately after the passage of Medicare. HMO-like Medicare came into use right after HMOs became prevalent (they have never been popular) among non-seniors and was formalized as Part C in 1997.

It's actually amazing that anyone chooses "Medicare as we know it" because the Medicare bureaucracy has recruited over 20,000 senior-center volunteers around the U.S. to encourage seniors to choose one of the other options and to make sure they are aware of all the federal, state and city assistance to help them pay for the other options if needed.

 

But if that's what you want, so be it. Senors voted with their feet and left "Medicare as we know it" to find more secure healthare insurance almost the minute the original plan was passed in the 1960s. As of 2012, over 90% of us have left that original plan. So how come some groups are fighting to keep it?