The New Republican Congress’ Plan for Medicare

If the new Congress and President have their way, there will be changes to the Medicare program. As it is now structured, it is a defined benefit program.This means that when you go to the doctor or hospital, and the doctor orders various blood or other tests, Medicare will pay 80% of the costs for the visit and the tests. You are responsible for the 20% co-pay, your monthly premium and yearly deductible.Speaker of the House Paul Ryan, who was the former Chairman of the House Ways and Means Committee, has the plan to change the structure of Medicare. He and other Republicans want to change it from a defined benefit program to a defined contribution plan. What this means is that each person eligible for Medicare would be given a certain amount of money to pay for an insurance policy purchased from a private insurance company. Persons with fewer assets will be given more than those of greater means. As it is now envisioned, Mr. Ryan’s plan would not impact current Medicare beneficiaries, only younger people. Also, under this plan, the age of eligibility will increase to 67 from the present 65 years.There is no guarantee that as premiums increase year after year, vouchers to pay for the premiums will increase in like amounts. Just as in health insurance policies other than Medicare now, deductibles, copayments, and benefits might be manipulated to benefit the for-profit insurance companies rather than those insured.

The Trump Administration’s Position

The position of the new Trump administration on Medicare, Social Security, and Medicaid is somewhat cloudy. During his campaign, he was quoted as saying, “I’m not going to cut Social Security like every other Republican, and I’m not going to cut Medicare of Medicaid.” However, what he says is not always what he advocates. His selection of Rep. Tom Price (R.-Ga.) to be Secretary of Health and Human Services, who is a very strong proponent of the Ryan Plan, suggests otherwise. Also, Mr. Trump’s website states that he “wants to modernize Medicare”. Although not explicitly stated, it can be interpreted as conforming to the Paul Ryan Plan.

Medicare Funding

There is no argument that we are spending more for Medicare than the amount being taken in. The major reason is that the baby boomer bubble is just starting to burst. For example, there is only enough money projected to pay 100 percent of Medicare Part A (hospitalization and rehab facilities) expenses through 2028 and only 87 per cent after that. Reforms to Medicare have to be made to align benefits with premiums. However, there are things that can be done other than reducing benefits and restructuring the whole program. If Medicare eligible persons will be given a voucher to buy a policy in the private market, less of their premium will be spent on benefits and more on overhead and insurance company profits. Medicare has a very low overhead and therefore more is spent on benefits.As the law now stands, Medicare must pay the full retail price for prescription drugs. It is prohibited from negotiating lower prices. And, as we know we pay more for medicine in the United States than any other industrialized nation. Medicare is the largest purchaser of prescription drugs in the country (maybe the world,) and the program would save many billions of dollars if this were changed so it could negotiate lower prices. Further cuts might be achieved by lowering waste, fraud and abuse and others ways as well.