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Expanding Medicare

We Already Have a Public Option

by MARSHALL AUERBACH

Senator Charles Schumer indicated earlier this week that Democrats were fleshing out plans to pass health legislation, particularly the option of a new government-run insurance program, with a simple majority, instead of the 60 votes that would ordinarily be needed to overcome a filibuster. Typically for the party that still seems to suffer from an acute case of “Stockholm Syndrome”, the Democrats continue to agonise about using their substantial majorities in Congress to fight for what they really believe in and question whether to use a budget reconciliation procedure to incorporate a public health insurance option in the legislation.

We’ve got a better idea for the Democrats, which will enable them to pass a bill without resorting to controversial Parliamentary procedures, whilst still incorporating a public health care option:

Expand the provisions of Medicare.

In the words of NY Congressman Anthony Weiner, “Medicare for all Americans”. Since its inception in 1965, Medicare has covered almost all citizens over age 65, and it is one of the most popular government programs existing today. Individual state-managed health programs with low reimbursement to caregivers cover additionally most children with congenital malformations and children with many other disorders. For low-income families, the combined federal and state-managed Medicaid program is available for the majority of medical disorders that are not primarily cosmetic. Why not expand its role to incorporate citizens not covered in any of the existing private health insurance plans? Why not, in fact, allow Medicare to compete against private health insurance companies in order to keep them honest?

The implicit presumption underlying the arguments of opponents of a public health insurance component is that it will add another layer of complex bureaucracy to an already overencumbered health care system, and offer a “consumer unfriendly” service, vastly inferior to supposedly consumer friendly private health insurance plans. (Private plans tend to be “consumer friendly” until the consumer attempts to exercise his/her right to comprehensive medical supposedly paid for by the increasingly exorbitant health insurance premiums.) But even if we accept the logic that a private health insurance program is invariably more efficient than a government administered option (which we don’t, for the record), why do these very same health insurance providers argue that a government run health insurance options will create “unfair competitive advantages”?

In fact, few Americans rail against Medicare or characterize it as a nefarious “socialistic” takeover of the health care system. As a program, it has great political legitimacy and is as strongly entrenched in the American political landscape as our Social Security system. In 1963, most elderly Americans had no health insurance. Few retirement plans provided any such coverage. The poor had little access to medical treatment until they were in critical condition. Only wealthier Americans could get the finest care, and only by traveling to a few big cities like Boston, Chicago or New York.

In 1966, 19 million were enrolled in Medicare; in 1998, 39 million, according to former HEW Secretary, Joseph Califano. Today, 43 million of Americans are covered by the program, yet seldom does one hear a senior citizen complain about struggling under the burden of “socialistic health care”. The program, while not without its flaws, has displayed significantly less cost inflation than private insurance. At 4% per annum its administrative costs less than half of most private insurance companies and polls consistently show very high satisfaction among its participants.

So why does Senator Kent Conrad continue to suggest that there are not enough votes in the Senate to pass a public option for health insurance? It would be interesting to see what would happen to Senator Conrad’s polling numbers in his own state were he to suggest that the government disband its existing public option – Medicare – in the interests of costs savings. Even the Republicans aren’t dumb enough to make that proposal, which makes one wonder why the Democrats don’t do the obvious and simply incorporate the program into a broader health care reform measure.

Why introduce a whole new layer of bureaucratic complexity into an already fiendishly complex health care system, when the foundation for a government run health care option lies right in front of our faces? To maximize profits and shareholder confidence, insurance companies, healthcare providers and drug companies have manipulated the system beyond comprehension. As healthcare costs rise at double-digit rates, fewer and fewer manufacturers and small businesses can offer comprehensive coverage to their employees. More than the UAW, health care was the legacy cost which likely doomed General Motors in its earlier incarnation.

Healthcare gets complicated when it’s built around profits rather than care. Private insurance companies largely generate profits by carefully screening applicants to identify those with a high risk of needing expensive treatment, and either rejecting such applicants or charging them higher premiums. But such screening is itself expensive. Furthermore, it tends to screen out exactly those who most need insurance.

Most advanced countries have dealt with the defects of private health insurance in a straightforward way, by making health insurance a government service. Through Medicare, the United States has in effect done the same thing for its seniors. There are a number of incrementalist ways this could be expanded so as to alleviate the inevitable insecurities associated with any major kind of reform, particularly in the emotive area of health care. One suggestion by Rick Fonkalsrud, M.D., and economist Michael Intriligator of UCLA proposes “Medicare Expansion,” would build a national care system by expanding on the existing Medicare program for citizens over the age of 65 years, with a gradual phasing out of the very uneven and underfunded state-administered Medicaid programs:

“The first step in the Medicare Expansion program would be to enroll children under 5 years of age, pregnant women and those with lifelong illnesses by the end of 2010. The remainder of the population would be phased in gradually, taking the most needy age groups first, until all persons are covered within five years. In 2011, those between 55 and 65 would be enrolled, and in 2012 those from 5 to 15 and those from 45 to 55 would be included. Those between 15 and 25 as well as those from 40 to 45 would be added in 2013. Finally, by the end of 2014, by adding the remaining population between 25 and 40 the entire U.S. population would be covered: There would be Medicare for all in a single-payer system. There would be no limitations based on pre-existing conditions, as is common in private insurance plans.” (Health Care Reform by Medicare Expansion.)

Incrementalism does have its virtues. With Medicare as a model, we can fill the growing gaps in health coverage and ultimately weave together a stable, comprehensive, affordable system for Americans of all ages, one which ties the end user directly to the health care provider, without the interposition of a private sector employer provided benefit (which remains dependent on you retaining your job), or a private health insurance company. Sometimes, simpler really is better. President Obama, please take note. Your presidency might depend on it.

Marshall Auerback is a market analyst and commentator. He is a brainstruster for the Franklin and Eleanor Roosevelt Intitute. He can be reached at MAuer1959@aol.com