Frightening seniors about Medicare changes is often referred to as Medi-scare. All Americans should be scared: In the coming years, 78 million baby boomers will place unprecedented demands on Medicare. Meanwhile, Medicare’s Hospital Insurance Fund will run out of money in 2024, according to the 2011 Medicare Trustees Report.
Every politician wants to solve the problem by eliminating “waste, fraud and abuse.” Organized crime is heavily involved in Medicare fraud: In 2010 federal indictments in five states exposed the largest Medicare fraud scheme ever committed ($163 million), involving members and associates of an Armenian-American organized-crime enterprise.
For once, it seems reasonable to attack fraud before reducing program benefits, increasing taxes or dramatically changing Medicare. Changing this popular program is risky business. As a part of the Patient Protection and Affordable Care Act, Democrats reduced future funding for Medicare by $500 billion and suffered historic defeats in the 2010 elections. Recent Republican proposals are suspected of causing voter backlash, too.
There are many ideas that have not been widely discussed with the American public. Below are examples of several changes that could be a part of any broader reform:
• Eliminate fraud
• Remove the 150-day limit on hospital stays (Part A)
• Provide a maximum out-of-pocket level for physician services (Part B)
• Allow medicare health savings accounts (HSAs)
The current Republican proposal does not produce new Medicare savings until 2022. Eliminating fraud can produce savings of $1 trillion over the next 10 years. To stop fraud now, IBM CEO Sam Palmisano has offered his company’s technology as a free public service.
The greatest fear of the elderly is outliving their assets. Part A exposes beneficiaries to the cost of hospitalization beyond 150 days. Reform could eliminate the Part A hospital day limit. A CMS actuary priced removal of the day limit for all at a quarter of a percent of Part A and Part B spending.
Part B exposes beneficiaries to an unlimited 20 percent cost share. The limit for Part B should be $5,000 to $10,000. A $5,000 limit would cost approximately 3.5 percent of Part A and Part B spending.
Medicare HSAs would generate savings to offset any added costs of modernizing Parts A and B. A 2009 study by the American Academy of Actuaries showed employer plans had 12-20 percent savings with HSA-eligible plans. About 9.2 million Medicare beneficiaries have Medigap plans to fill the gaps in current coverage. The proposed improvements would minimize the need for Medigap plans; the $200-$300 monthly Medigap premiums could be put into HSAs.
Expanding Medicare at a time when the debate is about how to reduce costs is difficult but doable. Sometimes doing the right thing is also good politics. The fastest growing bloc of voters in the country are baby boomers (78 million, or 10,000 per day) becoming eligible for Medicare. Tea Party members are 40-60 percent Medicare beneficiaries. Politicians have a chance to solidify this voting group by improving Medicare as it is being reformed.
Bachman is a senior fellow at the Georgia Public Policy Foundation.