The Patient Protection and Affordable Care Act is not "socialized medicine." Anyone who tells you otherwise is either grossly uninformed or deliberately misleading you. This legislation is an imperfect but good faith amalgam of consumer protection regulations, cost-saving measures, efficiency initiatives and expansion of existing services. It's a decent and eminently necessary first step.
It's not just a $940 billion spending measure. When you couple finely targeted taxes and fees with significant cost-cutting measures (such as the reduction of $455 billion in subsidies handed over to private companies servicing Medicare Advantage benefits, less efficiently than the government does on its own), it starts to make sense that we stand to make gains in an area where spending has been out of control for years -- to the tune of over $120 billion in overall deficit reduction by 2020, and potentially much, much more in the following decade.
One dollar can, in fact, be spent today in order to save two tomorrow. And this bill does more than simply spend money.
It's worth noting that, according to the Center for Medicare and Medicaid Services, in 2016 -- when the legislation becomes "fully operational" and spends $160 billion -- total health care spending will be approximately $3.7 trillion. In other words, the bill's annual spending is equivalent to about 4% of what the country will spend in health care per year, and it will be covering 30 million people. The $940 billion bill sounds like a lot, but when you break it down over the next ten years, it averages only $94 billion annually -- and I say "only" because that federal spending has to be understood in the broader context of the trillions of dollars already being spent on health care every year. It's a tremendous bang for our buck, particularly when you consider the human impact of this investment.
When the legislation passed the House, my mom expressed concerns about how her Medicare benefits would be effected. Like many others, she simply didn't know what to make of it. So much intensely partisan crap has been taken up and spread by the networks, and facts were the first victims of the war in Washington.
So here's what you need to know about Medicare:
The legislation includes $455 billion in spending cuts for Medicare and other federal health programs -- spread over the next ten years. Not all at once -- about $45 billion a year. (Which isn't totally accurate, because the cuts aren't uniform annually -- so I'm speaking in averages for simplicity's sake.)
None of these spending cuts effect the traditional Medicare benefit. Most of it is aimed at Medicare Advantage -- which uses private firms like Humana and UnitedHealth Group to deliver Medicare benefits. Those private providers offer extra coverage, and some of those extras may be dropped as Medicare Advantage subsidies are brought more in line with costs of traditional Medicare benefits. From what I understand, about 22% of seniors on Medicare use it.
Part of the recent rise in Medicare costs stems from extra subsidies to private companies that administer benefits under Medicare Advantage. Beginning in 2003, those payments to private companies were ratcheted up – despite the fact that company profits were higher and expenses for covering beneficiaries were lower than anticipated. (Why righteous taxpayer indignation has not been directed at that use of tax dollars, I have no idea.) While Medicare Advantage was supposed to be cheaper and more efficient than traditional Medicare, it has in fact been just the opposite. The government pays private insurance companies 14% to 20% more for providing coverage to Medicare Advantage beneficiaries than it would pay for the same beneficiary in the traditional Medicare program. The Act gradually reduces those government payments beginning in 2011, until they're more in line with traditional benefits.
So that is what's going to get cut -- the subsidy payments to private companies that exceed traditional Medicare. And frankly, these companies could stand to absorb lower payments from the government, after years of profiting pretty broadly on our dime. A recent examination by the Associated Press found that "profits at the insurers offering Medicare Advantage have far outpaced expectations, and their expenses to treat clients have been far lower than projected."
It's possible that those companies will reduce coverage or try to increase Medicare Advantage premiums to replace the profits lost from reduced subsidies. But it's also entirely possible that they'll do what American businesses do in changed circumstances: figure out how to become more efficient to maintain or even increase profit. Because by reducing coverage or increasing premiums, they risk losing customers who will transfer to traditional Medicare benefits or other providers.
So part of this Medicare expansion will be covered by the above-referenced cuts to the private companies operation Medicare Advantage. But there's going to be an increase to the Medicare payroll tax -- a small and targeted increase. The current tax that everyone pays is 1.45% -- but moving forward, individuals earning more than $200,000 a year (or couples making $250,000) will pay 2.35%. That's a 0.9% difference.
Importantly, alongside the subsidy redution and tax increase are several provisions to strengthen the Medicare program.
Medicare will now completely pay for annual check-ups, and will increase reimbursements for primary care physicians. Co-payments and deductables for preventative care will be eliminated. The Medicare prescription drug plan will also be improved. The current program includes a significant coverage gap in Medicare Part D that the legislation will eventually close -- what everyone is calling the "doughnut hole." In 2010, people who fall into the doughnut hole will get a $250 rebate. In 2011, they will get a 50% discount on brand-name drugs. By 2020, the doughnut hole will have been closed and 75% of drug costs will be covered.
The legislation aims to capture "productivity savings" in the health system to save Medicare money -- these are the waste-reducing measures that anyone, conservative or liberal, should be happy about. There are huge variations in cost across different parts of the country that aren't justified by improvements in health outcomes. The Act will allow Medicare to test different payment systems, with the goal of promoting better coordination of services -- increasing efficiency of care while improving quality of care. (A novel concept!) The bill also establishes an independent payment advisory board that will make recommendations on how to save money in Medicare and extend the financial solvency of the program, and provides more resources to fight Medicare fraud -- a problem that costs taxpayers in excess of $60 billion annually.
A few things to consider, from my humble point of view:
A friend of mine recently argued that health care reform punishes folks who are "hardworking, productive, lucky, careful with their money, and/or financially responsible" -- and rewards others too lazy to pull themselves out of poverty and poor health. As though we are incentivizing illness on the backs of the successful.
It's worth thinking about the fact that there are plenty of people who are "hardworking, productive, lucky, careful with their money, and/or financially responsible" -- and only make $30,000 a year. I could name several of my classmates from law school, for starters (who have the dubious fortune of a J.D. and punishingly high educational debt). We like to pretend here in the U.S. that everyone is of equal opportunity, if not means: that elbow grease and good judgment solves always everything. Well, it doesn't. Sometimes that's the case, but for millions of Americans, it's just not reality.
I don't think there's anything remotely disturbing about raising the Medicare payroll tax from 1.45% to 2.35% for individuals earning over $200k or couples earning over $250k. Like I said, it's a 0.9% difference. Hard to compare that sum to the availability of life-improving or even life-saving care for people who haven't had the means, support, opportunity or even luck that I've enjoyed. And a 0.9% tax increase isn't exactly a socialist takeover.
Not everyone has been lucky enough to have health problems that could be addressed simply by eating less and running more; one's health isn't always in one's control. Could you look someone in the eye and tell them that the 0.9% difference is worth more than their life? Because that's what we're talking about here: lives.
Anyway, look: I know it's not a perfect piece of legislation. I didn't drink the Kool-Aid. But it is undeniably a good step in the right direction and, frankly, the best first step forward we could hope for from our dysfunctional Congress. It's not socialized medicine or some kind of insidious government takeover. On the government side, it's about making existing government programs more efficient and more affordable with broader coverage. And on the private industry side, it's about encouraging healthier and more rigorous competition (through the upcoming exchanges, which will give consumers more choice -- always a good thing, and an engine of capitalism), demanding greater transparency in the ways health insurance companies operate (by requiring them to report what they're doing and how they're spending), and introducing much-needed consumer protection rules. The same kind of rules we use to keep big corporations in other industries from screwing consumers.
Except here, these are rules that some people literally cannot live without.
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