1. MEDICARE: PAST, PRESENT AND F UTURE James G. Anderson, Ph.D. Department of Sociology & Anthropology

2. MEDICARE PART A Federal heath insurance for persons over 65 years of age Covers acute care hospitalization Covers limited nursing home care and other institutional services The permanently disabled were covered at a later date In 1973, the end-stage renal disease program was added to Medicare

3. MEDICARE PART B Requires financial contributions from enrollees Covers professional fees for medical and surgical services

4. MEDICARE ENROLLEES (In Millions)

5. MEDICARE EXPENDITURES (In Billions)

6. CBO PROJECTIONS (Enrollment as % of Population)

7. CBO PROJECTIONS (Spending as % of GDP)

8. PROBLEMS WITH MEDICARE Impending insolvency of the hospital insurance trust fund Favors acute care over chronic care Does not cover most long term care services Omits prescription drug coverage Permits medical costs to impoverish older adults and their families

9. THE FUTURE OF MEDICARE Number of Workers per Retiree

10. Medicare’s Dwindling Reserves (In billions)

11. MEDICARE ENROLLEES IN MANAGED CARE

12. ELDERLY NEEDING HELP WITH ACTIVITIES (In Millions)

13. ELDERLY NEEDING NURSING HOME CARE (In Millions)

14. REFORM PROPOSALS Gradually raise eligibility age to 70 Raise direct payments by recipients by higher premiums for MD insurance or raise co-payments for services Provide incentives for Medicare beneficiaries to join HMOs Offer Medicare beneficiaries more choice in their health care plans Institute a means test for Medicare Enact an annual budget for Medicare Authorize medical savings accounts

15. MEDICARE PRESCRIPTION DRUG BENEFIT New drug benefit begins in 2006 Premiums are estimated to be $35/month, $420/year After the premium is paid and a $250 annual deductible the plan will pay 75% of drug costs until the enrollee reaches $2,250. The coverage stops and the enrollee pays for the next $2,850 in drug expenses. At this point the enrollee has spent $3,600 0n drugs plus $420 on the premium. For the rest of the year the enrollee pays $2 for every generic drug prescription and $5 for every brand name prescription or 5% which ever is greater. Before the program starts in 2006, seniors will be able to purchase a drug discount cared for $30/year

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17. MEDICARE PRESCRIPTION DRUG BENEFIT Low income enrollees will be able to obtain drugs at $1- 2 per generic drug and $3-5 per brand-name drug The drug benefit will be provided through private prescription drug plans that contract with the Medicare program. Private plans can charge different premiums. Premiums, deductibles and the “doughnut hole” will grow with the cost of the plan. Financial incentives would be given to employers who continue retiree health coverage if it provides a prescription drug benefit.

18. In addition to the annual premium of $420 a year… If your drug costs are…You pay…Up to… Cumulative total amount out of your pocket… $0 – $250100%$250 $251 – $2,25025%$500$750 $2,251 –$5,100100%$2,850$3,600 Over $5,1005%No limit $3,600 + 5% of costs above $5,100

19. PRESCRIPTION DRUG BENEFIT Advantages Prescription drug prices are out of control More than 1/3 of Medicare beneficiaries lack coverage Price discrimination against the elderly Drugs are now routinely used to treat heart disease, cancer, arthritis, etc.

20. PRESCRIPTION DRUG BENEFIT Disadvantages The bill does virtually nothing to moderate drug costs. The legislation prohibits Medicare from negotiating lower drug prices for beneficiaries Drugs can only be re-imported from Canada if the Secretary of DHHSA certifies that they are safe and will significantly reduce costs. Drug cost will rise significantly under this program.

21. Long Term Care Benefit Arguments For (1) Long-term custodial care accounts for 81% of catastrophic costs for the elderly. (2) Over half of those 65 years and older will need some kind of long-term care (LTC). (3) Over 70 % of single elderly patients spend down to the poverty level after 13 weeks in a nursing home. (4) 5% of Medicaid recipients in nursing homes consume 43% of the Medicaid budget. (5) The most equitable policy would be a universal mandatory LTC health insurance program financed by the federal government. (6) There are a number of ways of financing universal LTC.

22. Long Term Care Benefit Arguments Against (1) Family members should not be allowed to shift the cost of LTC onto the government and thus, onto taxpayers. (2) A government sponsored LTC health insurance program would be enormously costly. (3) Such a program would enormously increase both the demand for and the cost of LTC. (4) A tax supported program would be regressive - taxing younger working people to provide benefits for elderly persons with substantial resources. (5) The government should only provide assistance to those who do not have the resources to pay for long term care. (6) Instead of a government sponsored program the government should provide incentives for private insurance and savings to finance LTC. Outline.

23. DISCUSSION QUESTIONS Should we regulate drug prices like other countries do? How would regulation affect development of new drugs? Should Medicare cover prescription drugs? For all enrollees? For only the poor? Should Medicare purchase drugs at a discount and sell them to the elderly?

24. DISCUSSION QUESTIONS Should we extend Medicare to provide for Long Term Care? Should Medicare cover Long term care for all enrollees? For only the poor? How would we pay for Long Term Care? Increase the general payroll tax? Require the elderly to pay part or all of the premium for LTC?