April 06, 2016

Strengthening Medicare Without Shifting Costs to Beneficiaries

When it comes to strengthening Medicare, it is important to avoid changes that shift additional costs to seniors. The Alliance recently submitted comments for the record to the U.S. House Committee on Ways and Means Health Subcommittee regarding this very topic.

For the March 16th hearing titled, “Preserving and Strengthening Medicare,” the Alliance suggested several ideas for Congress to consider in order to improve Medicare’s benefits and finances. During the hearing, several proposals were discussed for reducing costs in the program. Unfortunately, all these proposals shift costs to beneficiaries while doing nothing to reduce the cost of health care.

Half of all Medicare beneficiaries have annual incomes under $24,150. One-quarter of beneficiaries have annual incomes under $14,350. Therefore, it is difficult to comprehend how anyone can expect Medicare beneficiaries to pay more. Furthermore, older adults spend three times (14 percent versus 5 percent) as much on medical expenses as the average household.

At the hearing, Medicare Advantage (MA) was touted as providing beneficiaries with good quality care and keeping costs down. However, MA plans have historically been paid more than traditional Medicare. These plans are actually paid bonuses that allow insurers to receive higher reimbursements.

Premium support was also discussed. Yet experience with MA plans has shown that private plans tend to siphon off healthier beneficiaries, leaving the sickest and most frail beneficiaries in the traditional Medicare program. Over time, costs under traditional Medicare will be become so expensive that the program will be unsustainable.

Raising the age of eligibility for Medicare; implementing further means testing; and redesigning Medicare to increase cost-sharing for healthier beneficiaries are other “solutions” that were discussed but which the Alliance cannot support.

Rather, the Alliance believes that Congress must do more to reduce the cost of Medicare. One area that deserves consideration is pharmaceutical costs. According to a study by the Center for Economic and Policy Research, if Medicare used its bulk purchasing power to buy prescription drugs, the government could potentially save over $500 billion over 10 years.

Also, we can reduce drug costs by eliminating waste in the system. For instance, on March 1, 2016, The Washington Post reported on a study that found $3 billion in cancer drugs are wasted each year. These drugs come in dosages based on patients’ weights and body sizes, but often the doses are too large and the remainder is tossed out. Some point to safety as the reason for discarding the leftover drug. Surely guidelines can be developed that provide safety while at the same time reducing waste.