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The Consequences of Conservative Health Care Proposals on Our Medicare System

The Consequences of Conservative Health Care Proposals on Our Medicare System

Marilyn Moon documents the effects that conservative health policies have had on our Medicare system.

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Over the past several years, a number of plans for health care reform have been proffered by conservative members of Congress, President Bush, and members of conservative think tanks. The general theme of these proposals is strikingly similar, emphasizing individual responsibility, competition among insurance companies, and changes in the tax laws governing the deductibility of health insurance.

Overall, these proposals emphasize the demand side of health care, influencing choices of insurance and of health care treatments and procedures. Studies have examined these various plans. Less common, however, is any analysis of the impact of these plans on the Medicare program. In fact, most of the conservative proposals do not directly include Medicare—even though spending on Medicare is often cited by conservatives as a problem that must be addressed through “entitlement reform,” meaning reductions in Medicare costs.

The Medicare program in the United States covers nearly all persons age 65 and over and more than 7 million individuals with permanent disabilities. Although these traits capture just 14 percent of the U.S. population, that share is expected to grow to 20 percent by 2025. In addition, Medicare is a critical part of the overall health care system because its beneficiaries use a disproportionate amount of services.

Case in point: hospitals receive nearly 30 percent of their patient revenues from Medicare. And since most providers of care do not treat their patients differently depending upon source of payment, any major change in one part of the health care system will affect another. Thus, if a dramatic shift in the financing of health care occurs for the under-65 population, then Medicare would also be affected.

That’s why it is important to consider both the direct and indirect effects of conservative proposals for health insurance reform on Medicare. Indirect effects would result from the lower health status of those under 65 who have inadequate health insurance coverage as a consequence of conservative reform. Such changes would lead to higher Medicare costs for treating those who would have received too little care over time. These higher costs would be felt by both taxpayers and beneficiaries. Direct effects would arise if similar conservative changes were sought for the Medicare program, thus directly affecting its beneficiaries.

This paper will briefly consider how Medicare could be brought into line according to the conservative principles outlined above. In the pages that follow, we will detail the conservative approach to health care insurance, demonstrate these proposals’ impact on costs and on coverage for the under-65 population, and then explore the ramifications of these effects on the Medicare system and its beneficiaries over time. The conclusions drawn from this analysis are sobering.

The conservative proposals would put individuals out on their own to find health insurance, reducing the overall health of American society and leading to higher costs and more pressure to change Medicare as new enrollees enter Medicare with more unmet health care needs than ever before. If these conservative reforms were applied directly to Medicare, then the easy access to care beneficiaries currently experience in Medicare would be eroded. And the federal government would no longer be a key player in seeking ways to make health care of higher quality or more efficient. At a time when we need more, not less, efforts to improve our health care system, having the federal government largely bow out would do irreparable harm.

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