As Congress works out a budget deal, Americans should consider carefully how this deal will affect their Medicare choices. As it stands, the current budget bills (S. 947/H.R. 2015) create a new Medicare Part-C program. Congress says the new Medicare program gives seniors more choices. But upon closer examination, the program favors traditional Medicare and doctor networks, while restricting seniors' ability to choose a Medical Savings Account (MSA).
On average, Medicare paid more than $5,000 per beneficiary during 1996. The MSA option would allow seniors to use that money to purchase a lower-cost catastrophic insurance plan, and then place remaining funds in an MSA. Those funds could be used to pay for any health care expense that is currently tax deductible.
How would the budget deal affect seniors' Medicare choices? At first glance, the Medicare program being proposed in the budget deal looks good. Most of the 37 million seniors could choose among the following types of health plans: traditional fee-for-service Medicare, Health Maintenance Organizations (HMOs), Preferred Provider Organizations (PPOs), or newly created Provider Sponsored Organizations (PSOs).
While nearly all seniors can choose those health plans, Congress is severely limiting the number of seniors who can open MSAs. Of 37 million Medicare beneficiaries, the House bill permits only 500,000 to open MSAs; the Senate bill restricts the MSA option to 100,000.
Congress is making a big mistake by restricting the MSA option. Other Medicare options do not give seniors an incentive to lower costs. Also, traditional Medicare does not provide "insurance" in the true sense of the word. No federal health insurance company assumes the financial risks of Medicare beneficiaries. Instead, Medicare is a "pay as you go" system whereby today's workers pay for seniors' medical bills. To that end, taxpayers are the ones who bear the financial risks - not a health insurance company. It is no wonder Medicare costs have grown out of control, while government interventions have failed to reduce Medicare costs for the past 30 years.
Now the 105th Congress is attempting to control costs by giving Medicare dollars directly to physician networks. They're selling this proposal as "increased Medicare choices." But the proposed Medicare program won't encourage seniors to become cost-conscious. Instead, it shifts Medicare dollars away from insurance companies and gives money directly to doctors and hospitals through "Provider Sponsored Organizations." PSOs are similar to HMOs, except they are owned and operated by physicians and hospital networks. PSOs have strong support from the American Medical Association and the American Hospital Association. However, insurance companies and consumer groups charge that Congress is granting PSOs unfair advantages, such as exemption from existing state regulations. Such exemption would allow PSOs to maintain lower financial reserves compared with other health plans. That could subject seniors to greater financial risk.
Another way Congress is considering controlling Medicare costs is by charging greater Medicare premiums to higher-income beneficiaries. But why should those who paid higher Medicare taxes have to pay even more when they retire? After all, there is no cap on the current 2.9 percent Medicare payroll tax. That means higher-income seniors already paid more for Medicare, but they receive the same medical benefits as every other Medicare beneficiary. Forcing higher-income seniors to pay more for their "insurance" will do nothing to reduce Medicare costs. Neither will shifting health care dollars from insurance companies to doctors and hospitals. But expanding the MSA option would.
The best way to control Medicare costs is to place health care dollars back in the hands of seniors. That is why Congress should give the MSA option to all seniors, and let them decide for themselves how to spend their Medicare dollars.
* Sue A. Blevins is president of the Washington-based Institute for Health Freedom.