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House Medicare Bill Would Begin to Dismantle the Medicare Program

June 18, 2003

House Medicare Bill Would Begin to Dismantle the Medicare Program

WASHINGTON, D.C. – Legislation being debated in the U.S. House of Representatives would radically transform the way Medicare operates to the detriment of seniors and people with disabilities.

Under the House proposal, the traditional Medicare program, which now covers almost nine of 10 beneficiaries and guarantees them the choice of almost any doctor and standardized benefits, would be forced to operate like a private insurance plan. It would set its premiums based on its costs and bid for Medicare beneficiaries against HMO and PPO plans offered by private insurance companies. Making Medicare function more like a private insurance market threatens to unravel the Medicare program as we know it.

The Republican-sponsored House bill, which has been approved by the House Ways and Means Committee and is pending in the Energy and Commerce Committee, would:

  • Force more beneficiaries to enroll in private HMO and PPO plans, thereby offering them less choice of doctors and benefits that cannot be guaranteed. The intention of the House bill is to push more Medicare beneficiaries to enroll in PPOs and HMOs. Beneficiaries enrolling in such plans may no longer be able to see their doctor of choice, may face restrictions on needed care, would be subject to premiums that vary on a yearly basis, and would find their coverage to be unreliable. Since 1997, on 2.4 million occasions, Medicare beneficiaries have been forced to find new providers of care when their HMO pulled out of the Medicare program. Traditional Medicare has never dropped a single enrollee in its 37 years of existence. Forcing beneficiaries to rely on private plans would be a big step backward for the Medicare program.
  • Force seniors to pay more to stay in traditional Medicare. After 2010, many beneficiaries would be forced to pay higher premiums to stay in the traditional Medicare program because the traditional Medicare program enrolls beneficiaries that are, on average, sicker than those in private plans. Those unable to afford the cost of staying in traditional Medicare would be forced to enroll in a PPO or HMO.
  • Reinforce one of the worst problems of the private insurance market— cherry-picking more healthy and less-costly— beneficiaries. The danger of private plans attracting healthier beneficiaries is not just theoretical. It is happening in the current Medicare program. To make money, the HMOs that participate in Medicare today target their membership promotions to the healthiest seniors and try to avoid people with disabilities. Also, sicker beneficiaries are likely to be more fearful about leaving the traditional program, where they have much wider choice of doctors. These are among the reasons that 13.8 percent of Medicare beneficiaries enrolled in the traditional Medicare program had both cognitive and physical difficulties, but only 6.6 percent of Medicare HMO enrollees reported such problems, according to the Urban Institute. The cost differences in caring for beneficiaries with cognitive and physical problems compared to those without such problems was dramatic in 1997 – $20,332 versus $5,037.
  • Undermine the social insurance nature of Medicare. Because it would increase the cost of staying in the traditional Medicare program, the House proposal threatens to undermine the social insurance nature of the Medicare program in which everyone contributes to the cost of caring for the frailest members of our society. Instead, the sick would be segregated in the traditional Medicare program and be forced to pay ever-increasing premiums for their health insurance, while more healthy seniors would enroll in managed care organizations (HMOs and PPOs) and pay less.

“Congress should not be conducting this reckless experiment with the lives of America’s seniors and people with disabilities,” said Frank Clemente, director of Public Citizen’s Congress Watch. “Medicare should continue to offer all people eligible for the program a guaranteed set of benefits at a known price. Private insurance plans will not do this; they make money by scrimping on care and discriminating against the sick.”