Senate candidate Bob Kerrey has unveiled a plan to reform Medicare that would share the pain of soaring medical costs.
Speaking recently at an Omaha press conference, Kerrey’s promised bi-partisan reforms to the pricey federal program.
Like all health care costs, Medicare costs are growing. Medicare consumes 13 percent of the debt-loaded federal budget. If all goes well, it will begin to run out of money in 2024 without reform, according to its trustees.
Health care costs will drive the federal budget higher through the foreseeable 40 years, even if federal spending on such programs as defense and social security is controlled, Kerrey said.
His plan draws on proposals that are also endorsed by some key Republicans, including Republican conservative Sen. Tom Coburn of Oklahoma, a physician.
Kerrey’s and Coburn’s proposals are also endorsed by independent Sen. Joe Lieberman as well as the Simpson-Bowles federal commission on debt reduction.
Medicare & its parts
• Part A covers hospitalization, skilled nursing care, most nursing home care, hospice and home health services. It is paid by a 2.9 percent payroll tax.
• Part B covers related medical costs such as: doctor’s fees, ambulance, medical equipment, mental health, the cost of a second opinion before surgery and some outpatient drugs. Enrollees pay a premium for Part B and the government pays the rest. Currently, people who have Medicare Part B pay a premium of $99 a month.
• Part C is Medicare Advantage, which allows elderly to receive all of their health care services through a provider organization, such as HMOs or PPOs, by paying a premium. Part C plans may help lower costs of receiving medical services, or provide extra benefits for a higher premium, Medicare officials say.
• Part D covers prescription drugs. It is voluntary and the costs are paid for by the monthly premiums of enrollees and the federal government.
Pay more, stop fraud
Under Kerrey’s plan, both Medicare recipients and drug companies would pay more.
And, he would crack down on fraud and abuse to save $9 billion over a decade.
Also, Kerrey would “means test” recipients, so people who earn $150,000 a year or more would pay the full cost of Part D prescription drugs instead of the lower, government-subsidized price that they currently receive. That would save up to $10 billion over 10 years.
More from people
Most of the savings would come from recipients, who would pay more for Medicare Part B.
Currently, people who have Medicare Part B pay a premium of $99 a month. Kerrey would raise it to about $150 a month.
Doing that would save the federal government $241 billion in the next 10 years, both Kerrey and Coburn say.
In an interview with the Bulletin, Kerrey said that Part B premiums were originally intended to cover 50 percent of Part B costs, but now the premiums cover only 25 percent.
Kerrey’s change would cover 35 percent of Part B costs with premiums, he said.
Also, Kerrey would require recipients to pay a single annual deductible (such as $550) for hospital and doctors visits (Medicare parts A & B), and require some coinsurance beyond that.
He would set a total out-of-pocket cap on deductible and co-pays of $7,500, helping seniors deal with medical catastrophes.
That would save another $32.3 billion over the next decade, Kerrey said.
More from drug companies
Another provision of Kerrey’s plan requires drug companies to rebate the government for the cost of drugs used by the lowest-income seniors who qualify for both Medicare and Medicaid.
The drug companies got a windfall in the 2003 Medicare reform act, according to a House committee report.
Twenty-nine large drug manufacturers produce 100 drugs used most often by dual eligible beneficiaries, the report said. In total, these manufacturers received billions more from the Medicare Part D insurers in 2006 and 2007 than they would have received without the 2003 reform, according to a study by the House committee on Oversight and Government Reform.
Requiring the drug companies to rebate more money would save the government $112 billion over 10 years, Kerrey said.
All in all, the reforms would save up to $409 billion of projected Medicare costs during a 10-year time frame. That is nearly as much as Medicare costs are projected to increase by 2020, according to a 2010 report by Medicare trustrees.
“This is a solvable problem that will take shared sacrifice among not just Medicare beneficiaries but insurance companies, hospitals, doctors and the pharmaceutical industry,” Kerrey said.
He said candidates should talk specifics.
“Refusing to talk about specific reforms because of fear that senior citizens will reflexively punish a candidate is insulting to a population that has shown the ability and willingness to make a contribution to the security of this country,” he said.