Over the past few days, the 2012 Presidential election has turned into a battle over Medicare. On one side, President Obama and Democrats have vowed to defend Medicare as a program of universal coverage for seniors and have worked to strengthen Medicare by protecting benefits while cutting back on waste, fraud, and subsidies to insurance companies. On the other side is GOP Vice Presidential nominee Paul Ryan’s proposal to abolish Medicare and replace it with inadequate vouchers for seniors to try to purchase coverage from private insurance companies. Ryan’s plan has been endorsed by Mitt Romney, and virtually every Republican member of the House and Senate has voted in favor of abolishing Medicare and replacing it with inadequate vouchers.
With the battle lines drawn, it is important to remind ourselves what it is we are fighting over. Medicare is a wildly successful program that provides quality health care coverage at a lower cost than private insurance. Abolishing Medicare would represent the ultimate triumph of ideology over pragmatism, and would increase costs and impose significant new economic burdens on seniors and their families. As such, Medicare should be preserved and strengthened, not abolished.
Medicare’s benefits fall into five primary categories:
1. Medicare greatly expands health coverage
In 1964, the year before Medicare was established, almost 50% of seniors were uninsured. Today, 97% of seniors have health insurance.
2. Medicare is more efficient than private health insurance
Medicare has significantly lower overhead costs than do private insurance. While there are some debates over exactly how to measure administrative costs, the estimates for Medicare range between 3.6% and 8%, while for private insurance the costs ranges from 12.5% in the large group market to as high as 30% in the individual market.
Medicare has also done a far better job of controlling costs than has the private insurance system. From 1970 to 2009, annual per enrollee costs went up 8.3% for Medicare and 9.3% for private insurance. For the years 2002 to 2009, the annual increase in Medicare costs was 4.6% while for private insurance it was 6.7%. And over the next 10 years – 2012 through 2021, Medicare is projected to have annual cost increases of 3.1%, while private insurance costs are expected to grow by 5% per year.
3. Medicare improves health outcomes
Between 1960 and 2000, the average life expectancy for a 65-year-old increased approximately 20%. Medicare is almost certainly one of a number of factors that have gone into that increase, especially in the first decade of the program when Medicare led to a substantial change in seniors’ access to health care. For example, a recent review of the impact of Medicare over its first decade on mortality rates among seniors found that “the program at its inception was an almost unqualified success in improving population health at a very reasonable cost.”
Much of the benefit of Medicare was seen in the early years of the program because, at that time, a higher proportion of people who were in their late 50s or early 60s were in poverty and lacked health insurance. As such, there was a significant impact from Medicare because people suddenly had access to quality insurance and health care they had not previously had. Those impacts of Medicare are no longer as noticeable because other government programs, employer-based health insurance, etc. mean that far fewer people in their late 50s or early 60s lack insurance today than they did in the early 1960s. However, if people over the age of 65 suddenly started lacking the access to quality health insurance provided by Medicare, negative health impacts would almost certainly return, especially given that more and more people are losing the guarantee of health insurance that had been provided by employers and pensions.
4. Medicare provides financial security
Health care costs for people who are uninsured or under-insured represent a huge financial burden that can lead to bankruptcy or significant cutbacks in the quality of one’s life. Medicare provides financial security to seniors, who no longer have to worry about large unpaid medical bills. In 1964, seniors paid an average of 53% of their health care costs out of pocket. By 1997, that figure was down to 18%. And given that the children of seniors often help support their parents and other relatives, the financial security provided by Medicare accrues not only to seniors, but also to people in their 30s, 40s, and 50s who are taking care of their elders.
The financial security provided by Medicare is perhaps best seen in the dramatic reduction in poverty rates among seniors. In 1935, approximately 50% of people over the age of 65 were living in poverty. That number has dropped to below 10% thanks in large part to two government programs. First, Social Security led to a dramatic decline in poverty among seniors from 50% in 1935 to about 33% in the early 1960s. Then, after Medicare was established, poverty rates for seniors dropped again, to around 15% by 1974 and to around 10% in 1999.
5. Medicare provides significant intangible benefits
The fact that Medicare is universal in its coverage of seniors provides benefits that may not show up on a spreadsheet but are significant nonetheless. The simple reality is that as we get older our health and mental faculties typically decline. And as that happens, our ability to engage in activities like trying to find a good health insurance policy from a private insurer, making sure the insurer is paying your claims and not improperly denying you coverage, etc. also falls significantly.
Imagine an 89 year old with dementia having to negotiate the world of the private insurance market. Thanks to Medicare, they do not have to do so. And while many seniors have family members who take care of them as they get older, Medicare also means that those family members do not have to take time away from caring for their elders in order to deal with the health insurance industry. I spent the past four years caring for my Dad as he went through the stages of dementia, and it was a huge relief knowing that I could count on Medicare to cover most of his health care bills, rather than having to figure out insurance on top of everything else such care giving entails. But if Republicans end Medicare and replace it with inadequate vouchers, the intangible benefits of Medicare’s universality go out the window.
In summary, Medicare has cost-effectively made health insurance coverage for seniors essentially universal, which has improved health outcomes, increased financial security, and relieved seniors and their caregiving families from the worries of dealing with the private insurance industry. The Romney/Ryan ticket is working to take those benefits away by abolishing Medicare and replacing it with an inadequate voucher that seniors would have to try to use to obtain insurance in the marketplace. By contrast, President Obama and the Democrats have worked to preserve Medicare as a universal program and to strengthen the program by reducing waste, fraud, and unnecessary subsidies to insurance companies.
If you agree that we should preserve and strengthen Medicare, rather than voucherizing it, please write a letter to your local newspaper editor and get involved in helping to re-elect President Obama.