The Medicare Paradox: Both Costly and Skimpy


WASHINGTON'S grueling budget strife allows little time for ceremonial observations, but it should not go unnoted that this year is the silver anniversary of Medicare, a benevolently intended assist for the elderly that has become a runaway monster in politics and medical economics. No one is singing "Happy Birthday."

The trouble with Medicare is that it's primarily a tax-supported system in a free-enterprise health-care market. And the market has demonstrated boundless ingenuity in selling services, necessary and otherwise, despite a great array of restraints on hospital and doctor bills.

In 1980, Medicare cost $35 billion. Last year, it was $107 billion. The estimate for 1995 is $180 billion, but past estimates have often been overrun. The producers of new medical technologies are endlessly inventive. The Medicare population, now 30 million over 65, plus 3.5 million disabled persons, keeps growing, as do the medical expectations of the American people. It's a rare year in which Medicare spending does not substantially outpace the inflation rate.

Every attempt to restrain spending or to raise cost-sharing by the elderly provokes threats of political retribution that few office holders are willing to face. Congress turned and ran last year when Medicare recipients rose up in a fit of irrational pique against a generous catastrophic-care measure that required cost-sharing by upper-income beneficiaries. The provision was canceled, leaving the elderly to savor a spectacular political victory, and back where they were with limited coverage for costly illnesses.

In the battles over deficit reduction, the White House and Congressional leaders had worked out an agreement for $60 billion in Medicare savings over five years, part of it from higher premiums paid by Medicare recipients and part from lower payment rates for medical services. The Medicare lobby struck back, cutting the House version to $43 billion in savings and the Senate's to $49 billion.

Exasperation with Medicare politics is strong on Capitol Hill, though few legislators show it openly. The latest episode, however, brought a public outburst from Sen. Bob Dole of Kansas, the Republican leader. Noting that the higher Medicare fees in the rejected legislation were keyed to income, Mr. Dole exclaimed, "Somebody mentions the word 'Medicare,' it is like crying 'fire' in a crowded theater, and we did not do anything in Medicare that touched poor people."

Senator Dole added, "Why should the taxpayer pay the Medicare premiums of millionaires in America or those making $100,000, $200,000, $300,000, $400,000? Why not means-test Medicare?"

The paradox of Medicare is that it is both expensive and inadequate. It pays only about half the health-care costs of the elderly, leaving the balance to their own resources or various skimpy public-assistance programs. Though Medicare has the appearance of a mini national-health-insurance program for the elderly and disabled, it merely helps with rather than covers health-care costs.

Various new measures are in the works to hold down Medicare spending, including annual caps on hospital expenditures and a revision of doctors' fees that will favor primary and preventive care.

But the basic problem with Medicare is that it is embedded in the American health-care system, and that system tends to be extravagant when it sniffs the possibility of reimbursement. In response to Medicare's money-saving moves, the health industry has proved itself to be endlessly ingenious in providing services that it insists are essential for the well-being of patients.

One example is in treatment for fatal kidney disease, which is reimbursed under Medicare. A recent report by the House Ways and Means Committee, which writes legislation for Medicare, notes that the number of patients has for no apparent reason risen far above the number forecast.

An unexpected part of the growth is in patients over 75 years of age, which the report says "reflects a shift in physician practice patterns." It adds that in the past, such patients would not have been accepted for treatment. The reason for accepting them now is not medically clear, the committee suggested, leaving the implication that perhaps economic factors are at work.

When the political dust settles from the latest budget battles, bruises will be visible on many federal programs. Medicare will at worst show a few scratches. At age 25, it is an entrenched power on the American political landscape, and sure to become even more powerful through demographics and legislative timidity.

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