Health Care’s Senior Moment

Seniors have recently emerged as an important battleground in the health reform war. Katharine Seelye of the New York Times has a post on the “new generation gap” separating the elderly from the not-so-elderly, and multiple polls have shown that seniors are more resistant to reform, at least when it is phrased broadly. In addition, the nonsense about “death panels” has worried at least some seniors, enough for the AARP to pitch in to try to shoot it down.*

This should seem ironic, given that people over 65 are the one group that has already most benefited from health care reform – only their reform happened in the 1960s, when Medicare was created. But hey, it’s a democracy, and people don’t have to wish for others the benefits they themselves enjoy.

What are the underlying reasons why seniors are more likely to oppose “reform?” The first – leaving aside the self-contradicting notion that health care reform will mean a government takeover of Medicare – is probably fear that Medicare will be negatively affected. Now, there is a grain of a partial truth to this fear. Several of the proposals on the table include paying for health care reform (meaning, paying for the subsidies that poor people will need if we’re going to mandate universal coverage) in part by reducing growth in Medicare spending. One proposal is the Independent Medicare Advisory Committee, which would look for ways to increase efficiency in Medicare, which could include lower reimbursements for procedures that were deemed to be not providing benefits commensurate with their costs.

To its credit, here’s what the AARP** has to say about health care reform and Medicare:

What do the proposals say? It’s true they all seek to save billions from Medicare costs—not by cutting benefits, but by setting up new ways to pay doctors more fairly and to reward providers for quality of care instead of (as now) paying them a fee for each separate service; reducing waste and fraud; and reducing preventable hospital readmissions.

All the proposals would cut the amount of subsidies now paid to Medicare Advantage private health plans, which cost an average of 14 percent more per person than traditional Medicare does. Without subsidies, the private plans could become more efficient, or they could raise premiums, reduce benefits or withdraw from Medicare.

The proposals also add benefits to Medicare­—such as covering more preventive services and narrowing the Part D “doughnut hole.”

More fundamentally, though, the need to reduce growth in Medicare spending stems from the simple fact that otherwise Medicare will blow through the entire Federal budget within the next few decades. Not reducing the Medicare growth rate is not an option. If I were a senior, or expected to be one in the next couple decades, I would very much want health care reform now, because the alternative will be much more draconian cuts to Medicare benefits in the future as the national debt explodes.

And reducing costs is precisely the other thing that seniors care about. According to Seelye, concern about health care costs rises with age. Now this makes sense; even with Medicare, seniors’ out-of-pocket medical expenses are considerably higher than those of younger people, for the simple reason that on average they consume more medical care. But there’s no good way to reduce seniors’ out-of-pocket spending without at the same time reducing Medicare spending because, broadly speaking, those two types of spending are buying the same thing – health care. You can’t have a system where Medicare spends more and more yet seniors spend less and less out of pocket (short of simply reducing seniors’ relative contribution to their health care costs, which would only make the fiscal problem worse).

It’s simply contradictory to oppose reductions in the growth rate of Medicare spending while favoring reductions in your out-of-pocket spending. Of course, there’s nothing that prevents people from holding two logically inconsistent thoughts in their heads at the same time. Uwe Reinhardt had a brilliant column a couple of weeks ago on the stew of inconsistencies that many Americans take for granted when it comes to health care.

Luckily, they elect representatives who can think clearly about these complex issues. Oh, wait, sorry about that.*

* On the other hand, what the hell does Chuck Grassley – one of the six people who think they are writing the health care bill – think he’s doing, saying “We should not have a government plan that will pull the plug on grandma?” As Brad DeLong might say, why oh why does he have a seat at the table?

** As far as I can tell from their website, the AARP is neither for nor against health care reform in general; they say they are working to make sure that health care reform is good for their constituency.

About James Kwak 133 Articles

James Kwak is a former McKinsey consultant, a co-founder of Guidewire Software, and currently a student at the Yale Law School. He is a co-founder of The Baseline Scenario.

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1 Comment on Health Care’s Senior Moment

  1. We should not have a government reviewing the health condition of seniors at any time. This is the responsibility of their doctor and family to decide what is best for them. It sounds like Medicare and seniors will bear the brunt of Helath Care Reform. If a parent is not covered by insurance, the burden of the cost will fall on the family. Childern will not let their parents go with out medical treatment. Seniors are the poeple who have for the most part made this country safe and great, and they should be given respected and special consideration. If the main objective of Health Care Reform is to cover every man, woman and child in this country, then find another way to pay for their coverage. I hear that even illegal immegrants will be given health benifits. Great, if we can afford it, but increasing the federal debt to cover them creates more problems for this and future generations. This is wrong!

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