MEDICARE

Federal legislation to add a prescription drug benefit to the Medicare program has gained momentum, and both the prescription drug bill in the Senate (S.1), and House of Representatives (H.R. 2473), are expected to pass. Although these bills represent an important first step toward providing much-needed drug coverage for senior citizens and people with disabilities who rely on Medicare both bills have very significant flaws.

History

• In response to the fact that the Social Security System was failing to protect older Americans against the greatest single cause of dependency in old age - the high cost of medical care - and because private insurers were incapable of providing comprehensive, affordable health care coverage to older Americans living on fixed incomes, Medicare was enacted in 1965 as one of President Lyndon Johnson’s Great Society Programs.
• Not long before Medicare’s passage, the Kennedy administration seemed on the verge of compromise to give private insurance a leading place in the new program so government could play a smaller role. Remembering that it was the failure of the private marketplace to care for these particularly vulnerable populations that led to the inception of the Medicare program, the private insurance idea seemed consigned to the dustbin of history.
• Medicare is the federal social health insurance program that was designed to provide all older adults with comprehensive health care coverage at an affordable cost.
• In 1972 Medicare eligibility was extended to include two other groups that were facing similar problems in obtaining reliable health coverage - people with disabilities and people with end stage renal failure.
• The Medicare system was originally administered by the Social Security Administration, but in 1977 the management was transferred to the Health Care Financing Administration (HCFA) which was renamed the Center for Medicare and Medicaid Services (CMS) in 2001.

How is it Funded?

• Part A is financed mainly by payroll taxes paid by both employees and employers. Part B is financed by both beneficiary premiums and general revenues (Premiums cover about a quarter of total Part B spending).
• Medicare is in no danger of imminent collapse. The day when Medicare’s hospital trust fund will become officially insolvent is now estimated to lie some 28 years in the future, the most distant point ever.

Who is covered?

• Medicare covers more than 35 million Americans ages 65+ and 6 million younger adults with permanent disabilities.
• An estimated 20 percent of older adults experience mental disorders.
• An estimated 40 percent of those who qualify for Medicare based on their disabled status have a diagnosed mental illness. 14% of the Medicare population is under 65 and is disabled. This percentage is estimated to grow to 17% by 2010.

Eligibility

• People with disabilities who have sufficient prior work history under the Social Security Disability Insurance (SSDI) program are automatically eligible for Medicare health and mental health care benefits two years after they qualify for SSDI.
• Most individuals ages 65 and over are automatically entitled to Medicare Part A (the Hospital Insurance Program) if they or their spouses are eligible for Social Security cash payments.

Status

• Medicare scores very high in insurance satisfaction surveys, largely because it grants the flexibility to see virtually any doctor and offers certainty that the coverage will be there when needed.
• The program’s administrative costs are far below those of private plans. It typically extracts lower charges from hospitals and doctors than a private plan can get, has extremely low overhead costs and no need to generate a profit or conduct costly marketing campaigns.
• Managed care plans that already operate under Medicare have a mixed record with some Medicare HMOs going out of business and others fixed to raise premiums or drop coverage and alter their benefits to remain profitable.
• Medicare expenditures are projected to rise faster in coming decades than the revenues that support the system.
• Coverage will need to be scaled back in the future decades unless new savings are found.

Main problems with traditional Medicare coverage are:

• Medicare benefits package has not kept pace with advances in modern medicine.
• Medicare’s lack of outpatient services and preventive health services are driving up Medicare inpatient hospitalization and costing billions of dollars annually.
• Medicare does not cover psychosocial rehabilitation, assertive community treatment, intensive case management, crisis residential care and individual providers who are licensed by their respective states to provide behavioral health services.
• Medicare has 50-50 mental health outpatient co-pay compared to the 80-20 co-pay for all other health services under Medicare.
• Medicare does not cover prescription drugs. (4 in 10 beneficiaries lack drug coverage.)
• Critics have pointed to its gaps to justify major restructuring of the program. In contrast, Medicare’s supporters have argued that the program works well and that additional benefits should be incorporated into its current structure.

The Debate over Medicare proposals in Congress:

• Prescription drug coverage would be limited and unreliable. Both bills include large coverage gaps. Some view the plan as a political rather than a substantive advancement.
• The bills rely extensively on private insurance plans to provide the drug benefit even though, historically, such plans have not been reliable Medicare partners.
• The private plans would be authorized to use preferred drug lists and charge higher co-pays for drugs not include on such lists.
• The bills fail to address the provision in the Medicare statute that requires a 50 percent co-payment for outpatient mental health services, rather than the usual 20 percent co-pay that is charged for other medical care.
• It is expected that there will be amendments to authorize states to impose prior authorization requirements.
• In 2010, the traditional program would be forced to compete with private plans. From then on, the amount that beneficiaries paid for Medicare would be set not by law, but by market forces.
• Some feel that the prescription drug benefit is window dressing for the legislation’s ultimate aim: fundamentally revamping Medicare to create a competitive system based on private health plans.

MHANJ'S Position:

We support assessment and encourage reforms that will improve Medicare without undermining its character as a universal social insurance program. In keeping with its concern about social and economical inequality among Americans we urge Congress to promote reforms or eliminate the disadvantages faced by vulnerable populations within Medicare.

Please Contact Senator Corzine, Senator Lautenberg and your Congressperson and tell them what key mental health issues need to be addressed in Medicare reforms. Visit our website at www.mhanj.org for contact information or the National Mental Health Association at www.nmha.org for contact information and a sample letter.

Join MHANJ’s Legislative Network! Contact
C. Chin at 973.571.4100 Ex. 37  or cchin@mhanj.org