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Medicare Policy Book Takes Beneficiaries' Perspective to Explore Program Pressures and Reform Options

Document date: May 23, 2006
Released online: May 23, 2006

Contact: Stu Kantor, (202) 261-5283, skantor@ui.urban.org

WASHINGTON, D.C., May 23, 2006—A new policy assessment of Medicare, arriving as the nation's largest public health care program enters its fifth decade amid calls to rein in spending, presents proposals for reforming the program, improving health care for elderly and disabled clients, and achieving long-term savings.

Medicare: A Policy Primer, by Marilyn Moon, explores Medicare's recent changes and their effects on beneficiaries. The Urban Institute Press book answers basic questions about the current status and future of Medicare, which spent $333 billion in 2005 to serve 37 million elderly and 6 million disabled individuals:

  • What is Medicare, how does it work, and where is it headed?
  • What are the problems facing the program and how can they be resolved?
  • What options hold the most promise?
  • Can current and future beneficiaries count on the program to deliver expected services?

A focus on beneficiaries should be central to policy discussions, says Moon, given their modest economic resources, the high costs of health care, and the Medicare population's diversity.

"Interests of providers of care and taxpayers may not always lead in the same direction as interests of beneficiaries," writes Moon, vice president and director of the health program at the American Institutes for Research and a former public trustee of the Social Security and Medicare trust funds.

Medicare: A Policy Primer outlines how pressures to change Medicare—one of the fastest growing federal programs, with annual increases of about 12 percent—are mounting, especially as the debate over who should finance it in the future remains unresolved. Moon suggests, for example, that the current 70/30 financing split between younger taxpayers and Medicare beneficiaries might need to change, although there is no consensus on how.

Created in 1965, Medicare began enrolling beneficiaries the following year. Before Medicare, only half of all older Americans had health insurance. By 1970, 97 percent had Medicare coverage. In 1965, the typical elderly person spent about 19 percent of her income on health care. Spending then dropped to 11 percent, but by 2004, the figure was up to 22 percent.

The Challenges Ahead

Over the next decade, says Moon, Medicare will face extraordinary pressures for change, especially as tens of millions of baby boomers turn 65 and begin to use their Medicare coverage.

"It should not be viewed as inevitable that all changes must represent a shrinking of protection," Moon concludes. "Rather, this should be a time for considering how, as a society, we wish to adjust to the challenges and opportunities an aging society poses."

Medicare: A Policy Primer offers a close review of Medicare's first major benefit expansion, a prescription drug benefit that starts this year as a result of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA). Moon outlines key themes raised by the MMA that shape Medicare's future and drive options for reform:

  • The favored role of private plans. "The confidence placed in private plans reflects more the faith of legislators than any evidence on advantages that private plans might be able to offer compared with traditional Medicare," Moon observes.
  • The inadequacies of the drug benefit and overall Medicare package. Acknowledging that the prescription drug benefit is timely and important, Moon explains how this program change is not enough.
  • The role of general revenues. Moon foresees acceleration of the longstanding trend whereby a larger share of Medicare is supported with general revenues. She argues that legislators' unwillingness to take on a Medicare financing debate has created a catch-22 that is nearly certain to create a financing crisis in the next several years.

In Medicare: A Policy Primer, Moon details changes that could improve health care and generate long-term savings:

  • Creating a new role for private managed care and establishing a level playing field between fee-for-service and managed care.
  • Increasing public financing of Medicare and beneficiary costs, where appropriate.
  • Improving Medicare's fee-for-service component and basic benefit package.
  • Expanding the Medicare savings and hospice programs and eliminating the two-year waiting period for disabled clients.

"A premier expert on Medicare, Marilyn Moon has produced a comprehensive, clear, up-to-date, and definitive picture of the program, its beneficiaries, its politics, and its ongoing policy challenges," says Robert H. Binstock, professor of aging, health, and society at Case Western Reserve University's School of Medicine. "Anyone interested in the program—beneficiaries, students, journalists, public officials, and policy analysts—needs to read this book and keep it close at hand."

Medicare: A Policy Primer is the third volume on Medicare by Moon, formerly a senior fellow with the Urban Institute, who wrote the first and second editions of Medicare Now and In the Future, also published by the Urban Institute Press. Medicare: A Policy Primer is available from the Urban Institute Press for $26.50 (244 pages, ISBN 0-87766-753-5). Order online at http://www.uipress.org, call 202-261-5687, or dial 1-877-847-7377 toll-free.

The Urban Institute is a nonprofit, nonpartisan policy research and educational organization that examines the social, economic, and governance challenges facing the nation.

Topics/Tags: | Health/Healthcare | Retirement and Older Americans

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