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OCR Page 1 of 72Health
David S. Broder
From
Medicare
To HMOs
The other morning, at a meeting of the
What works in private business may be
House Budget Committee, four business peo-
harder to accomplish in Medicare. Older peo-
ple gave Congress some advice that could help
ple incur higher medical costs, and one study
avert a fiscal train wreck and at the same time
for Vladeck's agency has questioned the likeli-
improve life for millions of senior citizens.
hood of large-scale savings from moving Medi-
The big bucks in any serious deficit reduc-
care patients into health-maintenance organi-
tion plan, almost everyone acknowledges, will
zations.
have to come out of Medicare, the govern-
But any savings will help, and the trend is
ment's health insurance program for senior
already going toward HMOs. While only 9
citizens. Medicare spending has been rising
percent of Medicare recipients currently are
almost 10 percent a year. By 2000, the annual
in HMOs, the number grew by 16 percent last
cost is projected to be $100 billion higher than
year and is expected to increase another 20
it is now.
percent this year.
This can't last. The presidential entitle-
It's often a good deal for everyone. HMOs
ments commission reported last December
charge the government 5 percent less than
that unless changes are made, the Medicare
the average per capita cost for Medicare
trust fund will likely go broke by 2001. Presi-
patients in their area and typically offer a
dent Clinton proposed no solution in his budg-
wider range of benefits, including prescription
et, saying Medicare changes should await a
drugs, which are not available to other Medi-
larger health care reform. But key members
care recipients.
of Congress know procrastination is no option.
Sen. Judd Gregg (R-N.H.) has a plan to lure
House Budget Committee Chairman John Kas-
even more Medicare patients into HMOs, by
ich (R-Ohio) is looking for major savings in
offering them cash rebates as well as expan-
Medicare as part of his blueprint for balancing
ded services. The American Association of
the budget, but he knows the politics of it will
Retired Persons has not endorsed it, but it is
be tough.
keeping an open mind. Kasich clearly wants to
For years, Congress has shaved Medicare
move in the same direction. There are still
expenditures by cutting back the reimburse-
many wrinkles to work out, but this approach
ment rates to hospitals and doctors, resulting
appears to offer hope of solving the single
in cost-shifting to non-Medicare patients and
biggest problem in bringing future deficits
their insurers. That game can't be played
under control.
much longer.
The only other obvious option is equally
uňpalatable-reducing services to Medicare
recipients or forcing them to make bigger
co-payments. Senior citizens vote in much
higher proportions than younger people. And
they are acutely protective of "their" Medi-
care and Social Security.
As Bruce Vladeck, head of the Health Care
Financing Administration, remarked to a con-
gressional committee last month, Medicare
beneficiaries "feel a certain ownership of the
program," even though the typical worker
turning 65 today will have contributed, along
with his or her employer, only about 40
percent of the average hospital benefits Medi-
care will pay him or her.
A possible escape from this dilemma was
súggested by the four private-sector benefits
managers Kasich invited to his hearing. The
officials of IBM, Eastman Kodak, Ryder and
Texas Instruments testified that health care
benefits for retirees (and active workers) can
be reshuffled in a way that saves big money
and does not bring loud protest-if it is done
right.
All four of the firms faced runaway costs for
their health programs. All of them decided
they had to encourage their workers and
retirees to shift from fee-for-service to man-
aged-care plans, in which networks of doctors
and hospitals agree to provide all needed
medical services for a flat, prepaid premium.
Before they made the shift, the four said,
the firms gave the workers and retirees a ton
of information about the options available,
engaged them in real discussion and then did
"a lot of hand-holding." The good news is that
costs have come down-radically-and em-
ployee satisfaction is up. Michael A. Tarre.
the IBM executive, told the committee that
THE WASHINGTON POST
SUNDAY, March 26, 1995
"1995 will be the fourth consecutive year of
per capita cost decreases" in a $900 million
program providing over half a million people
with wide-ranging benefits and a broad choice
of plans.