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Behind the Push to Shrink Government

Monday, November 5th, 2012

Recently 377 people in 19 states were stricken with meningitis after they received steroid injections to relieve back pain; 29 of these victims died. The infections were traced to a Massachusetts pharmaceutical lab that knowingly was mixing “sterile” medicine in rooms contaminated with bacteria and mold.

This is a shocking story, because we don’t expect the medicines our doctors give us to be contaminated. We may be a little hazy about where the medicines come from, other than a medicine factory, but we trust that the nice people who make the medicine wouldn’t do anything to harm us.

And, probably, most of them would not. But there are exceptions.

A couple of hundred years ago, there was no pharmaceutical industry. Indeed, there was little of what we call “science” in medicine at all. Self-taught “pharmacists” learned there was money to be made selling patent medicine. They would bottle various concoctions and sell them as cures for all manner of diseases. Unfortunately, often these home brews contained mercury, arsenic, and other toxins. Compounds of opium and honey were popular.

In the late 19th century, researchers began to apply scientific methods to medicines. They researched what causes disease and what medicines actually worked. And they realized a lot of people were being harmed, sometimes even killed, by quack medicine.

Pressure from doctors and the better educated public caused the first Pure Food and Drug Act to pass in 1906, and ever since then the federal government has stepped in to oversee production of medicine, to be sure the drugs were not dangerous and did what they claimed to do.

Since then, usually in response to real tragedy, the federal government has been charged with regulating an overseeing many kinds of industries to protect workers and consumers. For example, when it was clearly shown that exposure to asbestos caused the deadly lung cancer mesothelioma, the government set safety standards and tightly restricted use of asbestos in the U.S.

This system isn’t perfect. Often pressure from big interest groups can delay restriction of dangerous drugs and other products for years.

For example: Phenylpropanolamine (PPA) was used in many over-the-counter decongestant products. It stayed on the market for many years after reports emerged in the 1970s of hemorrhagic strokes in people who had taken PBA. Instead of voluntarily taking the drug off the shelves, companies making PBA-containing drugs — including Bayer, Wyeth and GlaxoSmithKline — hired an army of lobbyists and lawyers to fight the regulatory agencies. PBA was not restricted until 2000.

You might also remember Fen-Phen, a popular over-the-counter diet drug that sometimes caused fatal heart attacks. It finally was taken off the shelves, but not after many of the people damaged — or their survivors — filed more than 50,000 lawsuits against the companies selling it.

You might be thinking, then regulation doesn’t work. When it doesn’t, a big part of the reason is that sometimes people sympathetic to the big pharmaceutical companies are appointed to positions in the Food and Drug Administration, and they are inclined to give Big Pharma the benefit of many doubts. Sometimes politicians in Congress, who depend on donations from the pharmaceutical industry to get elected, pressure regulators to go easy on the industry.

The fact is, we see time and time again that even the big companies whose advertisements you see on television will cut corners and take risks to make a bigger profit. Consumers have two ways to fight back, and they both involve some part of government. One is to pressure the government for better regulations and swifter enforcement of the regulations we already have. The other is to file personal injury suits in court.

In recent years, many politicians have claimed that those regulations and lawsuits are out of control and costing jobs.  For years, Republicans in particular — but many Democrats also — have campaigned on deregulation and tort reform as cure-alls for the economy. By taking away the only tools consumers have to protect themselves, the corporations can rake in bigger profits.

But that means consumers are going to have to just trust Big Pharma to always do the right thing, and long experience tells us that’s not a good idea.

After Hurricane Sandy

Thursday, November 1st, 2012

The eastern United States and Canada struggle with the damage done by Hurricane Sandy. The immediate concern for many is restoring power and heat. Some have lost their homes, and according to the most recent news stories, at least 60 have lost their lives.

A disaster like this reveals how much we all depend on others. The electricity we take for granted comes to us through the work of many people we probably will never meet. The water that comes out of our taps, the roads and bridges we drive on — we assume they are safe; we trust that someone is taking care of them. When those ordinary things are taken away from us, it hits home how helpless we are.  Most of us can only wait for the power to come back on or the bridge to be fixed. We can’t do it ourselves.

In the past few days many people had to be rescued by police and firefighters. Many more were evacuated prior to the storm, which we knew was coming because of the work of the National Oceanic and Atmospheric Administration and the National Weather Service. State and local governments issued evacuation orders and set up temporary shelters.

It’s popular to believe everyone should be self-sufficient and take care of himself, but that only works up to a point. The truth is, in the modern world we all live in an elaborate network of inter-dependency. Most of the time, if everyone is doing his job and taking care of his responsibilities we don’t notice how much we depend on each other. But that doesn’t mean we don’t.

As difficult as the storm itself was, the next few days are likely to be more challenging. For example, when skyscrapers of lower Manhattan are without power, that also means no elevators. If you live on a 25th floor, which isn’t unusual in Manhattan, do you dare go down to the streets to look for supplies? Do you have the stamina to climb all those stairs to get home?

As always after a big, destructive disaster, there will be hazards amid the ruins. Where raw sewage has mixed into the flood waters there will be a risk of disease. There may be live electrical wires under the water. New Yorkers worry that the notorious subway rats, flushed up to the streets by the flood, will be taking up residence in their basements.

There are exposed nails, broken glass, and leaking fuel to deal with. As water-soaked rubble dries, asbestos insulation will mix into the air, causing a risk of asbestosis and mesothelioma. There is a huge amount of work to be done, and much of this work will need to be done by people with experience and the right equipment. Individual home and business owners, no matter how hard working they are, can’t put everything right by themselves. However, we can put everything right if we all work together.

Sen. Arlen Specter, 1930-1912

Sunday, October 21st, 2012

Former U.S. Senator Arlen Specter of Pennsylvania died this month at the age of 82, from Non-Hodgkin lymphoma. Sen. Specter served in the Senate for 30 years, from 1981 to 2011.

Obituaries called Specter a centrist and a moderate, but he was more accurately called a wild card. In his career he took positions both pleasing and infuriating to partisans across the political spectrum. He was a Democrat from 1951 to 1965, a Republican from 1965 to 2009, and then a Democrat again.

Along with Specter’s many accomplishments was one spectacular failure. He worked for years to pass bills to compensate asbestos victims through a trust fund, while shielding companies from asbestos liability. None became law.

The asbestos compensation issue is one that will be with us for a long time. Through most of the 20th century asbestos was widely used as fireproofing in building and other materials. Although a link between asbestos and lung disease had been suspected for a long time, medical studies showing a beyond-a-shadow-of-a-doubt link between asbestos and the deadly cancer mesothelioma were not published until the 1960s.

The asbestos industry fought hard against regulation of asbestos. Because of industry pressure the government did not establish workplace standards until 1994, and to this day asbestos has not been completely banned in the U.S. As many as 10,000 Americans are still dying of asbestos-related diseases each year.

Needless to say, a whole lot of sick people, and their survivors, have sued asbestos companies for damages. In the 1980s asbestos and tobacco companies inaugurated the “tort reform” movement, hoping to change law to reduce their liability. Arlen promoted his trust fund idea as a way to protect business while getting asbestos victims the compensation they deserve.

The trust fund argument sounds good to a lot of people, especially people sympathetic to the defendants. An argument can be made that trust funds are good for plaintiffs, too, if the defendant is going bankrupt. In fact, courts have sometimes set up such trust funds as part of bankruptcy proceedings, with mixed results. In the many court-ordered asbestos compensation trusts around the nation, experience shows they often lack transparency and may not be handling the money honestly.

But there were serious drawbacks beyond that to Arlen’s plan. For example, it was charged that the FAIR (Fairness in Asbestos Injury Resolution) bills that Arlen submitted to the Senate over the years did not provide enough money for genuinely fair compensation to asbestos’s many victims.  Again, this has happened to trusts set up by bankruptcy proceedings. Often the amount of money set aside for the trust seriously underestimated the number of people who have been damaged. Sometimes trusts are suspended; sometimes plaintiffs receive a few pennies on the dollar of what they were supposed to receive.

The bills also placed an unreasonable burden on plaintiffs to prove their health problems came from a particular exposure to asbestos. In the case of mesothelioma, which can take 20 or more years to develop after exposure, proof might be hard to come by. For that reason, Arlen’s FAIR bills would only have compensated people who could prove they were exposed to asbestos in their jobs. A worker might have been compensated, but a spouse who developed mesothelioma from washing the worker’s asbestos-covered clothes — which has happened — would not.

One of the arguments for the FAIR bills was that a lawsuit might take years to be settled and the plaintiff compensated. But the FAIR bills called for drawing all pending claims and litigation into the trust payment system, meaning it would have begun with a backlog of cases that might have taken years to review.

Arlen Specter’s 2005 FAIR bill received a surprising amount of opposition from Republicans, usually a group keen on any kind of liability protection. By then many conservatives had convinced themselves that most mesothelioma claims are bogus — those 10,000 deaths every year notwithstanding — and were more interested in passing laws making it more difficult for asbestos victims to file lawsuits than in setting up trust funds.

Specter’s long Senate career ended in 2010, when he lost a Democratic primary challenge. Republican Pat Toomey won the 2010 general election and now sits in Specter’s old Senate seat.

Study: Medicare Vouchers Would Cost Seniors More

Saturday, October 20th, 2012

The endless bickering over Medicare between our two political parties often focuses on vouchers. Republicans want to turn Medicare into a system that provides “premium support” — or vouchers — to help seniors buy insurance from private companies.

Democrats disagree with this idea and want to find ways to sustain the current Medicare program. They warn that the Republican Medicare “voucher” program will result in seniors paying more money for their health care.

Now the independent Kaiser Family Foundation has issued an in-depth analysis saying — yep, the vouchers will cost seniors more money.  Kaiser estimates that if this program were in effect now, 59 percent of seniors would have to pay more for the same benefits. (See Sarah Kliff at the Washington Post for a simplified explanation of the analysis.)

In fact, the Romney plan would not go into effect right away but would begin ten years after a bill establishing the plan became law. (This enables Mr. Romney to promise current seniors that their Medicare won’t change as he campaigns for president; as far as anyone can tell, that’s the only reason for the ten-year delay.) The Kaiser study looks at how the plan might work right now, because we know what the state and cost of health care is right now, and we don’t know what it will be ten years from now. The study presumes that if the program would raise cost now, it probably will in the future, too.

The Kaiser analysis is our best indication yet that the voucher plan is a bad idea. It could leave seniors — especially those with serious conditions such as mesothelioma — digging deeper into their own pockets for medical care.

The Republican “voucher” program saves the federal government money by putting tight restrictions on future increases in the amount of the fixed allowance, or voucher. For this reason, other studies have projected that the gap between the amount of the “voucher” benefit and the actual cost of health care will grow wider over time. In 20 years, the gap could run into thousands of dollars for some seniors.

Voucher advocates disagree. They place great faith in the ability of private insurance companies and free market competition to keep the system efficient and hold down cost. That might happen, but keep in mind that the cost of private insurance generally has been rising faster than the cost of Medicare.  And for years, the private Medicare Advantage policies have been costing more than regular Medicare.

Essentially, the Republicans want to “save” money by adding a middle man — private insurance companies — to the system instead of paying providers directly. This makes sense, how?

As explained on Republican presidential nominee Mitt Romney’s website, under his plan “existing spending is repackaged as a fixed-amount benefit to each senior that he or she can use to purchase an insurance plan.” This means seniors are put on an allowance they can use to purchase insurance. If your insurance costs more than your allowance, you pay the difference. If your insurance costs less than your allowance, you can apply that difference to co-pays and deductibles.

This will reduce the cost of Medicare, he says. “With insurers competing against each other to provide the best value to customers, efficiency and quality will improve and costs will decline.” As explained above, this proposition may turn out to be true, but right now it has to be accepted on faith alone. There is little real-world evidence to support it.

One twist with the Romney version of the voucher system is that he would not eliminate traditional Medicare. however, the website says, “if it costs the government more to provide that service than it costs private plans to offer their versions, then the premiums charged by the government will have to be higher and seniors will have to pay the difference to enroll in the traditional Medicare option.”

Mr. Romney leaves out a lot of details that could make a difference in how the program might work. One big concern is that if the private insurance companies accepting the vouchers are allowed  to “cherry pick” customers, they will lure healthier seniors into lower-cost plans and expect the “government” Medicare to accept sicker seniors who have bigger medical bills. This would turn regular Medicare into a high-risk pool, which is very expensive. And, as Mr. Romney just said, seniors will have to pay the difference.

Asbestos and the Massachusetts Senate Race

Friday, October 19th, 2012

One of the most closely watched races for U.S. Senate is going on in Massachusetts. Incumbent Republican Sen. Scott Brown and Democratic challenger Elizabeth Warren are running for the seat once held by the late Sen. Edward Kennedy.

Warren, a Harvard Law professor, is known for being an advocate for consumer protection and corporate accountability.  A few weeks ago, however, Sen. Brown began running television ads accusing Warren of representing big corporations against asbestos victims.

“Elizabeth Warren’s not telling the truth about her career,” the narrator says in Brown’s ad. “Elizabeth Warren was a key lawyer in an asbestos case working for a big corporation. Warren helped Travelers Insurance restrict payments to victims of asbestos poisoning. The results were disastrous for the victims. The insurance company saved millions. And Elizabeth Warren got paid 40 times what they paid victims. Elizabeth Warren’s just not who she says she is.”

Warren said that her role in the case was as a bankruptcy expert, and her legal work was to secure a $500 million trust to pay asbestos victims. This week, Sen. Brown apologized for some of his ads against Warren, but he has not retracted all of his claims.

What really happened?

The case involved the Johns-Manville Corporation. For much of the 20th century Johns-Manville was the largest producer of asbestos products in the world. The products included asbestos shingles, insulation, and other building materials.

Beginning in the 1960s, thousands of individual and class action lawsuits were filed against Johns-Manville by people suffering from mesothelioma cancer, asbestosis, and other diseases caused by exposure to asbestos from Johns-Manville products. The company filed for Chapter 11 bankruptcy protection in 1982. One of the conditions of the bankruptcy resolution was the formation of a trust to be used to pay the claimants.

Later, some claimants filed direct action lawsuits against some of Johns-Manville’s insurers. The legal issues were complex but mostly involved questions of the original bankruptcy court’s jurisdiction and allegations that insurers had withheld information about Johns-Manville products.

One of the insurers,  Travelers Insurance, and several claimants settled on the creation of a $500 million trust fund, but other insurers objected. In 2008, Warren was brought into the case by Travelers as a bankruptcy expert. Her job was to secure the trust fund. In effect, she was working for both Travelers and the asbestos victims.

The case eventually went to the Supreme Court. Warren’s arguments on behalf of the $500 million fund prevailed. Unfortunately, after Warren had left the case, a lower court ruled that Travelers did not have to pay the trust. Litigation continues, although Warren is no longer involved. The important point is that Warren was working for both the victims and for Travelers to secure the trust fund.

In the Massachusetts Senate race, the Warren campaign fired back at Scott Brown with two television ads featuring family members of asbestos victims. In one, the widow of a shipyard worker who died of Mesothelioma praised Warren for her work on behalf of the victims.

“Elizabeth Warren went all the way to the Supreme Court to try to get more money for asbestos victims and families,” the widow, Virginia Jackson, said. “Now Scott Brown is attacking Elizabeth Warren about her work. Scott Brown is not telling the truth. He’s trying to use our suffering to help himself. He ought to be ashamed.”

Brown then accused Warren of hiring actors to play the grieving survivors. This week the :Associated Press reported that Brown withdrew this accusation and apologized.

Mitt Romney’s Plan for Pre-Existing Conditions

Thursday, October 11th, 2012

Republican presidential candidate Mitt Romney promises to repeal the Affordable Care Act, or “Obamacare,” as soon as he is inaugurated. But how would he replace it? Mr. Romney is not big on details, unfortunately. And whether they are healthy or have a life-threatening disease such as mesothelioma, Americans deserve to know details before they vote in November.

In the first debate with President Obama, Mr. Romney was asked how he would replace Obamacare. He began his response this way:

“Well, actually it’s — it’s — it’s a lengthy description. But, number one, preexisting conditions are covered under my plan. Number two, young people are able to stay on their family plan. That’s already offered in the private marketplace. You don’t have to have the government mandate that for that to occur.”

According to Mr. Romney’s campaign website, however, his plan would “Prevent discrimination against individuals with pre-existing conditions who maintain continuous coverage.”

In other words, if you buy insurance while you are healthy and don’t let it lapse, you can change policies even after you have developed a medical problem. But once you are uninsured for any reason, you have no protection from being denied coverage.

On the other hand, if the Affordabe Care Act is not repealed, beginning in 2014 insurance companies may not deny coverage to any person with a pre-existing condition, period. The ACA also provides that nearly everyone obtain insurance or pay a penalty. This is to prevent people from waiting until they are sick to buy insurance, which would be ruinous to the insurance industry.

To be fair, Mr. Romney’s plan does provide an incentive to buy and keep insurance also — if you develop a health problem while you are uninsured you may be unable to obtain insurance for the rest of your life. In other words, things wouldn’t change much from the way they’ve been for several years.

Obamacare includes several programs to make affordable group insurance plans available to people who don’t get health insurance through their jobs. Mr. Romney has hinted that he might create similar programs. His website says he would “Ensure flexibility to help the uninsured, including public-private partnerships, exchanges, and subsidies.” But that’s all it says;  he provides no further details.

This week in Ohio, Mr. Romney met with the editorial board of the Columbus Dispatch. He told the editors that people without insurance would have a chance to make a “choice” to be covered. Exactly what he meant by that, he did not say.

However, he also minimized the problems people have with no insurance. “We don’t have a setting across this country where if you don’t have insurance, we just say to you, ‘Tough luck, you’re going to die when you have your heart attack,’  ” he told the editors. “No, you go to the hospital, you get treated, you get care, and it’s paid for, either by charity, the government or by the hospital. We don’t have people that become ill, who die in their apartment because they don’t have insurance.”

But the “free” treatment the poor get in emergency rooms drives up everyone else’s bills. And a  Harvard study found that about 45,000 Americans die every year because they don’t have insurance.

As to the second point — today parents may keep children on their health plans until the age of 26. That was not true until the government made it the law. Mr. Romney says “You don’t have to have the government mandate that for that to occur.” But, in fact, it didn’t occur until there was a government mandate.

Why Hospital Readmissions Are a Political Issue

Wednesday, October 3rd, 2012

Another piece of Obamacare went into effect on October 1. From now on, hospitals with too many readmissions of Medicare patients will be fined. This should save taxpayers some money and encourage hospitals to provide better care. However, as with everything else involving Medicare, this initiative is being attacked as a big, wasteful government program.

A “readmission” means that a patient discharged from a hospital has to be admitted again within 30 days, especially for something that should have been handled better the first time. The Medicare Payment Advisory Commission estimates that about one in five Medicare patients admitted to a hospital are readmitted. There are estimates that as many as three in four such readmissions are preventable.

In 2010 alone, Medicare readmissions cost taxpayers $17.5 billion. The “Obamacare” initiative is intended initially to reduce that number by at least 20 percent, and perhaps by more in the future.

This program is just one of several Obama Administrative initiatives designed to reduce Medicare costs and keep the program solvent. These savings are included in the money that conservatives claim President Obama is stealing from Medicare to pay for “Obamacare.” It’s more accurate to say that Obamacare provides a  lot of cost-saving measures to keep Medicare going. Those who depend on Medicare, especially for treatment of life-threatening illness such as mesothelioma, deserve to know the facts.

What causes preventable readmissions? Along with medical error, the most frequently cited cause is poor follow-up care. A hospital may release a patient who isn’t able to take care of himself and who doesn’t have reliable caretakers. Or, the caretakers are reliable but may not understand how to care for the patient. Sometimes the patient doesn’t follow hospital instructions.

This problem is so widespread — and not just for elderly patients — that there is a new type of medical specialty called a “hospitalist.” A hospitalist is a physician who practices general medicine within a hospital. This means they supervise the care of hospitalized patients whose regular doctors spend most of their time in their own practices, outside the hospital. Part of the role of a hospitalist is to be sure the patient being released is going to get good care.

The maximum fine for excessive readmission is 1% of a hospital’s base Medicare reimbursements for the coming year. This week more than 2,200 hospitals were charged with a total of $280 million in penalties.

Some hospital administrators are complaining that the program will penalize the poorest hospitals that serve low-income patients with fewer post-hospital resources. Medicare says the hospitals being evaluated are risk-adjusted. For example, if a hospital serves more poor or less educated patients than average, the evaluation will cut them some slack.

Nick Gillespie of the libertarian Reason Foundation complains that hospitals will just jack up other costs to pay for the fines. And even if the program does cut costs, it would be only a tiny fraction of Medicare’s budget.  But Gillespie’s real gripe is not with the readmissions reduction program but with Medicare itself. “There comes a time when you’ve got to admit that no amount of tweaks to the system will help if the system is the problem,” he writes.

In other words, he wants to scrap Medicare as it is and expect seniors to depend on the private insurance market to take care of them. However, Gillespie doesn’t tell us in which alternative universe that might actually happen.

Hot Air and Medicare

Monday, October 1st, 2012

In the last post, we flashed back to 2010 and the dire predictions that Obamacare would kill the Medicare Advantage program. Those predictions turned out to be false, at least so far.

The politicians and pundits whose predictions didn’t pan out are not deterred. Now they say that Medicare Advantage will disintegrate sometime after 2014.  Could they be right this time? Or are they still full of hot air? Further, some Republicans in Congress claim that the Obama Administration is propping up Medicare Advantage with additional payments until after the November election.

At the beginning of 2012, about 11 million seniors were enrolled in Medicare Advantage. This is about one-fourth of all Medicare recipients. American seniors, including those with serious illness such as mesothelioma, depend on Medicare for their medical care, and the future of the program is one of the hottest topics in the presidential campaign.

What’s going on here? First, there’s a lot of confusion about what in Medicare Advantage was cut, and why. The Medicare Advantage program pays private insurance companies to enroll seniors in managed care health plans. So the plans are subsidized by our taxes, which go directly to the private insurance companies. The original idea was that private insurance companies would, through competition and efficiency, be able to offer better plans for less money than the government bureaucracy could offer. But that’s not how it turned out.

In fact, the Medicare Advantage plans were costing taxpayers about 14 percent more than regular Medicare plans. These overpayments were not paying for seniors’ health care but were being taken as company profits and administrative overhead. The Affordable Care Act provides that insurance companies offering Medicare Advantage policies have to bring their costs to taxpayers down to be in line with regular Medicare. It is estimated that this will save taxpayers $308 billion over ten years.

But people who opposed Obamacare began shrieking that Obamacare was gutting Medicare and killing Medicare Advantage. How dare we save taxpayers $308 billion!

Put another way — the politicians behind Medicare Advantage who believed that the private insurance industry would do a better job of managing a cost-effective Medicare program were outraged when the government refused to pay  more tax dollars than we pay for regular Medicare plans. Go figure.

But the Medicare Advantage companies continue to sell policies and continue to make a profit. Medicare Advantage enrollment is rising, and long-time enrollees aren’t seeing big changes in their policies. So what’s the problem now?

The Affordable Care Act includes a program to reward insurance companies doing an especially good job, as measured by good health care outcomes, with a bonus payment. But the Obama Administration decided to broaden the criteria for performance outcomes, and so more bonuses are being given.

This has Republicans up in arms, because they claim the bonus money is being used to cover up the damage being done to Medicare Advantage by Obamacare. Rep. Darrell Issa, R-Calif., chairman of the House Oversight and Government Reform Committee, says that the Health and Human Services (HHS) department is engaged in a conspiracy to hide the impact of the cuts to Medicare Advantage. He is  threatening to subpoena documents from HHS. HHS Secretary Kathleen Sebelius is stonewalling Congress and refusing to comply with congressional requests, he says.

Could this be true? Maybe, but Issa has a record of stirring up controversial claims against the Obama Administration that turn out to be overblown. The bonus program controversy may turn out to be more hot air.

Medicare Advantage: Alive and Well

Sunday, September 30th, 2012

Back in 2010, when the Affordable Care Act was first passed, a lot of “pundits” predicted Medicare Advantage was doomed. For example, Robert Book and James Capretta of the Heritage Foundation predicted in September 2010 that …

“Regardless of which outcome a particular patient experiences, every patient who would have enrolled in an MA plan under prior law will experience a loss in the value of his or her Medicare coverage. … Instead of reducing waste, the MA cuts will simply cut health care services available to patients and transfer spending from Medicare Advantage to other federal programs and other payers (including patients), thus increasing federal and state spending on Medicaid and patient spending on Part D, supplemental care plans, and out-of-pocket costs.”

Now, two years later — um, they were wrong, folks. Medicare Advantage is doing just fine.

Centers for Medicare & Medicaid Services say that by 2013, Medicare Advantage will have enrolled 28 percent more seniors, while the cost of premiums has dropped for many enrollees, and benefits have not been cut.

We wrote in 2010 that there were all kinds of scare stories about Medicare Advantage going around. Politicians and organizations opposed to Obamacare were spreading stories claiming that Medicare Advantage was being “gutted” by Obamacare.

Compounding the confusion was that another law, passed during the George W. Bush Administration, called for phasing out Medicare Advantage free-for-service coverage by the end of 2010.  This was because fee-for-service plans were costing more money than what managed care plans cost. But when people heard about fee-for-service plans ending, they assumed this was the fault of Obamacare.

And it’s no wonder many seniors were nervous about what might happen to their Medicare policies. Private insurance companies don’t want seniors as customers, unless taxpayers are  subsidizing the policies. And we all need more health care as we get older. Some ailments — heart disease, arthritis — are common in seniors, and some are rare, such as mesothelioma cancer, which is rarely diagnosed before the patient is 50. But for that reason, there is no way for private insurance to provide affordable insurance to seniors. So, seniors rely on Medicare.

It’s true that the Affordable Care Act made cuts to Medicare Advantage, but that’s because Medicare Advantage programs were costing taxpayers 14 percent more per person than regular Medicare. The Medicare Advantage program pays private insurance companies to enroll seniors in managed-care networks, and the private insurance companies were burning money for marketing and administration, as well as padding company profits with taxpayer dollars.

So to get costs under control, the Affordable Care Act provided that Medicare Advantage companies had to reduce costs to match regular Medicare. The ACA also provides that companies offering Medicare Advantage policies  must spend 70 percent of Medicare dollars on patient care.

The private insurance companies grumbled, but they also figured out they could still make a profit on Medicare Advantage plans. And now Medicare Advantage is as popular as ever, and there are plenty of plans to choose from.

However, some politicians are grumbling about another program that pays bonuses to Medicare Advantage companies providing outstanding service. Last week Rep. Darrell Issa, R-Calif., chairman of the House Oversight and Government Reform Committee, accused the Obama Administration of using these bonuses to mask the cuts to Medicare Advantage until after the election. True? We’ll look at that in the next post.

Why You Should Care About Medicaid

Thursday, September 20th, 2012

We’ve been looking at the costs of long-term care for senior citizens. Bills for nursing homes, assisted living facilities, and in-home assistance usually are not covered by Medicare. For this reason, American seniors are spending tens of thousands and sometimes hundreds of thousands of dollars in their last five years of life.

The last post focused on some proposals for public long-term care insurance. However, there are no pending bills before Congress for such insurance, and even if such a bill were passed tomorrow it would take awhile before the insurance would start paying benefits.

If you are already retired or nearing retirement age, it’s safe to assume you could find yourself saddled with huge medical bills eventually. There are a host of severe diseases that affect seniors more than anyone else. Mesothelioma, for example, is most often diagnosed in people over 55 years of age.

Other than getting yourself a private long-term insurance policy — which is highly recommended — what can you do? Many seniors find themselves falling back on Medicaid after they’ve drained their own assets paying for long-term care. It’s not a great system, but at least seniors aren’t losing their nursing home beds because they can’t pay their bills.

However, the fight in Washington is not over finding a better way to help seniors so that they don’t have to go broke before falling back on Medicaid. It’s over whether there will be a Medicaid to fall back on.

As explained in a recent Bloomberg News analysis, the presidential candidates are very far apart on the issue of Medicaid.  Very simply, President Obama wants to preserve Medicaid as an entitlement program, which means it will pay all acceptable expenses for people who qualify for the program. The Affordable Care Act, or “Obamacare,” actually expands Medicaid a bit, raising the eligibility requirements so that more people are eligible.  However, right now Republican governors in some states are refusing to expand their Medicaid programs.

Republican presidential nominee Mitt Romney wants to turn Medicaid into a block grant program. Federal guidelines and requirements would be eliminated, and instead the federal government would give fixed amounts of money to states as block grants. The states would then create their own programs providing health care for the poor.

However, the amounts of money granted to the states would increase only at 1 percent more than inflation, and actual health care costs have been growing much faster than that. Bloomberg estimates that in ten years the grants would be $1.26 trillion short of what would be needed to sustain current benefits.

This would appear to save the government a lot of money, but no consideration has been given to what’s going to happen to the millions of seniors whose nursing home bills are paid by Medicaid. The day may come when the only inheritance most of us leave are a pile of unpaid medical bills.

“This policy disagreement illustrates the great divide between Obama and Romney over government aid,” the Bloomberg analysis says.  “Obama believes in setting a floor to support Americans in need; Romney wants a ceiling on the government’s responsibility.”

A public long-term care insurance program would both protect seniors and be less of a drain on the federal budget. This is a far more sensible solution than Medicaid block grants.