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This article was written by the Consumers Union Washington Office.
Before Medicare, millions of our nation's elderly had no health insurance at all. Today, a full 99 percent of those who are 65 years or older have health insurance. That's a success.
The Balanced Budget Act of 1997 allows patients and providers to contract privately for services Medicare already covers, in the name of patient choice. Any physician who enters a private contract with a Medicare patient must forego any reimbursement by Medicare for two years. This controversial provision resulted in new legislation proposed this year by Senator Jon Kyl and Representative Bill Archer (S. 1194 and H.R. 2497, respectively).
The private contracting bills (S. 1194 and H.R. 2497) threaten seniors with unpredictable increases in out-of-pocket costs by encouraging doctors to negotiate the price and terms (i.e., private or through Medicare) for individual services, escaping Medicare's limitations on fees for privately provided services. Currently, Medicare beneficiaries have the freedom to choose their own doctor; they are effectively protected against unlimited physician bills; and they are free to contract privately for services not offered under Medicare (e.g., prescription drugs, cosmetic surgery). S. 1194 and H.R. 2497 circumvent safeguards that were instituted to limit seniors' exposure to large out-of-pocket health care costs.
These financial protections are critical when weighed against the fact that two-thirds of this nations' seniors are living at or near the poverty line according to the Social Security Administration. A recent Consumers Union report, Hidden From View -- The Growing Burden of Health Care Costs, showed that seniors already face a disproportionate health care burden. According to the report, 57 percent of households 65 years and older spend at least 10 percent of their income on out-of-pocket costs and premiums. Simply put, exposing the nationsí seniors to more unmanageable health care expenses is not sound policy.
Curbing physician charges above the Medicare-approved levels has been a remarkable success story. S. 1194 and H.R. 2497 would unravel this achievement. Only 70 percent of claims were paid on assignment (i.e., at Medicare approved fee levels) in 1986, but in 1996, a full 96 percent of claims were paid on assignment according to the Physician
Payment Review Commission. The non-partisan Congressional Budget Office (CBO) predicts, if approved, this legislation would "almost certainly" send national health care spending spiraling upwards.
In addition, the Congressional Budget Office predicts that this new proposal would lead to an explosion of new fraud when unethical doctors move to scam the system and double bill, collecting payments from both Medicare and the direct patient contract. And the new fraud could be coupled by a problem of other doctors fleeing the system altogether. If America embraces private contracting on a service-by-service basis, as proponents urge, the viability of the Medicare program is threatened because this fundamental shift sets up a "perverse incentive for physicians to avoid Medicare patients," according to the American College of Physicians.
In sum, the proposed Medicare private contracting legislation threatens to replace Medicare beneficiaries' freedom of choice of doctor and protection against excess charges with a system that reduces access to quality care, exposes seniors to surprise unlimited medical bills, and introduces a new source of fraudulent practices into the Medicare program. Consumers Union urges lawmakers to vote against S. 1194 and H.R. 2497.
"Hidden from View ñ The Growing Burden of Health Care Costs," Consumers Union, January 22, 1998,
"The Most Frequently asked Questions about Physician Private Contracting in Medicare," AARP, December 8, 1997.
"Medicare Physician Private Contracting S.1194/H.R. 2497," AARP, Oct. 3, 1997.
"Revising Medicare," Washington Post, January 5, 1998.
"Backward Move on Medicare," Philip R. Lee, Washington Post, Nov. 5, 1997.
Letter from June E. O'Neill, Director, Congressional Budget Office to Honorable Bill Archer, Chairman, Committee on Ways and Means, U.S. House of Representatives, October 30, 1997.
Jennifer O'Sullivan, "Medicare: Private Contracts," CRS Report for Congress, October 21, 1997.
F.A.L.S.E. ALARM (Fooling Americans into Losing Senior Entitlements), Fact Sheet, Medicare Rights Center, January 21, 1998.
"The Truth About the New Medicare Private Contract Provisions," National Senior Citizens Law Center.
Letter from William A. Reynolds, M.D., President, American College of Physicians to the Honorable William v. Roth, Jr., Chairman, Senate Finance Committee, United States Senate, November 5, 1997.
"Monitoring the Financial Liability of Medicare Beneficiaries," Physician Payment Review Commission, No. 97-2, 1997.
