Why the Lieberman-Coburn Medicare plan doesn’t add up

July 1, 2011

The bad ideas for cutting Medicare just keep on coming. The latest pitch came earlier this week from senators Joseph Lieberman, an independent, and Republican Tom Coburn. They suggested boosting Medicare’s eligibility age; increasing seniors’ out-of-pocket spending; and socking it to the wealthy via higher premiums.

As Casey Stengel said: “Can’t anybody here play this game?”

We don’t have a Medicare problem – we’ve got a problem with medical inflation and skyrocketing healthcare costs that is hitting all Americans, young and old. Plans like Lieberman-Coburn – and the Ryan plan — just shift costs around and don’t get at the real issue. To wit:

Higher eligibility age
Lieberman-Coburn propose gradually increasing Medicare eligibility from 65 to 67 by 2025. They argue it this way:

Since the creation of the Medicare program in 1965, life expectancy and the average length of time that people are covered by Medicare has risen dramatically. According to the Centers for Disease Control, when Medicare was passed in 1965, the average lifespan for Americans was 70.2. In 2006, the average lifespan for Americans was 77.7 – an increase of 10.6 percent. This increase in the length of time an enrollee may be covered by Medicare has significantly raised the costs of the overall program.

Where will these younger seniors find health insurance under Lieberman-Coburn? In the new public insurance exchanges to be launched under the Affordable Care Act (ACA). Leave aside that Coburn has voted to repeal the ACA. A higher eligibility age might save some money— but it really just shifts costs to Medicaid and the exchanges.

The plan cites Congressional Budget Office estimates that increasing the eligibility age could save Medicare in excess of $124 billion over the next 10 years. But the Kaiser Family Foundation (KFF) projects much lower savings, because of other costs that could rise as a result of the age increase.  Kaiser projects that net federal spending for 2014 would fall $7.6 billion (the foundation hasn’t done the 10-year analysis); it starts with a gross reduction of $31.1 billion, but then adjusts it for higher Medicaid spending ($8.9 billion), federal premium and cost-sharing subsidies under the exchanges ($7.5 billion) and lower Medicare premium receipts ($7.0 billion).

Higher out-of-pocket spending
Lieberman-Coburn calls for “streamlining the deductibles” in Medicare. Granted — Medicare deductibles are complex: $1,132 for Part A (hospitalization), $162 for Part B (doctor’s visits).

But this isn’t about making life easier for seniors. Lieberman-Coburn would create a single $550 annual deductible for Parts A and B — Part A comes down, Part B goes up. But only about 20 percent of Medicare beneficiaries are hospitalized in a given year, while 90 percent see a doctor. So the vast majority would face higher out-of-pocket costs to meet this new middle-of-the-road deductible.

This will discourage seniors from using outpatient services. That might cut short-term costs, but it will lead to sicker patients – and higher costs – down the road for those who haven’t received proper preventive care and early intervention.

The higher deductibles are linked to another Lieberman-Coburn idea — cutting Medicare utilization by prohibiting first-dollar coverage under Medigap policies. Many seniors purchase these supplemental policies to handle co-pays, and to protect themselves against catastrophic out-of-pocket costs. Lieberman-Coburn argues that first-dollar coverage won’t be needed with the new, lower combined $550 deductible. But it really just discourages healthcare utilization; seniors would think twice about out-of-pocket spending for their share of the bill below the deductible.

Higher premiums for the rich
Conservatives like Lieberman and Coburn oppose higher progressive income tax rates on the wealthy, but have no problem asking rich seniors to pay more for the same medical services they’ve been paying for all along:

The Lieberman/Coburn proposal will require those 65 and older who are making more than $150,000 annually ($300,000 for couples) to pay the full cost of their Medicare Part B coverage. We believe that in a time of massive federal debt and long term deficit projections, using federal tax dollars to subsidize the health insurance of high income retirees is unwise. Warren Buffett can afford to pay the full cost of his Medicare Part B insurance coverage and thousands of other wealthy seniors can as well. The Lieberman/Coburn proposal will require those well-off seniors in higher income brackets to pay the full $400+ premium for their Medicare Part B coverage.

This is posturing, because the savings are chump change in the context of the giant Medicare program – Lieberman-Coburn estimate savings of $5 to $10 billion over 10 years. That’s because well under five percent of seniors have income that high; after all, they’re retired.

And, this isn’t a new idea. The most affluent seniors have been paying higher income threshold Medicare Part B premiums since 2007. Starting this year, affluent seniors are shouldering steep increases in Medicare premiums mandated under the ACA. This year, the surcharges affect individuals with $85,000 or more in annual income, and joint filers with income over $170,000.

The ACA is a half loaf when it comes to cost containment, but it does at least contain promising delivery system reforms and new payment mechanisms. Plans like Lieberman-Coburn and Ryan assert that the federal government won’t get involved in delivery system reform or system-wide healthcare cost containment. Instead, they just make sure the costs don’t fall on the federal budget.

All of which brings to mind another Stengel line: “I don’t know if he throws a spitball but he sure spits on the ball.”

10 comments

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[…] Why the Lieberman-Coburn Medicare plan doesn't add upReuters Blogs (blog)The bad ideas for cutting Medicare just keep on coming. The latest pitch came earlier this week from senators Joseph Lieberman, an independent, and Republican Tom Coburn. They suggested boosting Medicare's eligibility age; increasing seniors' …Top Democrats reject new plan to cut Medicare spendingWashington PostDelay Medicare eligibility: Coburn and LiebermanThe Associated PressSenate Bill Ups Medicare Age to 67MedPage TodayMiamiHerald.com -Bloomberg&nbs p;-Medscapeall 353 news articles » […]

Posted by Why the Lieberman-Coburn Medicare plan doesn’t add up – Reuters Blogs (blog) | Acessando Net | Report as abusive

[…] Why the Lieberman-Coburn Medicare plan doesn't add upReuters Blogs (blog)The bad ideas for cutting Medicare just keep on coming. The latest pitch came earlier this week from senators Joseph Lieberman, an independent, and Republican Tom Coburn. They suggested boosting Medicare's eligibility age; increasing seniors' …Senators' Unveil Plan to Save MedicareFox NewsSenator Tom Coburn's Plan to Save MedicareThe New LedgerMedicare Doesn't Need to Be Sacrificed to Solve our Budget WoesHuffington Post (blog)NewsOK.com -CBS News -The New Americanall 354 news articles » […]

Posted by Why the Lieberman-Coburn Medicare plan doesn’t add up – Reuters Blogs (blog) | Trends Medical News Magazine | Report as abusive

I first met Joe Lieberman in 1965. He was a political opportunist, a coward on issues of social import, back then.

He hasn’t improved.

Posted by Eideard | Report as abusive

Two rich guys feeding at the public trough, with their own (paid for by us) insurance, figuring out how the cut the rest of Americas’ benefits. Politics as usual.

Posted by kehenalife | Report as abusive

Mr. Miller makes some interesting points, but has not addressed the central issue, how to make Medicare sustainable when the baby-boomers retire. The Lieberman-Coburn Plan encourages us to be responsible for our own healthcare until we are 67 (personally I think the transition age should be tied to the average lifespan). Transfering healthcare costs to another government agency is, clearly, not the intent.

When we take responsibility for our own health, we will start doing the things necessary to be healthy; eat right, get moderate exercise, etc. Most health problems are diminished when people exercise. Our bodies depend on a healthy diet. From what I have been told, studies show that the major cause of increased healthcare costs is that individuals are asking for more services. Obesity, heart disease, and diabetes are associated with poor habits. I am close to individuals who make excessive use of healthcare and I am embarrassed by their lifestyle choices.

Certainly there are health conditions that are not caused by poor lifestyle choices and everyone has increased health concerns as they age, but everyone I know with significant health issues admits that the conditions are due to their choices, often choices that were made decades before. This is also true of individuals in their 90’s. We need to develop incentives to encourage healthy decisions throughout life so individuals aren’t caught by the consequences of earlier actions.

The Lieberman-Coburn Plan is certainly is not a sufficient way to contain healthcare costs, but it is a start. The next step is more difficult. We need to develop systems that encourage efficient use of the healthcare dollar. I know a 91 year old man who has had 9 surgeries on his eyelid, and the eyelid still doesn’t work. At his age each surgery put his life at risk and Medicare paid for it. Personally, I think his doctor (who suggested and encouraged the procedures, assumedly to put a son through college) should be held accountable for his actions.

Posted by zoebisch | Report as abusive

I have an even better idea, stop throwing money at the problem, abolish Medicare.

Posted by Mike5896 | Report as abusive

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Posted by Medicare Reform: Give it a Chance (Just One Time) – Huffington Post (blog) | Trends Medical News Magazine | Report as abusive

OK, why don’t we just let the providers(pharm., medical(HMO,equipment, etc) figure it out for $1,000/person. Because they are so smart and know so much…and will do no harm.

Posted by bikerbob61 | Report as abusive

The way to cut Medicare expenses is to restrict the income of Doctors, Hospitals, Drug Companies and others by a moderate amount. This is a tactical game – enough cuts to get Doctors out of the BMW/Mercedes range, but not enough to stifle this popular route to becoming rich. Maybe a Nice Toyota.
The way to lower the cost of Medicare is to lower the cost of Medicare.

Posted by sandy12345 | Report as abusive

Insurance prices in risk.

When someone says – as Mike5896 suggests – that we get rid of Medicare, I know that they’re naive, because anyone that has ever bothered to look at the open market price of health care insurance just below the age of eligibility for Medicare knows damn well that most people cannot afford the lowest-priced policies. The fact is, prices increase as one gets older, to the point that one cannot afford it.

Medicare costs are lower.

And anyway, Medicare costs have NOT increased as fast as private health care insurance, which is very important to note for two reasons: Medicare costs price in the treatment of elderly people reaching EOL problems while private insurance mostly balances healthy young people against a few sick ones; Medicare does not cut people for pre-existing conditions, but up until The ACA, private insurers could and would.

Dead people can’t vote.

Ultimately, this is about the tens of thousands (about 40K Americans, based on mortality tables of 2008) of people who will die short of both retirement AND Medicare. Or as I like to say: Dead people can’t vote. It’s a brilliant strategy by Republicans to kill off people who would otherwise vote against them.

Posted by GRRR | Report as abusive

Excellent article, Mark.

You are on point as usual. Until we address the dramatic increase in the cost of delivering healthcare, there is no solution from any party that will solve the problem staring us in the face.

Posted by Adam_S | Report as abusive

Why not do away with expensive doctors, hospitals and drugs altogether. People could look up what was wrong with them on WebMD, buy the appropriate medications and look up how to do their own surgery. No one would have to worry about malpractice suits because they would have to sue themselves. Alternatively, we could go back to the early 1900’s when we did not have penicillin, CT scans, MRI’s etc etc etc., and most folks died at home. Anyone who said they were a doctor was one. No need to train until you were 30 years old like the average doctor today. People survived then, so why not now? Costs would be so low that none of the above commenters would even need to worry about them.

Posted by zotdoc | Report as abusive

US has one of the worst HC systems in the world, by return on investment. Each year, doctors do thousands of pointless tests and procedures, to drive up revenue and limit liability.

Healthcare can’t be dictated by the market. We’ve proven that now. Let’s swallow some pride and copy how it’s done in Europe, Canada. However, they maintain costs partly by driving down the prices big pharm can charge, and since they fund politicians here in the US, nothing will happen

Posted by GA_Chris | Report as abusive

[…] eligibility age. Some of the bipartisans want to push Medicare eligibility from 65 to 67. That just shifts health care costs from Medicare to seniors, and also to the new public exchanges set to launch in 2014 and to […]

Posted by 5 ways a big deficit deal will whack your retirement | Reuters Money | Report as abusive

[…] So, consider what it would mean to slash Social Security and Medicare for these vulnerable retiree groups. Deficit hawks want to boost Social Security’s retirement age and cut the program’s annual cost-of-living adjustment – moves that will reduce monthly benefits 20 percent and 8 percent, respectively. And they want to increase the Medicare eligibility age from 65 to 67. […]

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[…] in excess of $124 billion over the next 10 years. But the Kaiser Family Foundation (KFF) projects much lower savings, because much of the cost would shift to federal premium and cost-sharing subsidies under the […]

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