Just one year ago, health-system reform was like a pendulum poised to swing across the face of American medicine and change it rapidly, radically and forever. We said it was a moment of truth for physicians and patients, and we struggled to make our voices heard above the din in Washington.
What a difference a year makes. In the blink of an election, that moment passed and an entirely different moment of truth took its place. Reform went from red-hot to lukewarm, and change went from elemental to incremental.
In America today reform is under way but in the worst possible fashion: disorganized, nasty and dollar-driven. Who would have imagined that the noble practice of medicine would be shoved around by cutthroat competition in a rough-and-tumble marketplace, where clinical competence might not matter as much as the bottom line?
In the midst of this pell-mell rush for change, it has become clear that there are areas where we must take control now or face disaster in the future. A year ago the big issue was universal coverage; this year it is Medicare.
Virtually no one disagrees that there is a Medicare crisis. Experts have predicted that the trust fund that supports Medicare Part A will be insolvent by 2002. In response, the Republicans have recently proposed some $270 billion in cuts to the Medicare program. The White House has proposed $125 billion in provider cuts alone.
But slash-and-burn tactics and tinkering at the Medicare margins won't do the job. What is needed is a fundamental transformation of the Medicare system-and that is just what the American Medical Association has in mind.
Since 1986 we have been developing a body of Medicare policy that will increase patient choice, increase individual responsibility for all participants and allow the strengths of the marketplace to help bring the spending spiral under control.
One of the reasons healthcare reform failed last year is that physicians were excluded from the process. But this year we are working with Congress to promote the well-being of both patients and physicians.
Recently, House Speaker Newt Gingrich invited the AMA to use its expertise to help shape the debate over Medicare. We accepted his challenge, and in June we provided the speaker with a comprehensive plan for the transformation of this promise to America's elderly and disabled. The AMA's proposal is a fundamental shift away from government control and toward improved coverage, greater patient choice and an integrated Medicare marketplace.
Our proposal relies on savings rather than cuts. In fact, over the next seven years total savings could run as high as $200 billion. Yet the plan will actually put money back into the pocket of Medicare beneficiaries.
Our prescription begins by transforming the traditional benefit program, reducing expenditures, restoring effective cost sharing and, perhaps most important, permanently eliminating the need for Medigap insurance. At the same time, we believe we can enhance the value of the care provided.
Next, we offer patients a second option, called Medichoice, based on the Federal Employee Health Benefits Plan. Finally, we propose a coverage option consisting solely of a medical savings account coupled with catastrophic coverage.
Here is how our proposal works:
Beneficiaries who choose traditional Medicare would make monthly payments, deducted from their Social Security checks, equal on average to the cost of coverage under Medicare. However, half this money would be deposited into a benefit escrow account to pay for deductible medical expenses; the other half would be collected as a premium. All Medicare services would be subject to this deductible, while copayments would be lifted. At the end of the year, the unused balance in the benefit escrow account would be refunded to the beneficiary. The average refund would be $348.
Meanwhile, the cost of medical services would no longer be set by the federal government. Instead, Medicare would continue to reimburse a fixed amount to providers for their services. Then, based on the price charged by the providers they choose, patients could elect to pay the balance or save the difference by selecting less expensive care.
The second step in our proposal is to provide patients with an alternative through the Medichoice program. Modeled on the FEHBP, it would allow Medicare patients to select coverage at any level-and in any form-from fee-for-service to a benefit payment schedule or to an HMO.
For the first time, Medicare would give patients true ownership of their coverage. Each year they would receive a subsidy equal to the cost of enrollment in the traditional program-health dollars they could then spend as they saw fit, allowing a full range of costs, coverage and choice.
As a final option in our plan, patients could choose to use their subsidies to buy catastrophic coverage only, in conjunction with a medical savings account. Tax-free distributions from the fund would be used to meet medical expenses, while the unspent balance would continue to accrue. By making this option available to younger Americans as well, dependence on Medicare eventually would wane.
The AMA is calling for two additional changes: raising Medicare's eligibility age over time to make it consistent with that of Social Security; and making modest reductions in the Medicare subsidy for high-income beneficiaries. We also believe that Medicare's support of graduate medical education must gradually be reduced and that residency programs must move to an all-payer system with increased participation from the private sector.
Last year's moment of truth involved a concept of health-system reform that collapsed under the weight of its own complexity. This year's moment of truth is much simpler: using the plan I've described to guarantee Medicare for this and every generation.
We want and can have a better future for physicians and for patients than what we have today. Through the AMA's vision for transforming Medicare, America's physicians are building the future now.
What a difference a year makes.