What should we do about Medicare? We hear solutions every day from talk radio and TV babbling heads.
Give senior citizens vouchers!
Stop senior citizen abuse of Medicare!
We can’t afford Medicare!
Young workers ought not have to contribute to Medicare and Social Security!
Chief among the strategies promoted by the babbling heads, solely because nobody wants to take the heat for eliminating Medicare outright, are health care service vouchers. The Babbling heads promote the idea that we can fix Medicare if every senior citizen is given a voucher for say $25,000, the average amount of Medicare benefits they are expected to use during their retirement years. The babbling heads suggest that senior citizens will engage in more disease prevention and health promotion activities. The babbling heads suggest that these seniors would be “empowered” to spend these funds wisely and would indeed spend these funds wisely.
Other, even more cynical suggestions include simply giving seniors actual cash transfers of similar amounts. The party line here would be that senior citizens may not need health care services and should be able to spend this money any way they want. After all, why should a healthy senior citizen not be able to spend their money fixing up their house, buying a new car, or taking a trip? After all, they are healthy so why should they be restricted to making the same purchases sick people make?
As a nurse, social worker, licensed health care risk manager, mathematician, statistician, and chartered property casualty underwriter, I find these ideas foolish to the point of reprehensibility. In fact, I have written and presented extensively about this, including my work on “Professional Caregiver Insurance Risk”, my book “Standard Errors: Our failing health care (finance) systems and how to fix them,” and my dissertation for my PhD in nursing: “Risk Induced Professional Caregiver Despair: A Unitary Appreciative Inquiry.”
In this article I will explain one of the simplest and most obvious flaws with this approach. This is not an article solely for Americans. The same thing is happening in Great Britain, Canada, Europe, Japan, and Australia. The clarion call is always that we cannot afford fairness and compassion for the poorest and most humble among us, but we can always afford tax cuts for the wealthiest and most powerful.
How Insurance Really Works
The core problem here is that these babbling heads simply do not understand, or do not care about, the most basic principles of risk management through health insurance. Health insurance works when small numbers of people incur high cost health care services (Perhaps 6% of people incurring 10 times the average level of health care costs), a slightly larger group incur health care service costs close to the average (Perhaps 11% of people incurring average levels of health care costs), and most people incur virtually no health care services costs (83% of people incur 10% of the average level of health care costs).
Suppose the average lifetime health care costs per senior citizen is $25,000. But this is the average cost. Some senior citizens incur higher costs and others incur lower costs. We need more numbers to understand what is happening and how these proposals for vouchers or cash grants will affect senior citizens.
Suppose 6% of senior citizens incur total lifetime health care service costs of 10 times this amount, or $250,000. Another 11% of senior citizens incur total lifetime health care service costs that are average, or $25,000.
But most senior citizens (83%) incur total lifetime costs that are less than average, about 35% of average costs or about $8,750.
This is a perfect model for a successful insurance program because all we need to do is accumulate $25,000 over a lifetime and our contributions, along with everyone else’s will be adequate to meet all our needs. No less a figure than Benjamin Franklin endorsed such common goals when he formed The Philadelphia Contributionship for the Insuring of Houses from Loss by Fire.
It worked for the residents of Philadelphia in the 18th century and it can work for Medicare in the 21st century.
How Health Care Vouchers and Cash Grants Will Affect Senior Citizens
If, as these advocates of stingy vouchers want, we turn over vouchers in the amount of $25,000, 83% of the population will have vouchers that will exceed their needs by $16,250. Since they will never use these benefits, most of the money allocated for their use will go unspent. This is the real plan – painlessly eliminate what appears to 65% of Medicare health care spending for 83% of Medicare beneficiaries and save trillions of dollars in the process while saying you are taking care of everyone. But these aren’t savings at all because these people were never going to spend this money. You cannot save what you were not going to spend!!
How about the 11% of people whose average costs are at the average for all senior citizens, or $25,000? The first thing we should note is that about half of these senior citizens will have lower costs, so some of their vouchers will also go unused. Once again it seems as though we are painlessly saving more money! But these aren’t savings any more than the savings for 83% of the population because these people were never going to spend more than $25,000. Once again, you cannot save what you were not going to spend!!
But about half of these senior citizens (5.5%) will have higher costs, more than $25,000, so their vouchers will be inadequate. These senior citizens will run out of money before they die, and they will have nothing left to cover their costs that exceed $25,000.
But these 5.5% of the average group may be off by just a little bit. A few thousand dollars may be made up from personal savings, friends or family without a great deal of harm to anyone.
The worst case, the reason we need Medicare at all, is presented by the 6% of senior citizens with extraordinarily high health care costs, of $250,000 on average. These people will only have access to 10% of the care they need. Each of these senior citizens will have, on average, $225,000 in uncovered health care needs and no way to pay for such care. The real savings are derived not from the 88.5% of senior citizens spending less than $25,000 on health care services, but the 6% of senior citizens who will be denied the care they need.
These senior citizens will be the walking wounded: discharged from hospitals, nursing homes, home health care agencies, and assisted living facilities. They will be unceremoniously wheeled out to the curb because they can no longer pay for their health care needs. It is already happening hundreds of times a day – mostly to poor and homeless people – but it will be occurring more and more frequently if we move to a voucher program.
These most needy, frailest and sickest senior citizens will not get open heart surgeries that would allow them to live happy, productive, and enjoyable lives. These most needy, frailest and sickest senior citizens will not get cancer treatments. These most needy, frailest and sickest senior citizens will not get nursing home care. These most needy, frailest and sickest senior citizens will not get home health care. These most needy, frailest and sickest senior citizens will not get be able to get care from physicians, hospitals, or hospice centers because they will have exceeded their voucher entitlements.
These 6% will not die immediately, but the quality of their lives, and the quality of all of our lives will be affected. We will be encountering these people, as homeless invalids in our cities and towns. They may be begging for food, in pain, or otherwise suffering and nobody will be there to help them because their vouchers ran out long before their treatments were completed. They simply cannot pay for such services on their own because the costs of such care are far more than most people are able to put away during an entire lifetime of work and saving. They will, over time, commit crimes, if only the crime of vagrancy, filling our prisons with frail, elderly people at costs that far exceed the costs of Medicare.
About 88.5% of the population will not use their full voucher entitlement during their lifetime. Around 83% of senior citizens actually will not need Medicare at all. But the senior citizens with the greatest needs, your mother, father, sibling, grandparent, friend, or relative who really needs ready access to health care to live and thrive, will not get the care they need.
The problem is that none of us know which group we will be in during the last years of our lives. We do not know whether we will be hit by a truck running across the street to go wind surfing in our 80s or if we will be lingering on for months with kidney failure, heart disease, or stroke related health care problems.
While the non-voucher Medicare program actually delivers average benefits of $25,000 per senior citizen, the voucher program provides far lower average benefits to senior citizens, 54% lower benefits than the current Medicare approach, or $11,512 less, per senior citizen. Where do these savings come from – from delayed and denied care for those most in need.
These reduced costs come from delaying and denying care to the frailest, oldest, and poorest. We would be withholding benefits from those who cannot afford to pay lobbyists. Who will benefit from these reductions in care? Most of the benefit from these “savings” will go to the richest Americans in the form of totally unnecessary tax cuts. Billionaires will reap most of the benefit of reduced Medicare costs and reduced taxation while average working people will suffer most of the harms.
It is the same bald faced divide and conquer, class warfare, that Republicans and Conservatives are waging in health care, social services, veterans benefits, entitlement programs, education, environmental protection, and workplace safety. Let the poor and disenfranchised suffer the affects of inadequate care and let the richest, most entitled people on the planet reap the benefits.
Is this the best we can do as a society? Is this the real message America wants to deliver to the world? Is this what economic, social, political, and religious freedom really means?
We can do better than this. Risk management through insurance works. When properly managed, all 100% of senior citizens can get their needs met regardless of which group they are in during the end of their lives. Nobody needs to be deprived of care.
We can always “save” extraordinary amounts by simply denying care, failing to help our family, friends, and neighbors in their hour of need.
The question is – will they be there when we need help and do we really want to live in a country where the frail and elderly are left to die alone and abandoned on our streets?