Testimony before the Medicare Commission

September, 1998

Physicians for a National Health Program is a national organization with over 8,000 physician members across the United States. Our members represent every state and medical specialty, and include national experts in geriatrics, psychiatry, chronic illness, public health, women's health and long-term care as well as health care policy and financing.

We are pleased to be invited to testify on a panel before the Medicare Commission on health system reform, as that is PNHP's primary focus. PNHP was founded in 1987, and for over 10 years has performed nationally recognized research and education on the need for and the way to achieve system reform to address the fundamental problems plaguing the American health system.

Medicare is critical to the health and security of American seniors and the disabled, but despite this, Medicare is inadequate protection for many. On average, seniors now spend over 20% of their incomes for health care. Deductibles and co-payments are a barrier to access. Medications and nursing home care are not covered; home care services are limited and subject to fraud and abuse. With decreasing lengths of hospital stays and more out-patient procedures, the burden of care is being shifted from trained physicians and nurses to frail and untrained seniors and their family members.

The privatization of the Medicare program, shifting seniors into for-profit HMOs, has led to a new series of problems, notably increasing costs (6% higher per beneficiary in an HMO) and bureaucracy in the Medicare program, and a troubling rise in quality and access problems.

According to the Health Care Financing Administration, Medicare lost $2 billion on HMOs in 1996 alone due to selective enrollment of healthier seniors. A 1996 Physician Payment Review Commission Study of Medicare HMO enrollees between 1989 and 1994 confirmed previous studies showing selective enrollment, finding that HMOs enroll healthy seniors with only 63% of average Medicare costs prior to enrollment. The study also found that patients who disenrolled from Medicare HMOs had 60% higher health care costs -- a sign of the Medicare HMO "revolving door," where the "healthy go in, and the sick go out."

Other disturbing evidence from privatization is the rise in bureaucracy. The latest HCFA data show that administrative costs for beneficiaries in HMOs have skyrocketed to 9.1% while traditional Medicare's administrative costs are 2%.

Research also shows that the elderly, chronically ill, and poor do worse under managed care. A four year study of 2,235 patients in three cities with hypertension, diabetes, recent MI, congestive heart failure, or depression published in the Journal of the American Medical Association found that patients who were elderly were almost twice as likely to decline in physical health in an HMO than in traditional Medicare.

Medicare HMO enrollees are also, according to the Physician Payment Review Commission, three times more likely to report access to care problems as those in fee-for-service.

MSA's and other forms of privatization and fragmentation of the Medicare risk pool (e.g. the proposed Kyl amendment to allow physicians to charge Medicare patients higher fees) also would raise Medicare's costs and increase the risk of fraud and abuse within the Medicare program.

Although cost containment has not been successful in the U.S., other industrialized countries have done a far better job at controlling costs than the U.S. while also providing universal coverage. Between 1980 and 1994, national health expenditures as a share of GDP in France, Canada, Western Germany and the U.K. rose an average of 1.30% annually. In the U.S., the average was 3.15% or more than double this rate. During this period, Canada also experienced a rapid aging of the population. Between 1980 and 1990, the share of Canadians age 65 or above rose from 9.5% to 11.5%, an increase of 21%. This is only moderately below the 25% growth the trustees of the Social Security trust fund project will occur between 2010 and 2020, the decade of peak growth in the elderly in the U.S. (Economic Policy Institute study).

In 1996, the U.S. spent 13.6% of its total GDP on health care ($3,759 per capita), even though 43 million were left uninsured. Costs continue to rise and an additional 100,000 people lose coverage every month. Our neighbor to the north covered all residents for $2,002, about 10% of (her lower per capita) GDP in 1996. Canadians also continue to have free choice of physician and have much lower spending on bureaucracy (2% on insurance administration).

A study by the U.S. General Accounting Office concluded that the U.S. could save enough simply on administrative costs with a single payer national health program to cover all uninsured Americans. In addition, with more the more effective cost-containment mechanisms possible under single payer (negotiated fees, global hospital budgets, capital planning and budgeting), the U.S. Congressional Budget Office found that the U.S. could save $224 billion by 2004.

The advantages to seniors, and to Americans as a whole, of a single payer national health program would not include just affordable health care throughout their lifetimes. These advantages include: being able to choose their physicians, hospitals, clinics and other care settings; enough savings on bureaucracy to cover prescription medications and long-term care; an end to hospital, doctor and insurance bills; and a preservation of the doctor patient relationship with care based on clinical decisions by chosen caregivers.

Despite its magnificence, Medicare since 1965 has been an incomplete universal single payer insurance program for the elderly. Opponents of universal care for all people have cynically pointed to the limitations of Medicare which were imposed by the marketeers who profit from the present systems as an argument against guaranteed care for everyone. The Commission must not fall into this trap.

For more details, we submit to the Medicare Commission the following proposals: "A National Health Program for the U.S." (New England Journal of Medicine, January 12, 1989); "A National Long-term Care Program for the United States: A Caring Vision" (JAMA, December 4, 1991); "A Better Quality Alternative: Single Payer National Health System Reform" (JAMA, September 14, 1994); "Liberal Benefits, Conservative Spending: The Physicians for a National Health Program Proposal" (JAMA, May 15, 1991).