Medicare's birth is cogently presented from an insider's viewpoint in Code Blue Health Care in Crisis by Edward Annis, M.D. This is a very readable book by a former AMA president from Miami. Dr. Annis ably led many of the debates supporting the AMA position against establishing the Medicare system. On national TV, he debated against Hubert Humphrey and also gave the AMA's response to President Kennedy's tepid speech in support of Medicare, and through this exposure influenced public opinion in America. Popular support for passing Medicare dropped from 67% in 1961 to only 32% in a bipartisan Congressional poll of July 1964.

However, popular support does not directly make or defeat legislation; legislators do. In 1965, the Medicare legislation was passed by a liberal Congress and signed into law by President Johnson as a piece of the "Great Society" program.

Before Medicare and its resulting government intervention, office and hospital overhead was low. Bills were straightforward and easy to understand without the use of CPT and ICD codes. Patients usually promptly paid their own bills and received an ordinary receipt. Those who couldn't afford to pay were given reduced rates based on ability to pay, and often for indigents, care was given and no bills were generated. Hospital charges were set by the day without all the incidentals we see presently. Medical care was affordable to the average person and was made available to all regardless of the ability to pay. Doctors were well respected. Medicare changed this.

The leadership of the AMA was concerned about the potential "monetarization" of the profession by financial schemes and bureaucratic red tape, which could undermine the physician-patient relationship. Once the Federal Government began handing out billions of dollars, it was felt the caring medical profession could become an insensitive business. This appears to be happening. Medicare, as the largest payer of health care in the nation, has been the driving force in the majority of changes in the health care delivery system. Other insurers tend to follow Medicare's lead. Proponents of Medicare (Hubert Humphrey among them) contended there would be no bureaucratic intrusion into the practice of medicine and administrative costs would decrease. Of course bureaucratic intrusion is a present nightmare, and former Surgeon General C. Everett Koop estimated that 26% of our current health care costs are for administrative functions. Proponents also argued that if Medicare were enacted, health insurance costs for those under age 65 would decrease. Of course health care costs increased for everyone, as could be expected with a government program creating excessive demand through third party payments with first dollar coverage (as can be obtained with a Medicare supplemental policy). Also such a massive federal program created fraud and abuse opportunities for the unscrupulous. Finally the AMA argued that it was intrinsically unfair to expect a minimum wage worker to be paying taxes to support Medicare benefits for a millionaire who was age 65 or older. Means testing of recipients seemed to make more sense, especially in light of the fact that Medicare pay-ins do not cover the cost of Medicare expenditures.

Medicare created perverse incentives in the market place. One was not paying for certain procedures unless the patient was hospitalized (certainly not the cost-effective way). Another was a cost-plus basis for reimbursing hospitals as well as a guaranteed return on capital outlay— both of which encourage spending. The latest questionable incentives are : 1) spending money on HMOs (which have not been shown to reduce costs in severity adjusted groups of patients), and 2) increasingly massive monetary outlays for home health services of dubious benefit. Both of these are now being closely examined after the fact.

Medicare was instrumental in increasing health care costs by creating an excessive demand for health care services, by subsidizing the health care of the well-to-do, and by increasing the central planning of all of medicine with its attendant expensive red tape and regulation (26% of health care costs). The cost of Medicare has doubled every year since 1970. As could have been predicted in 1965, it is currently felt that Medicare is finacially unsound, too expensive, and needing to be revamped— i.e. limiting benefits, increasing deductibles and copays, and decreasing reimbursement to providers.

Rather than a Medicare "temporary fix" which has been done continuously since its inception, a solution would appear to be in order. As Dr. Annis points out in his book, "There is no more efficient or effective method of delivering health care than the private doctor serving the patient who pays a fee directly for the service rendered". One solution is to return medical financial responsibility to the patient by allowing each Medicare-eligible individual to be given a high deductible private health insurance policy of his choice (Medicare would pay the premiums) and medical payments (or vouchers) to be utilized by the individual patient to directly purchase his own health care. Medical savings accounts could also be utilized to perform this function. This would return freedom of choice as well as medical economic decisions to Medicare patients. Recently, Medicare has allowed Medicare patients more choice (MSAs, HMOs, or traditional indemnity plans) but has yet to clearly and adequately explain the various choices.

September, 1999/ Jacksonville Medicine

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