HA 615- Healthcare Economics
You have recently been hired as a research assistant to the Secretary of Health and Human Services. To keep the administration informed of health care issues, your supervisor has asked you to research options for changing the Medicare system. Current concerns stem from the fear that if Medicare remains an open-ended entitlement program, its share of the federal budget will continue to increase over time.
Prepare an official memo to the secretary examining one or more of the following proposed changes. Use your best economic reasoning.
1. A freeze in physicians’ fees and a requirement of a mandatory assignment.
2. A plan to enroll everyone eligible for Medicare in managed care networks and pay a fixed, capitated amount per enrollee equal to the current per capita Medicare spending level.
3. Allowing all Medicare recipients to buy high-deductible insurance policies and use the premium savings to set up medical savings accounts.
The memo should be submitted to Blackboard. No late memo will be accepted, so try to submit early to account for any technical difficulties, etc.
Your memo should be double-spaced, 2 pages in length, formatted in Times Roman font, 12 points, with one inch all around, must adhere to the APA reference format. The memo should include citations from at least THREE peer-reviewed journals, in addition to other sources.
To: Secretary of Health and Human Services
From: Research Assistant
Date: November 18, 2021
Subject: Change Medicare System
Medicare as a legal entitlement program provides legal obligation to the government to ensure medical benefits are provided for all legible individuals. These individuals, under the entitlement scheme are obligated to be served, and participating physicians, are usually required (but not mandated) to take the assignments, which at the moment, counts to about 80% of what medicare pays; participating physicians are currently paid 5% higher than non participants (AAFP, 2021). As such spending on Medicare cannot be fixed in advance. The financing structure in which the government pays may increase when needs within the program expand or vice versa as an entitlement to all individuals associated with the program. But there is no system to define the rise and fall in the program expenditure at any given time, as there is no measure to outline whether the Medicare patient or the physician needed, or delivered the service respectively. External financing changes, if instituted may end up altering the program, as such there comes need to create a new solutions.
At the same time, rising health care costs are increasingly becoming a hazard for many American families, and the entitlement programs in the US, in particular Medicare have expanded and become entangled, so much making reforms so difficult. This is particularly because, entitlement programs, a part of welfare system have expanded more than tenfold since their founding, but minimum wages have not risen near 10 times better off (Heritage, 2019). The resulting phenomenon guarantees that the share of the federal budget will continue to rise overtime, as long as programs such as Medicare remain as they are.
While it may see as though such programs provide Americans cash benefits, as well as, medical care; the same programs have become infamous, as they risk depriving Americans personal choice, autonomy, greater incomes, and more importantly risk increasing individual American personal debt. This is based on the fact that Medicare and social security risk carrying $70 trillion worth of unfunded obligation if unresolved over the next 75 years, an equivalent to $445,000 credit card bill for each American citizen (Heritage, 2019). A need to create a new system is imminent and the following parts outlines the recommendations necessary to solve the problem.
A key solution would include:
1. A freeze in physicians’ fees and a requirement of mandatory assignment for all physicians. Would work to create an oversight to ensure no physician gets paid for service not delivered. As already established, while physicians on all Medicare claims (of which 80% is funded by the tax payer, and 20% is founded under a copayment by the patient’s insurance), their Medicare participation agreement do not require physicians to participate or accept every Medicare patient who seeks treatment (AAFP, 2021). Implying to a loop hole in the financing structure for Medicare that allows physicians to be paid regardless. A mandatory assignment and a freeze in physician fees will ensure greater acceptance of all Medicare participant y physicians.
2. Capitation for all Medicare participants will also create a more rational participation, as it will limit the amount of people willing to participate without advance co-payment systems. Caping the amount of participants willing to participate without copayment. This is because capitation compels for a fixed amount of money per patient, per unit of time serviced in advanced by the physician for the delivery of health care services (Alquire, 2018). Capitation, is a system developed by use of local costs and average utilization of service creating an oversight, and limit excess funding. This will effectively affect the funding structure ands make the system unsustainable. A capitation for all enrollee equal to the current national per capita Medicare spending level allows for equalization of the funding structures in and outflow.
3. Thirdly allowing all Medicare recipients, to buy-in high deductible insurance policies and their insistence the use of premiums, savings to set up medical accounts will be important in reducing the medical expenses associated with Medicare funding, and medicaid participants as Medicare provides pre-tax breaks earnings to federally insured savings accounts. The funds could be applied to sustain current medical expenses or saved for a needed time. Research by Fontinelle (2021) reveals that A high deductible health premium could work to save money in the form of lower premiums and offer tax breaks on medical expenses.
The above memo outlines risks associated with the current medicare system (an open-ended entitlement program) and how the risks can be mitigated and resolved in the short and long term. This reminder and notation describes Medicare’s existing financing structure and examines its implications for the federal government, for states, citizens and for coverage of the low-income populations Medicaid serves. There is an overall advantage in applying the aforementioned three solutions.
AAFP. (2021). Medicare Options. Aafp.org. Retrieved 18 November 2021, from https://www.aafp.org/family-physician/practice-and-career/getting-paid/medicare-options.html.
Alquire, P. (2018). Capitation Payments | Understanding Capitation | ACP. Acponline.org. Retrieved 18 November 2021, from https://www.acponline.org/about-acp/about-internal-medicine/career-paths/residency-career-counseling/resident-career-counseling-guidance-and-tips/understanding-capitation.
Fontinelle, A. (2021). How High-Deductible Health Plans Work. Investopedia. Retrieved 18 November 2021, from https://www.investopedia.com/articles/personal-finance/012716/how-highdeductible-health-plans-work.asp.
Heritage. (2019). Social Security and Health Care Entitlement Reform. The Heritage Foundation. Retrieved 18 November 2021, from https://www.heritage.org/blueprint-balance/policy-agenda/social-security-and-health-care-entitlement-reform.