Ross Perot's Medicare Rx

Ross Perot has a knack for identifying those issues that are important to voters. Just a week after congressional leaders said that Medicare reform would be the biggest policy issue this fall, his book on Medicare hit the stands. Intensive Care is a book about the crisis facing Medicare and Medicaid, the federal and federal/state health insurance programs for the elderly and poor.

Medicare and Medicaid have evolved into enormous, wasteful and inefficient government programs that must be reformed before they financially break the country. How big is the problem? Mr. Perot points out that Medicare and Medicaid will take up 17.4 percent of the federal budget in 1995, or about 35 percent of all entitlement spending. According to Medicare's board of trustees, without fundamental change the program will go bankrupt by 2002.

Something has to be done, and it has to be done soon. But as Mr. Perot points out, historically Congress has been reluctant to resolve the federal government's penchant for excessive spending. "Our elected leaders have ignored the clear signals that the greatest nation in the history of man has been spending itself toward bankruptcy."

Medicare is probably the only large health insurance plan in the country that has not undergone fundamental change over the past decade. Many employers have increased deductibles and copayments – requiring employees to manage more of their own health care dollars. More frequently, employers have begun directing their employees to lower-cost doctors and actively managing health care costs.

Medicare has moved in the opposite direction. In recent years the deductible for Part A (hospital insurance) has not changed in real terms, and the deductible for Part B (other medical expenses) has actually decreased in real terms. While there has been some experimentation with managed care, in most places Medicare is still a wide-open, fee-for-service plan in which patients can see almost any doctor for any service.

Reforming Medicare and Medicaid and balancing the federal budget will force us to make some tough choices, and when there are tough choices to be made Ross Perot hears his entry cue. He believes that "we should view the coming debate over Medicare and Medicaid as an opportunity rather than a dilemma." It's an "opportunity for creative minds to update old systems that have served their purpose, but are now in need of an overhaul to function properly in the next century."

What direction should reform take? "A properly designed system based on market principles will do more to initiate positive change than any government rules and regulations that attempt to monitor the profits of the health care industry," Mr. Perot tells us.

As mentioned earlier, many employers are actively managing their employees' health care costs or are moving them into managed care plans. Mr. Perot discusses this solution and points out that Congress is already moving in this direction for Medicare. Current law allows some Medicare beneficiaries to withdraw from Medicare and join a health maintenance organization (HMO) instead. While seniors should be free to remain in Medicare, we should build on this precedent and allow Medicare beneficiaries to withdraw from Medicare Parts A and B and choose any alternative private plan.

Perhaps a more attractive option than managed care is also discussed by Mr. Perot: Medical Savings Accounts (MSAs). This option would permit Medicare recipients to use their Medicare funds to purchase a catastrophic policy coupled with a Medical Savings Account. For example, private insurance might cover all health expenses over a $3,000 deductible, and place any premium savings in an MSA. MSA funds would then be used to pay for expenses below $3,000. In case a gap remained between the MSA deposit and the catastrophic deductible, retirees could top up their MSA by contributing amounts they otherwise would have used to purchase private, Medigap insurance or pay out-of-pocket expenses.

Of course, to hear Democrats and liberals complain about MSAs, you'd think it was positively un-American to let people keep some of the money they are now giving to insurance companies. It's that same mentality we've seen from Washington for years: "Heaven help us if we let taxpayers keep some of their own money. They might not spend it like we bureaucrats would like."

Ross Perot has always believed in the ability of the American people to respond properly when adequately informed – and that's what this book is meant to do. While his book will not be the last word on Medicare, Intensive Care has succeeded as a sound analytical beginning.