Access to healthcare. Mandate coverage for everyone (sorry twenty-somethings, you are not invincible). The insurance industry has said for years that if everyone is required to have coverage, then they will drop pre-existing condition clauses. It also alleviates the costs associated with adverse selection. Allow people to purchase individual polices when an employer-sponsored plan is not available.

Drive out costs associated with health care. Many health plans, both employer-sponsored and individual, are loaded with mandated benefits, such as behavioral health, substance abuse, maternity, etc., but does everyone really need these benefits? Not necessarily. Further, it is very expensive, and often cost-prohibitive, to administer a different plan in each state. Reform should address this issue, either by allowing individual purchasers to select a plan from any state (like 529 plans), and/or allow insurers to offer plans that meet federal minimum guidelines (e.g., Medicare A and B). This drives out administrative costs from the carriers, and offers individuals more options from which to select a plan that truly meets their needs, both in terms of benefits and costs.

Affordability. If the pool of insureds increases, adverse selection decreases, which drives down premiums. If the costs of administering the plan decreases, so do premiums (assuming free markets are allowed to work). Further, if people have the option to only purchase what they need, and individual purchasers can deduct their health care premiums, thus receiving the same benefits as employee contributions processed through a Section 125 plan, affordability starts to become a reality.

So in conclusion, let’s keep it simple and focus on feasible solutions to the real issues. The individual market is the best place to start.

First and foremost, why should the government penalize Medicare beneficiaries who have successfully planned for their retirement?  Our government should encourage people to save for their future – not charge them more for a benefit for which they have been making contributions for more than 40 years.  

Second, the process for managing Medicare D deductions is already inefficient; so inefficient and just plain bad that according the Medicare Advocacy website (medicareadvocacy.org), there are 3 pending lawsuits resulting from the government’s inability to properly process the deductions and fix errors in a timely matter.  Part of the problem is that there are 3 separate government agencies involved in the process – the Centers for Medicare & Medicaid Services (CMS), the Social Security Administration (SSA) and the Internal Revenue Services (IRS).  The other part is that, unlike Part B which has a single deduction option, there are multiple deductions for Part D, depending on the selected plan.  Add another layer to the matrix, namely income, and the problems will only get worse.

Finally, I doubt this is even cost-effective.  There are time and resources involved in working through the process, updating and testing systems, as well as trouble-shooting once in place.  Further, if the government is already in court as a result of their inability to handle the current matrix, I am fairly confident that by adding complexity and therefore increasing the likelihood for errors, more court cases are bound to follow.  In addition, according to the US Census Bureau, only 10.8% of households 65 or older earn over $100,000.   The percent of earners over $160,000 would be even less.  So Senator McCain’s proposal is to add complexity to an already inefficient process for less than 10% of the eligible population.  That fact alone speaks for itself.

What other options are there?  Well, if this process was taken over by a private entity, the first order of business would be to drive costs out of the process – what can be automated, simplified, eliminated?  Next, private enterprise would look for ways to reduce the costs of goods sold – in this case, the cost of the prescriptions.  Finally, the consumer pricing model would be reviewed, looking at both hard costs and soft costs.

There is no doubt that there is a need for the “modernization and improvement of Medicare”.  However, implementing a program that creates administrative burden, lawsuits, and penalizes Americans who successfully plan for retirement is not the answer.