What's at Stake in the Medicare Showdown

A friend recently asked me for advice on how to protect her father. He wants to stay in his own apartment as he recuperates from hip surgery. But the Medicare program that covers him requires that he head off to a costly nursing home. My friend was so desperate that she has also consulted a health-care lobbyist for advice.

At stake in the presidential election is whether we will all need to consult lobbyists to have our medical issues heard by a remote, bureaucratic Medicare program. Medicare's staff, members of Congress and Barack Obama are all moving to expand government influence over the medical choices we make. As early as today, the House will vote on legislation that aims to cut Medicare Advantage - a program that allows millions of seniors to use federal dollars to buy private health insurance.

Democrats hate Medicare Advantage and have been trying to cut it for quite some time, because they don't like health-care markets. Sen. Obama promises to cut $150 billion out of it in the coming years. The Senate has been haggling over cuts to the program for weeks. Why cut? For all the talk about finding health-care savings with painless "reforms" like better information technology or disease management, the only way to really control costs under our current health-care model is to control access to drugs, devices and services.

The crucial question is where the controls should be - with patients working through private plans or with government agencies. While private health insurance is imperfect, there's a misguided faith in Medicare's superiority that rests on flawed assumptions.

First, there's a mistaken belief that Medicare is better staffed than private plans, and can therefore make better decisions about patients' clinical circumstances and the access to new therapies they should have. Yet at any time, Medicare has about 20 doctors and 40 total clinicians (including nurses) inside the coverage office, and fewer than a dozen in the office that sets the rates that doctors are reimbursed for the care they provide. Private insurers employ thousands of doctors, nurses and pharmacists, many experts in new technologies.

Aetna has more than 140 physicians and about 3,300 nurses, pharmacists and other clinicians across its health plans. Wellpoint has 4,000 clinicians across its different businesses, including 125 doctors and 3,180 nurses. That works out to one clinician for every 9,000 people covered. United Healthcare employs about 600 doctors and 12,000 clinicians across all of its health plans and various health-care businesses.

Private plans use clinically trained people to establish access to new technologies and services, but they also consult with doctors on a case-by-case basis, determining whether a product or service should be covered. Competition for beneficiaries means private plans need to provide better access for appeals, modern services and more personal considerations than what's offered by Medicare, a monopoly supplier.

Recent data from Price Waterhouse Coopers found that private plans spend roughly four times more than Medicare on "consumer services, provider support, and marketing," which includes money spent answering the telephone to adjudicate individual issues. Smaller health plans use one clinician for every 10,000 beneficiaries. Medicare would need 4,500 clinicians to keep pace.

One place where the clinician disparity is most obvious is the delivery of cancer benefits. Medicare doesn't have a single oncologist on staff, yet since the year 2000 the program issued, by my count, 165 restrictions and directives on the use of cancer drugs and diagnostic tools.

A second common refrain is that Medicare is more efficient than private plans, spending less money per beneficiary to administer health services. But a lot of the money that private plans spend is on clinical specialists charged not only with reviewing individual cases, but also with ensuring that doctors and beneficiaries comply with plan contracts. Far from a selling point, not having these functions is one of Medicare's shortcomings.

Medicare doesn't need to hire doctors to weigh individual medical cases because it uses formulaic rules made in Washington to set broad and inflexible restrictions on medical practice. Nor does the program need to hire clinical staff to monitor compliance. It passes costs for that on to the broader health-care system by backing up its rules with the threat of costly civil and even criminal sanctions. Providers and medical product developers spend hundreds of millions of dollars on systems, personnel and paperwork to ensure compliance with Medicare's sticky morass of regulations - tasks made more expensive by the fuzziness of the program's regulations and the arbitrary way they are enforced.

This brings us back to Medicare Advantage. Many in Congress assume that private insurers are driven by greed, and only a government-run health program can ensure adequate access to services. But Medicare Advantage plans offer prevention and wellness benefits, care coordination and alternatives to hospitals at the end of life that traditional Medicare does not provide. The clinical staff of Medicare Advantage plans isn't just there to handle appeals, but to offer personalized services that reflect the care people want rather than benefits defined by remote staff at a monopoly supplier.

If Democrats have their way these plans could be in for big cuts. If Congress does nothing before July 1, doctors in Medicare will take a 10.6% cut in their pay. To stop that from happening Congress will likely raid Medicare Advantage and use the money saved by cutting that program to cushion the blow to doctors. What terrifies members is facing constituents over the July 4 break who will be upset about rising co-pays and uncertainty about their coverage. The question is how big of a bite the House and Senate will take out of Medicare Advantage. But cut they will, because Medicare Advantage plans enable competition that serves as a model for shaping Medicare into a privately run system.

Mr. Obama has been honest about his intentions. He wants to cut from Medicare Advantage to pay to expand "fee-for-service" Medicare programs. For those not yet eligible for Medicare, he also proposes to saddle private plans with new regulations and create a subsidized, Medicare-like public plan to "compete" against the private health-insurance market for the under-65 crowd. The idea is that the Medicare-like alternative would eventually displace a dwindling number of private plans, after many are driven away by costly new government rules. His endgame is to leave the government-administered Medicare program in a position to set decisions for the entire health-care system.

Will we stick with a "defined benefit," where everyone is promised the same government services? Or will we move toward a "defined contribution" system (favored by John McCain), where seniors can buy private health insurance? It's a fundamental question we are being asked in November.

In the end, my friend's father was transferred to a nursing home. Patients covered under Medicare Advantage have their own discomforts, but at least they can always change plans and appeal decisions. And they don't need to consult a lobbyist.

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