menubar
 
The Future of Medicare
19 March 1999
Stuart H. Altman, PhD
Director, Institute for Health Policy
Sol Chaikin Professor of National Health Policy
The Heller School, Brandeis University
Biosketch:
Stuart H. Altman, Sol C. Chaikin Professor of National Health Policy at The Florence Heller Graduate School for Social Policy, Brandeis University, is an economist whose research interests are primarily in the area of federal health policy.  He was appointed by President Clinton to the National Bipartisan Commission on the Future of Medicare.  Professor Altman was Dean of The Florence Heller Graduate School from 1977 until July 1993 and interim President of Brandeis University from 1990-1991.  He was the first Chairman of the Congressionally legislated Prospective Payment Assessment Commission and served in that capacity for twelve years.  ProPac was responsible for advising Congress and the Administration on the Medicare DRG Hospital Payment System and other system reforms.   Professor Altman is a member of The Institute of Medicine of the National Academy of Sciences; a member of the Board of Overseers of the Beth Israel Deaconess Medical Center in Boston, Massachusetts; and, Co-Chairman of the Board of the Institute for Health Policy at Brandeis University.

Between 1971 and 1976, Professor Altman was Deputy Assistant Secretary for Planning and Evaluation/Health at HEW.  While serving in that position, he was one of the principal contributors to the development and advancement of the Administration's National Health Insurance proposal.  From 1973 to 1974 he also served as the Deputy Director for Health of the President's Cost-of-Living Council where he was responsible for developing the Council's program on health care cost containment.

Professor Altman was a senior member of the Clinton-Gore Health Policy Transition Team.  He testifies often before various Congressional Committees, most recently on the 1997 Balanced Budget Act and its impact on Medicare spending for hospitals and the health care system.

Professor Altman has an M.A. and Ph.D. degree in Economics from UCLA and taught at Brown University and the Graduate School of Public Policy at University of California at Berkeley.  In addition, Dr. Altman has served on the Board of The Robert Wood Johnson Clinical Scholars Program and on the Governing Council of The Institute of Medicine.  He is the Chair of The Robert Wood Johnson Foundation sponsored Council on the Economic Impact of Health System Change.  The Council is a private non-partisan group whose mission is to analyze important economic aspects of the U.S. health care system and evaluate proposed changes in the system.
 


Summary:
The Future of Medicare
19 March 1999
Stuart H. Altman, PhD
Director, Institute for Health Policy
Sol Chaikin Professor of National Health Policy
The Heller School, Brandeis University

One day after a national commission failed to agree on recommendations for reforming Medicare, Commission member Stuart Altman provided an insider's view of the process at an LDI noontime seminar on March 19. Dr. Altman noted that the National Bipartisan Commission on the Future of Medicare, which needed 11 of 17 votes to send its recommendations to Congress, had little chance of success because of partisan politics and disagreement on market-based changes to the Medicare program.

"From day 1," Dr. Altman said, the majority of commission members refused to consider a tax increase. "We did not talk about solving the long-term financing problem of Medicare." If demographic trends persist, he said, the Medicare Part A Trust Fund will be bankrupt somewhere between 2008 and 2011, because of the size of the beneficiary pool relative to the payer pool. The 65 and over population will increase from 34 million in 1996 to 70 million in 2030.

The majority's proposal focused on restructuring the program through a "premium support" system modeled on the federal employee health benefits plan. The proposal would have allowed beneficiaries to choose among competing health plans, one of which would be the existing Medicare fee-for-service plan. Dr. Altman noted that he was not opposed to competition, although he felt it would solve no more than 10% of Medicare's financial problems. Other options for addressing the funding gap include:

· Raising the eligibility age from 65 to 67 or 70;

· Transferring all non-patient care expenses (such as payments for direct and indirect medical education) to general revenues;

· Transferring all expenditures for beneficiaries eligible for Medicare because of disability or end-stage renal disease to general revenues;

· Restricting payments to providers after 2001 (when the 1997 Balanced Budget Amendment expires);

· Tightening utilization controls on traditional Medicare program;

· Limiting benefits to higher-income beneficiaries, or requiring higher deductibles or copayments from them;

· Raising the payroll tax;

· Shifting benefits from Part A to Part B (such as home health or nursing home payments), or combining Parts A & B.

Republicans and Democrats on the Commission disagreed on many of these options. The Republicans were completely opposed to raising payroll taxes. The Congressional Budget Office and the General Accounting Office were concerned about transferring expenses into general revenues, because of the "fiscal discipline" enforced by the Medicare Trust Fund. Increasing the eligibility age raised concerns about increasing the ranks of the uninsured. Democrats wanted to use some of the budget surplus to shore up Medicare's finances, while the Republicans wanted to use the surplus to enact a tax cut. The final proposal included provisions to combine Parts A & B, and to remove payments for direct medical education from the Trust Fund. It also tied the Medicare eligibility age to that of Social Security, with a non-subsidized buy-in available at age 65.

In the end, Dr. Altman voted against the majority proposal. The deciding factor, he said, was the proposal's lack of a subsidy for prescription drugs. "I couldn't support a Medicare program for the 21st century that didn't have some coverage for prescription drugs," Dr. Altman explained. He said he was willing to consider catastrophic coverage, with deductibles and stop loss protection, but the majority would not go along with any provision that included a subsidy for the coverage. "And without a subsidy, you'll have a terrible adverse selection problem."

In response to a question from the audience, Dr. Altman said that his ideal plan for reforming Medicare would include adding a prescription drug benefit, increasing beneficiary payments by increasing coinsurance for higher-income people, and ultimately, raising payroll taxes. "My fear is that we will do nothing until 2005 or 2006. Then the tidal wave will hit and we'll raise taxes and cut payments in a crisis environment."


 

Home  |   About LDI  | Contact LDI  | Mailing List  |  Senior Fellows  | Research  | Health Policy  | Education & Training |
Calendar of Events | HSR Resources |   Search