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Friday, November 24, 2006

Trimming Medicare Costs

According to the article Democrats Look To Trim Medicare Costs from the Washington Post, Democrats are trying to cut costs of up to $27.6 billion over five years in Medicare costs. These cuts would reduce the number of managed care plans. "Medicare Advantage" is a managed care plan where insurers receive a set amount per person from the government. The insurers then reimburse the providers of the care. Democrats believe that Medicare should work under a more traditional program where health care providers bill the government for the services they perform.

One of the biggest arguments on the Democrats side is that Medicare is being over-funded. Due to the implementation of managed care programs, each person receiving Medicare receives a set amount. Since not everyone uses that amount, there is a fund called the regional stabilization fund. This fund was put in place because of the over-funding of Medicare and used for emergencies. This fund has not been tapped into. Democrats want to target this fund initially. With the elimination of the fund, they would save about $6 billion over five years.

Republicans and insurance companies do not want to cut these costs because they believe there will be a need for the fund at some point. Insurance companies believe that if Medicare costs are cut there will be a contraction in the number of available hospitals in rural areas of the country. Also, many insurers believe that managed care plans offer more focus on prevention and services, but Democrats believe they are more interested in the profits.

The Medicare Payment Advisory Commission recommend lowering the reimbursements for managed care programs. This would save about $18 billion over five years. This commission is often cited by lawmakers of both Republican and Democratic Parties. The commission believes that over-funding the Medicare program is a mistake. They believe that insurers and health care providing organizations will work more efficiently if they are faced with financial distress.

Over-funding Medicare is similar to over-funding Social Security. People are paying more than what they need and their excess money is going to a government fund or straight to the insurers. Using a traditional Medicare program is best, in my opinion. Every individual has different needs and therefore, should not have a blanket medicare payment. They should pay a premium inline with what services they need.

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