A philosophy of privatization: rationing health care through the Medicare Modernization Act of 2003.

• Author: Sorresso, Eleanor Bhat

1. INTRODUCTION II. PAYING FOR HEALTH CARE IN THE UNITED STATES A. A Brief History of Managed Care B. The Founding of Medicare III. INTRODUCING THE MEDICARE MODERNIZATION ACT OF 2003 IV. RATIONING HEALTH CARE UNDER MEDICARE V. CONCLUSION I. INTRODUCTION

   An enduring duality continues to define the debate over how to pay for American health care. On one side stands the traditional American ideals of individuality and personal autonomy; these strong cultural values support the idea that our accomplishments, including our ability to pay for our own health care, should reflect personal effort rather than the benefits of a charity state. (2) On the other side stands the evolving belief that health care represents a "public good." (3) As such, the need for health care may be considered a basic need, like food or shelter, and there may even exist an innate right to such care.

   In many ways, our current system of private commercial insurance epitomizes these ideals of individuality and personal accomplishment. Private insurance policies are acquired either as part of an employment package or purchased from a private insurer at personal cost. (4) Whether structured along managed care lines or traditional fee-for-service, these policies generally delineate with care a list of supported services for which the policy will pay. The policy may only partially cover the cost of a particular treatment in which case the remaining costs incurred become the responsibility of the individual.

   In contrast, Medicare was born in the era of President Lyndon B. Johnson's "Great Society." (5) Its passage marked a commitment to the idea that ensuring adequate health care for the American populace was more an issue of societal merit than personal economic resourcefulness. Even so, that commitment was far from unanimous and the birth of Medicare also marked the beginning of an enduring and public debate over health care as a matter of social justice or market economics. (6) Increasingly, the question of continuing national health care coverage would turn on whether health care constituted a public good "differentiated by society for its own highest purposes, not a business to be exploited" or a matter of market economics, to be shaped by "the fundamentals of our political economy--capitalistic, pluralistic, and competitive." (7)

   Both systems struggle to cope with rising health care costs today. The cost of private insurance has placed it outside the reach of many individuals. (8) Rising premiums have also made it impossible for many small corporations to continue to offer employer-sponsored health insurance which has resulted in a steady increase in the number of uninsured Americans since 2000. (9) Furthermore, recent studies suggest that uninsured Americans who later become eligible for Medicare benefits often incur greater health care costs than those who had been insured prior to attaining Medicare coverage status. (10) Approximately forty-seven million Americans went without health care insurance coverage in 2005. (11) Another sixteen million Americans had insufficient health care insurance coverage. (12)

   Similarly, the escalating cost of Medicare expenditures has become legendary. Current Medicare costs total approximately $374 billion, which is equivalent to fourteen percent of the federal budget. (13) Medicare costs are expected to escalate to $524 billion by 20l1. (14)

   The trend in coping with these rising Medicare costs has been to increase the role that private insurance plays in providing coverage for Medicare recipients. Much of this movement towards an increased "privatization" of Medicare has been born of the belief that the private sector of health care insurance coverage has been made more efficient by existing market forces and will provide a way to both continue providing health care to elderly Americans while containing Medicare costs through these increased efficiencies as exemplified through the managed care model.

   This premise will be further explored in this article. First, this article will review an abbreviated history of private sector managed care as well as the origins of Medicare. Second, it will review the basic structure of the Medicare Modernization Act of 2003 (MMA) as it was first introduced and discuss how the MMA continues to evolve in the face of escalating health care demands. Finally, it will address how the MMA seeks to ration health care within the Medicare system and how such rationing has proven problematic in the private sector as well as discussing some of the troubling implications of our current parameters for rationed health care.

   Ultimately, a detailed analysis of Medicare's foundations lies outside the scope of this article as does any prediction regarding its extended future. Even a cursory review of the complex issues that have helped to form today's Medicare program proves that defining the future of that program would be daunting at best. (15) All too often, however, the ongoing debate regarding Medicare's future reduces to an oversimplified balancing of economic forces alone, present and anticipated. After only cursory examination, considerations of public policy increasingly fall to the side. Without doubt, Medicare's future will continue to be shaped by the tides of economics, politics, and public policy. This article argues only for open consideration of the implications of those resulting policies and how these will reflect our society and its most enduring values.

2. PAYING FOR HEALTH CARE IN THE UNITED STATES

   Technological advances, a growing elderly population and increasing public expectations have worked together to increase the cost of health care. (16) With rising costs has come the question of how to afford the health care we need. In the private sector, commercial insurance plans have relied on managed care models to ration health care services which utilize a combination of explicit rationing, such as limiting the range of reimbursable services, and implicit rationing, such as physician discretion in allocating the resources available with respect to covered services. On the other hand, government health plans have relied on stream-lining reimbursement and have only recently begun to consider price-sharing and other forms of rationing as a means of controlling escalating health care costs. (17)

   1. A Brief History of Managed Care

      Rationing may be defined in several ways. Webster's dictionary defines rationing as "to distribute equitably" or "to use sparingly." (18) Additionally, Webster's defines a ration as "a share especially as determined by supply." (19) We ration many things in everyday life from determining monthly grocery budgets to allocating available vacation time. In many instances, the idea of rationing evokes impressions of self-restraint and preparedness for an uncertain future.

      However, as a nation, we dislike the idea of rationing health care. When used in the context of health care, rationing strikes an unpleasant chord in many of us and often raises the unanswerable question--how much is life worth? Life is precious and we would like to believe that we will implement any treatment that offers the chance of preserving that life regardless of cost. (20) Most of all, we would like to believe that we live in a society that does not ration health care and that the absence of rationing renders us one of the best health care systems in the world, regardless of statistics that may suggest otherwise. (21)

      In fact, Americans have been rationing health care for almost ninety years. In 1929, several hundred Oklahoma farmers and their families enrolled in a prepaid health care plan under which routine patient care was administered for a predetermined, prepaid flat fee. (22) In 1933, Harold Hatch, an insurance agent, proposed paying a flat, fixed fee in advance for the medical care of construction workers building the Los Angeles Aqueduct in the Mojave Desert. (23) The idea of prepaid health care captured the imagination of Henry Kaiser who persuaded the same physician to offer a similar service for construction workers building the Grand Coulee Dam 5 years later. (24)

      Continued technological advancements in the medical field fueled escalating health care costs and spurred the Nixon administration to propose the development of health maintenance organizations (HMOs) in 1971. (25) The concept of managed care continued to develop over the next few decades until the 1997 Balanced Budget Act introduced managed care options to the Medicare market. (26)

      Ultimately, prepaid health plans and managed care rationing reflect the often unacknowledged reality that the cost of health care can easily spiral out of control. Managed care represents an attempt to limit those costs while promising continued delivery of some necessary health care services in the future. (27) The introduction of managed care plans into the Medicare program suggested for the first time that the escalating health care costs faced by the elderly were no longer costs that our society could afford to shoulder to the same degree as it had in the past; the cost of some medical treatments would increasingly fall on individual Medicare beneficiaries.

   2. The Founding of Medicare

      The institution of Medicare represents far more than our nation's attempt to fund the health care needs of its elderly. Like commercial health insurance, its evolution as an institution reflects changes in the economic current, public policy, and political climate of this nation. (28) Also like commercial health insurance, it "does not just pay for medical care" but also impacts the future shape and continuing evolution of our medical care delivery system, including the sort of technological advancements we will seek and the expectations we will hold as a society about what constitutes adequate health care. (29) Certainly, Medicare's current Byzantine architecture defies any accurate analysis without some understanding of the...