The US Medicare scheme is nearly universal. Payroll taxes (‘contributions’) are mandated, and anyone with a contribution history of forty quarters (ten years) or more is eligible for coverage, along with their dependant spouse, as soon as they reach the age of 65. Benefits can begin earlier if a covered person should become disabled.
Except for the curious pre-funding of benefits with contributions, and restriction of benefits to the elderly and disabled, I used to think that Medicare in the United States was similar to the Canadian scheme popularly known also as ‘medicare’: government health insurance for legal residents of all ages. I was wrong, for two reasons.
First, the Canadian system is single-payer, whereas participants in the US scheme can opt out into private insurance plans. The higher cost of approved private plans are paid by the Medicare trust fund. Jared Bernstein, a former member of President Obama’s economic team, explains.
For decades, Medicare recipients could enroll in private plans instead of traditional Medicare and a few years ago, Congress created Medicare Advantage, further expanding private coverage options for seniors in Medicare. About a quarter of Medicare recipients are enrolled in such plans right now. ….
[A] significant source of health-care savings in the Affordable Care Act['ObamaCare']—a chunk of which extend the life of the Medicare trust fund by eight years—comes from reducing overpayments to these MA [private] plans ….
[T]he Medicare program’s payments to the private fee-for-service plan in 2009 were 18% above traditional Medicare. ….
These overpayments have fallen over time … in part because Congress has already been enforcing lower payments. I mean, given that we already have Medicare—widely considered to be an excellent form of coverage—why should money be diverted from it to pay for more expensive private plans?
Jared Bernstein, “Medicare (Dis-)Advantage“, On the Economy, 17 August 2012.
Second, whereas there are no co-pays and no lifetime expenditure limits in the Canadian system, US Medicare has both. Dennis Byron, who recently visited TdJ, left this comment on Bernstein’s blog:
This little phrase is the crux of the whole debate:
“given that we already have Medicare—widely considered to be an excellent form of coverage—why…”
Who has told you that healthcare insurance with no catastrophic coverage, up to $6000 a year in hospital deductibles if admitted, 20% co-pays if in a hospital but only observed (possibly thousands of dollars in one visit), 20% co-pays for outpatient and MD visits, very limited rehab benefits, no annual physical coverage, no prescription drug coverage, no vision/dental/aural coverage and severe geographic restrictions is “excellent?” ….
[T]he reason that there is a Medicare issue is that Medicare is terrible insurance.
Dennis Byron, August 18, 2012 at 9:06 am
Jared Bernstein replied that Medicare, though not comprehensive, is nonetheless “very popular and covers a fixed set of essential services … at lower costs (really, lower payments) than the avg MA [private] plan.”
The US healthcare system is extremely complex, and I do not pretend to fully understand how it works. I am now more informed, thanks to people like Jared Bernstein and Dennis Byron.
Jared Bernstein has a PhD in Social Welfare from Columbia University. From 2009 to 2011, he was the Chief Economist and Economic Adviser to Vice President Joe Biden. In May 2011 he joined the Center on Budget and Policy Priorities, a non-profit think tank, as Senior Fellow.
Dennis Byron blogs at