I keep seeing people say that Medicare in its current form is not sustainable, as if that were an established fact. It’s anything but.What is Medicare? It’s single-payer coverage for the elderly. Other countries have single-payer systems that are much cheaper than ours — and also much cheaper than private insurance in America. So there’s nothing about the form that makes Medicare unsustainable, unless you think that health care itself is unsustainable.
What is true is that the U.S. Medicare is expensive compared with, say, Canadian Medicare (yes, that’s what they call their system) or the French health care system (which is complicated, but largely single-payer in its essentials); that’s because Medicare American-style is very open-ended, reluctant to say no to paying for medically dubious procedures, and also fails to make use of its pricing power over drugs and other items.
So Medicare will have to start saying no; it will have to provide incentives to move away from fee for service, and so on and so forth. But such changes would not mean a fundamental change in the way Medicare works.
Of course, what the people who say things like “Medicare is unsustainable” usually mean is that it must be privatized, converted into a voucher system, whatever. The thing is, none of those changes would make the system more efficient — on the contrary.
So this business about Medicare in its present form being unsustainable sounds wise but is actually a stupid slogan. The solution to the future of Medicare is Medicare — smarter, less open-ended, but recognizably the same program.
Krugman is right that Medicare is sustainable. Changes will be necessary to account for demographic changes in an aging society, and to account for increasingly expensive technology. He is wrong in concentrating on fee for service as the main problem. After all, the current fee for service Medicare system is far more cost effective than private insurance is. Krugman is also wrong in saying that eliminating fee for service “would not mean a fundamental change in the way Medicare works.”
Private insurance tried to eliminate fee for service. The HMO era was a disaster, trying to save money by giving incentives not to provide medical care. Those who have gone through this in the past while working are unlikely to see this as desirable for their future years when they qualify for Medicare.
Adjustments certainly need to be made to Medicare, including adjustments to what services are paid for and how they are paid under a fee for service system. Some modifications which are currently being experimented with may also be of value, such as partially paying based upon performance or for providing the services of a Medical Home, might turn out to be worthwhile modifications. However, any successful system which provides for the needs and desires of individual patients will need to include a strong fee for service component.