The End of an Era
Medicare impacts the lives of everyone, whether it is the older Americans who rely on it for their medical needs, or the younger people who help pay for these benefits from their pay checks. Many people plan to have Medicare to help them later in life. This scenario, sadly, may not be the case in the future. If you take the dwindling funds in the trusts which back Medicare and Social Security, rising medical costs, the retirement of the baby boomers which began in 2011, and the medical advancements allowing people to live longer it becomes clear that these benefits are unsustainable.
There have been many methods proposed to ensure the future of Medicare for all Americans, some which are unpopular. The main one is rising the age of eligibility to receive these benefits from 65 as it is today. This is an unpopular method, and many view it as unfair. When do you raise the age? What about the people who will now have to wait a few more years, people who planned to have access to Medicare, and now their plans are ruined? There must be some way to preserve these benefits, and still allow people to retire as they planned.
An idea which is gaining traction is known as Medicare portability. The Center for Medicare Portability defines it as “Medicare coverage for eligible Americans who are living or traveling extensively abroad.”i Many Americans retire abroad, mostly in Mexico, because of the lower costs of living, inexpensive healthcare, and occasional financial incentives from the government of the new country. ii There are many advantages to offering Medicare to the retirees who leave the country, but there are many drawbacks as well. With a complicated system like Medicare, the answers are never black and white, but something must be done to keep the system available for future generations and portability is one tool at our disposal.
How Medicare Works
To begin a discussion about Medicare Portability, a brief explanation of the system is necessary. Medicare is broken down into four parts A, B C, and D; along with other options which are available. Generally, anyone of qualifying age, automatically qualifies for Parts A and B, and can optionally enroll in part D. Part C is a different entity which combines the other three parts.
Part A is inpatient care coverage. All Americans 65 or older, people who are disabled, or have returned to work after disability are covered automatically. Anyone who has paid, or has had their spouse pay, Medicare taxes for forty quarters (ten years) receive these benefits premium free. iii If you do not qualify for the premium free option then you must pay $451 per month, with an additional penalty of 10 percent if you did not enroll when you were first eligible. iv When purchasing Part A, Part B is usually required as well.
Medicare Part B covers physician visits, in patient care and diagnostic services. Part B is optional for those who have paid the ten years of Medicare taxes, but participants must pay a premium of $99.90, with another 10 percent late enrollment penalty for each twelve months you were eligible but did not sign up v.
Medicare Part C is known as the Medicare Advantage Plan. This began in 1997, and includes traditional elements of insurance like HMOs, PPOs, and the Medicare Medical Savings Account (MSA). Enrollees in Part C must also be enrolled in Parts A and B and cannot be part of Medigap (which will be discussed later). These plans usually have a network, but services can be used out of the area for urgent care or during short term trips out of the country.
Medicare Part D was established in 2003 by the Medicare Prescription Drug, Improvement, and Modernization Act; and went into effect 2006. Part D covers prescription drugs through one of two ways; either through a stand-alone prescription drug plan or through the Medicare Advantage prescription drug plan offered by HMOs and PPOs which cover drugs. Enrollees in Part D pay a premium which varies by carrier and the drugs the patient is taking. Again, a late enrollment penalty applies to those who did not register on time. vi Part D is where the infamous “Donut Hole” comes from. To sum up the donut hole, Part D covers prescription drugs up to a certain dollar amount, after reaching the dollar amount the enrollee pays out of pocket, then if spending passes a certain dollar amount coverage kicks in again.
Medigap plans help the enrollee pay for coinsurance, co-payments, deductibles, and prescriptions. Which kind of Medigap plan is available varies state to state; the plans also take their names from letters – A through L – which follows various state and federal laws. Only one single person can be covered per plan, spouses must purchase a separate plan.
The Ideas of Medicare Portability
With the retirement of the baby boomers, the generation born after World War II from 1946 to 1964, the numbers of people retiring is going to increase dramatically. It is estimated that between 2000 and 2040 the number of people aged 65 and older will double in the United States. This added growth is combined with rising healthcare costs, Medicare is expected to be 11 percent of GDP by 2080 viii, and a decline in the growth in the working-age population; which grew by 62 percent from 1950 to 2010, but is projected to grow by 15 percent by 2040.ix This spells a recipe for disaster; more people spending money on higher priced healthcare goods, with fewer people to pay for it. How then do we fix an issue this large?
Many people, although still a minority, chose to spend their retirement outside of the country. Numbers are hard to track down because of the difficulty in counting. For example, the U.S. census does not count people living abroad, and while the Mexican Census does count foreigners, they are listed as being from their country of birth not necessarily where they are citizens; if a person born in Mexico were to have moved and worked in the United States, vii and was eligible for Medicare and Social Security but then moved back to Mexico to retire, the Mexican Census would count these people as Mexicans. These difficulties make getting exact number very difficult, for example in 1999 the U.S. Department of State estimated that one million U.S. citizens were living in Mexico; while the next year in 2000 the Mexican Census put that figure at 358,000.x
The fact is however, that there are people living in Mexico who are U.S. citizens and a lot of them are retirees who are eligible for Medicare. Medicare however, cannot be used outside of the United States unless it is during an emergency while on an overseas trip, or if a Hospital not in the U.S. is closer while the person is in the U.S. This is where Medicare Portability comes in. Medical costs in Mexico are less costly than the same procedure in the U.S., and the fear that it will be performed by a poorly trained physician is unfounded because many doctors in Mexico are trained in the U.S.xi By giving these retirees access to their benefits while still in Mexico, as opposed to making them travel back to the United States for care, the U.S. will save money on procedures.
How Medicare Portability May Look
There are a few obstacles in the way for implementation. The two primary ones are regulation and administration. Medicare is a highly regulated body already, and moving it overseas will only increase it, not lower it. This however, can be a good thing. This added regulation will prevent fraud, and will ensure the people who are utilizing the system receive the best care available. The problem is that, although prices are considerably cheaper in Mexico, increased regulation on the part of Medicare will increase the costs of the services they provide.xii
The second problem is how to administer and distribute Medicare overseas. The first step would be through joint ventures with Mexican insurers, initially not with Medicare. xiii The idea behind this is to establish a precedent of insurance companies from both sides of the border working together. This initial period would be an opportunity to work out issues likes abuse and fraud. Once this is done, the company who accomplishes this will be able to present their plan, and how they accomplished it, to Medicare. This could then be added to Medicare Advantage plans.
There are numerous alternative ideas as well. The first is establishing a managed care product which is prepaid for smaller medical issues which arise which is not tied to Medicare, and then offer transportation to the United States where Medicare can be used if a major medical concern arises. Another idea would be a plan which reimburses a fixed amount for services, regardless of where the services are given.
A Medicare plan who purpose is to offer benefits overseas, a Medicare part E, could also be a method to give distribute benefits. xiv Although any program like this would need to be in the future.
Problems of Portability
As with any innovation, there are numerous problems that could be encountered. Some of these problems will not be known until Medicare Portability begins, but we can predict some of these issues. Most of these issues are from the political landscape. Due to the nature of the Medicare as a government program, and a program that is often in the news, a large deal of political controversy is sure to surround any changes.
Recent surveys detailing the approval rating of the current congress show that regard for the governing body is among the lowest it has ever been. These low ratings are primarily due to the apparent lack of ability of the congress to “reach across the aisle,” and work with the other party in order to pass any bills. Any attempt to change a major program like Medicare will surely meet with fierce opposition somewhere along the line.
One of the big issues that may arise from a decision like this is the claim of “outsourcing” medical care. With large national debates around the issue of Americans sending jobs out of the country, a bill allowing people to receive their medical care out of the country will seem to some like doing just that. Many will claim that this is taking away jobs from American doctors, and taking money out of the country. Although some of the ideas listed above will still have patients coming to America for major health concerns, it will still be an issue which will arise.
A second issue, specifically with Medicare making a deal with Mexican insurers, will be the fairness of this plan. If Medicare funds procedures in Mexico, than why not Canada? The United States, Mexico, and Canada have all signed the North American Free Trade Agreement (NAFTA) making a free trade zone out of the three countries. Any special deal with Mexico could be seen by Canada as an affront to NAFTA. If this happens, then what will happen with other nations the U.S. has free trade agreements with, such as Israel, Korea, and Australia? These questions must be addressed before any movement is made to enact portabilityxv.
Medicare Portability, while appearing to be an excellent method to not only help retirees get medical care and to help the government save money, is still many years off. There must be a proven method of delivery which deals with concerns over problems like abuse and fraud. Any changes to Medicare would be a hard fought battle through a divided congress, and through the trial of public opinion. Determining how exactly to give these benefits to the people who need them is another stage of implementation.
If Portability can make its way through this, then it will be ready for implementation. This issue seems like the solution to many problems American faces, how to administer healthcare to future generation of Medicare recipients. By allowing people to use their Medicare where they live outside of the country, where medical costs are substantially lower, they will save money. There will be savings despite the added administrative costs. Will this solution become a reality? Only time will tell.
- i (Center for Medicare Portability, 2012)
- ii (Gladstone, Retiring Abroad, 2010)
- iii (Warner, et al., 2007)
- iv (Centers for Medicare & Medicaid Services, 2012)
- v sic
- vi (Warner, et al., 2007)
- vii (Haims & Dick, 2010)
- viii (Warner, et al., 2007)
- ix (Gladstone, The New Population Bomb, 2010)
- x (Warner, et al., 2007)
- xi (Gladstone, Retiring Abroad, 2010)
- xii (Warner, et al., 2007)
- xiii Sic
- xiv (Haims & Dick, 2010)
- xv Sic
About the Authors:
Jonathan Edelheit is the president of Free Health LLC, a leading US and International insurance and healthcare media company that specializes in “niche” industry health insurance, employee benefits and healthcare magazines. Under Free Health LLC, Mr. Edelheit is Editor-in-Chief of Benefits Live Magazine. The magazine includes four industry-specific publications, including: Corporate Wellness Magazine, the only US and International magazine dedicated to health and wellness in the workplace, the Voluntary Benefits Magazine, the Self Funding Employer Healthcare and Workers Compensation Magazine, and the National Healthcare Reform Magazine, the only magazine dedicated to the newly implemented US Healthcare Reform Law.
Daniel Pyne is the assistant editor of Benefits Live, and graduated from Florida State University with a B.A. in International Affairs, and a B.S. in Political Science.