A solution for Medicare

Medicare is the healthcare insurance program for retired and disabled individuals who have paid enough into the system to become eligible for coverage. It consists of Parts A (hospital), B (physician), and D (drug) coverage, each with separate deductible and coinsurance provisions. Part A is free; parts B and D are optional and require payment of an additional premium, generally withdrawn monthly from one’s Social Security payment. Some beneficiaries choose to enroll in Medicare Advantage (HMO or PPO) plans, which replace their Medicare coverage with a private insurance plan with limited choice of providers.

The majority of beneficiaries who keep traditional Medicare enroll in private Medigap plans to cover part or all of their Parts A and B annual deductibles and coinsurance. Popular Medigap plans include Blue Cross and Blue Shield, United Healthcare/AARP, United American, and USAA Life. Those whose income is below a certain level are eligible for Medicaid coverage, and military retirees and their spouses are eligible for Tricare. A few retirees of large corporations have retiree health benefits which may pay some or all of their deductibles and coinsurance; because this coverage is often only partial, many of these retirees also purchase a Medigap policy.

After a claim for services is processed by Medicare, Medicare is supposed to electronically forward the claim to Medicaid, Tricare, or the Medigap insurance company for processing and payment of any additional benefits. In the case of retiree health plans, it is up to the provider of service or the patient to copy the Medicare explanation of benefits and submit a claim to the health plan.

A consequence of this system is that each claim for medical service is processed twice (or even three times!) by different bureaucracies, costing extra postage each time and utilizing additional paper. Each bureaucracy, in turn, has its own claim processors, administrators, and human resource people to support out of the premium dollars it is paid.

A more efficient system would be to eliminate the secondary insurers. For a Medicaid-eligible beneficiary, Medicaid would pay to Medicare a fixed amount per month; likewise, for a Tricare beneficiary, the armed forces would pay to Medicare a fixed amount per month. An employer which offered retiree health benefits would pay Medicare a fixed amount per month per retiree. Other Medicare beneficiaries, instead of paying a monthly premium to a Medigap insurance company, would pay a comparable, likely lower, premium to Medicare for the level of coverage they desire. Medicare, in turn, would pay 100% (perhaps less, in the case of Medicaid beneficiaries) of the covered amount for each claim, without any need to transmit the claim to another insurer. By receiving the additional premium revenue from Medicaid, the armed forces, employers, and beneficiaries, Medicare would cut its losses. Medicaid, the armed forces, and employers offering retiree health benefits would save the costs of processing claims. Beneficiaries might see a reduction in premiums. Lastly, providers of service would receive payment sooner and save the bookkeeping cost of posting two or more payments per claim.

A downside would be loss of the jobs of those who work for the Medigap insurance companies and those who process claims for Medicaid, Tricare, and some employers.