Ed Haislmaier: Medicare Is "Stuck in a Time Warp"

Government programs, especially Medicare, are stuck in the past and are not designed to accommodate advancements in modern technology, said Ed F. Haislmaier, the Preston A. Wells Jr senior research fellow at the Institute for Family Community, and Opportunity at The Heritage Foundation.

What is the problem Medicare faces with having Parts A, B, and D? How and why should they be combined?
If you look at Medicare—Medicare is an example that I point to at every government program either here or abroad—the design to the program in healthcare reflects the way the world looked when the program was created. The British National Health Center reflects 1940s medicine and the Medicare program in this country reflects a 1960s picture of medicine and that was very hospital centric. So, it is focused on hospital deductibles and, interestingly enough, the deductible was the cost of a day in the hospital. Nobody bills by days in the hospital anymore that’s no longer done. It’s not like a room rate for a hotel, but that was the way it worked in 1960. They had a flat 20% co-pay for all the physician’s services.

And Medicare didn’t include drugs in 1960 because there weren’t a lot of drugs and they weren’t that expensive. They were mainly some antibiotics and things like that. So, there wasn’t felt to be a need to include drugs. Drugs were like vision care or hearing aids. They were something extra, which Medicare also didn’t cover. So, that is a very 1960s premise. The state of medical technology in the 1960s, I mean this is before drug therapies, before heart transplants, all sorts of things. What happened is that gets frozen in time, because it was written into a government program. So, that’s the problem with designing a government-run program is these things get sort of stuck in a time warp.

The better approach is to focus not on the design of the program, but focus on the people you’re trying to help. And say, "How do we get resources to the people we are trying to help?" If you focus on a government program design then here you are 40 years later trying to update a clearly antiquated structure.
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