Medicare is the free, public health care system in Canada. This is truly the public sector in its greatest glory.

In the U.S. it is often referred to as single-payer because there is only one payer--the government. This eliminates inflation, because there is only one source of money--providers cannot shop around, and bid up their prices. Canada's health care expenses are consistently much lower than American.

The principals of medicare are universal, portable, comprehensive, necessary, publicly administered, and compulsory, though one rarely hears of that one much anymore.

Starting in the late 50's as hospital plan, it was extended in the 60's, over the objections of Tories like John Robarts, then premier of Ontario, to include all medically necessary expenses in doctors' private offices as well.

The first Canada Sickness Survey, in 1951, showed what would not surprise anyone with any commonsense: if you don't have money, or enough money, you put off medical treatment.

Generations of Canadians have grown up without the fear that must be everpresent for so many Americans, especially, what do they do if they, or their children get sick or hurt. Generations of Canadians have grown up healthy, and able to contribute to the common good.

Now, we see the coming to fruition the policy, intentional or not, of starving the public health system of resources. Nurses have been laid off in the thousands. Hospital beds have been closed. Ralph Klein, the premier of Alberta, has even had hospitals demolished. In Ontario, Mike Harris, the Tory premier has had hospitals restructured, leading to a crisis in emergency rooms this past winter.

Then, certain interested parties can say, 'Look, public ownership doesn't work! We must bring in the private sector. All the while presenting themselves as pragmatists, since only us supporters of medicare, and public ownership are ideological.

Poor DMan. I guess he just likes to pay thousands and thousands of dollars for medical care. But then, as a graduate of Corneil, he'll make lots of money.

The theory of single payer, as they call our system in the U.S., is that, with only a single source of money into the system, there is no inflation--it is impossible for suppliers to play off one purchaser against another.

The theory of the American system, is that there are many purchasers, and thus, inefficiency in the system--too many inputs of cash to too many suppliers: inflation is inevitable. And the increase in costs, at least from the suppliers' side, is considered success--their revenue goes up.

If DMan's uncle went to med school in Canada, then he owes this country. No one who goes to school in Canada pays all the cost of their education--we have a public education system.

People who can't afford medical costs--how many millions in the U.S.?--get sick. Maybe in the gated community that DMan is going to live in when he gets his dot com company up and running, will keep the bugs out.

Maybe the resurgence in infectious diseases won't affect DMan or his family. Maybe.

Medicare in the United States is health insurance in the public sector.

History of Medicare

Medicare was created in 1965 by the same legislation which created Medicaid. It covers most people over 65, some disabled people meeting specific requirements, and people with End Stage Renal Disease, or kidney failure. As part of the Social Security program, it is funded by current workers, in the form of the FICA tax. It is administered by the Centers for Medicare and Medicaid Services, or CMS.

In the several years immediately following the creation of the two programs, healthcare costs skyrocketed. The debates immediately began. Critics were quick to note that providers (doctors) had no incentive to keep costs down, since the government was paying the bill. There was also a tendency for the insured to overutilize the healthcare offered, or choose a doctor/specialist without thought to whether the rates that doctor provided were fair.

The process of looking for solutions to these problems spawned the first managed care organization, called a Health Maintenance Organization, or HMO. The idea behind the invention of the HMO was that a insurer which controlled both the healthcare provided and the financing of that healthcare would be much more effective at controlling costs.

Medicare Programs

Medicare consisted of two basic parts for many years, Part A and Part B. However, the Balanced Budget Act of 1997 created Part C, or Medicate+Choice, which offered several additional services to fill gaps many people were feeling in their coverage.

Part A: Hospital Insurance

Part A coverage is free if the insured person worked at least 10 years of Medicare-covered employment (i.e. a job where s/he had to pay the FICA tax). Otherwise, a premium is charged. The following services are provided under Part A coverage:

  • Hospital Care: Up to 90 days of benefits are provided for hospital stays. Medicare pays for a patient's first 60 days in a hospital, less a deductible. After that, the patient is required to pay daily charge specified by Medicare for the hospital stay.
  • Skilled Nursing Care: Benefits are provided for up to 100 days in a nursing facility. All costs are covered for 20 days, after which the patient pays a daily charge.
  • Home benefits: Includes part-time nursing and physical, occupational, or speech therapy. A doctor must prescribe the home health care for the patient to be eligible.
  • Hospice Care: Medicare will cover hospice care for individuals with a life expectancy of 6 months or less.
Part B: Supplemental Medical Insurance (SMI)

SMI covers physician's and surgeon's charges, wherever they are rendered. All insured persons much pay a premium ($54.00 monthly in 2002) if they wish to receive Part B coverage. Despite this premium, SMI is still covered 75% by the federal government. Patients are expected to pay a deductible; nothing is paid until this deductible has been met by the insured. After that, SMI pays 80% of the remaining expenses. An individual may have to pay even more out of pocket if the physician charges more than Medicare finds acceptable; if the physician opts to charge more, s/he is said to refuse assignment.

Part C: Medicare+Choice

Medicare Part C was a program that was hailed as a measure to "save Medicare." It was essentially a move to privatize the Medicare system, or place more of the system under the control of private industry and the persons being insured. Under Medicare+Choice, beneficiaries may elect one of three alternatives:

  • Coordinated Care Plans: Include HMOs, PPOs, and PSOs (provider-sponsored organizations).
  • Private Fee-for-Service: Beneficiaries are allowed to enroll in a private insurance plan which offers unrestricted use of participating providers. Providers are limited in how much they may charge, and beneficiaries are expected to pay the difference between cost of coverage and the Medicare payment.
  • Medical Savings Account (MSA): Beneficiaries hold a savings account for medical expenses and are also required to carry a high-deductible castatrophic health insurance policy to supplement the account. The catastrophic plan must at least provide the same services offered by Medicare Parts A and B (after the deductible has been met). Funds taken from an MSA to pay medical expenses are not taxed, but if the funds are withdrawn for a non-medical reason, they could be subject to some hefty penalties.
Medicare Supplement Policies

60% of covered people purchase private insurance to supplement their Medicare coverage. The most common type of policy purchased is usually called a Medigap policy. These policies are offered by commercial insurers such as Blue Cross and Blue Shield, and specifically designed to help fill the gaps left by Medicare's deductible and coinsurance requirements.

What will Become of Medicare?

Most people, especially the Americans among us noder-types, know about Social Security and the problems it's been having lately. To put it briefly:

  • In 1950, there were 13 workers for each beneficiary.
  • In 2000, there were 3.3 workers for each beneficiary.
  • In 2030, it is projected that there will be only 2.1 workers for each beneficiary.
People are living longer, beneficiaries are being paid more benefits (above and beyond inflation increases), and more people qualify for benefits. It seems that every election we have a brand new "Social Security crisis" waiting for the candidates to bicker over. After a candidate wins, he passes some measure that will "save Social Security." The measures never work, and the crises keep occurring because they never go away. (Yes, I'm grossly generalizing, but this has been happening every four years since at least Carter's administration.)

It is no different for Medicare. And, like Social Security, there are several prominent factions with different goals in mind. Grossly generalizing again, Republicans want very badly to privatize the system so they can control their benefits and play with their money. Democrats want to raise taxes to fund the benefits so they can hand out even more money for free.

Meanwhile, the federal government borrows from the trust funds of these programs, issuing government bonds in return. In effect, the government is borrowing from itself. Someday, probably prior to 2030, the bonds are going to be redeemed, and no one will have a clue where the money will come from.

Vaughan and Vaughan. Essentials of Risk Management. 2nd ed. John Wiley & Sons, Inc.: New York, 2001.

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