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Medicare: Is it really the ‘third rail’ of politics?

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President Obama and Mitt Romney have both talked about the need to reform Medicare, but the health care program has been referred to as one of the “third rails” of American politics. Touch it, conventional wisdom goes, and your political career is toast.

But it turns out some changes have been met with relatively few sparks. It all depends on the kind of change and whom it targets.

Medicare became law in 1965. At the time, more than half of seniors had little or no access to health care, and private insurers considered the elderly too risky to cover.  It was a compromise. Democrats were able to extend the social safety net to a vulnerable population, and Republicans were satisfied Medicare wouldn’t lead to “socialized medicine” – something doctors feared. Members of the American Medical Association had talked about boycotting the program, so the architects of Medicare gave them a sweetheart deal. Physicians and hospitals would provide care; then, they’d bill the government directly. There was reimbursement, plus a bonus.

David Kendall, senior fellow for Health and Fiscal Policy at Third Way, a Washington-based think tank, says “this was basically open season for providers.”

The modern health care industry was born, and so too were its spiraling costs. David Rosner, the Ronald H. Lauterstein Professor of Sociomedical Sciences at Columbia University, says the price doctors charged Medicare patients became the default for everybody.

“A hospital day, which in 1962 probably was around $23, by 1973, it was $100 and growing, and almost $200 by the late 1970s,” he explains.

Soon, politicians started talking about the Medicare “cost crisis.” President Reagan worked with Democrats in Congress to change how hospitals got paid. Jonathan Oberlander, a health policy professor at UNC-Chapel Hill, says that instead of a “blank check” that reimbursed them retroactively, there were payments upfront:

“In the early 1980s, Medicare says to hospitals, we are going to pay you according to a patient’s diagnosis, and you’re going to get a fixed payment no matter how long you keep a patient in the hospital.”

A few years later, another law established a similar fee structure for doctors, which slowed Medicare spending growth considerably. These changes may have been a shock to physicians and hospitals, but there was no “third rail” outcry from the public.

But then, the focus of changes to Medicare shifted from providers to beneficiaries. In 1994, Republicans seized control of the House and Senate from Democrats. Senate Majority Leader Bob Dole and Speaker of the House Newt Gingrich led what they called “a revolution” against big government.

“Last November, you put Republicans in control of Congress for the first time in 40 years,” Dole said at the time. “And the message you gave us was to make government smaller and more efficient.”

In 1995, Congress passed a budget that, among other things, drastically scaled back Washington’s role in Medicare. Rather than pay for hospital stays and visits to doctors, the government would give seniors a subsidy to buy private health insurance.

“Gingrich, at the time, had famously said that Medicare would ‘wither on the vine,’” remembers Oberlander.

Instead, the “third rail” crackled to life with the energy of angry voters. A Gallup poll at the time found 60 percent of respondents wanted President Clinton to veto the budget bill. And so, with a nod to history, he did. “Three decades ago, this pen you see here was used to honor our values, when President Johnson used it to sign Medicare into law,” Clinton said. “Today, I am vetoing the biggest Medicare and Medicaid cuts in history.”

A later poll found 54 percent rated Medicare a high priority in the 1996 presidential election, which Clinton went on to win. Today, there is another debate over changes to Medicare. The program currently spends more than half a trillion dollars, and the pool of beneficiaries is expected to almost double by 2030.

But it remains deeply popular to people like Sybil Ricketson, of Ringgold, La. “Well, Medicare means I’m still alive,” she says. “I have a lot of health problems, and if it weren’t for Medicare, I wouldn’t be here.”

Both President Obama and Gov. Romney say something needs to be done to rein in the program’s rising costs, but the question is, can either of them push through a plan that won’t get zapped by that proverbial third rail.

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