Privatizing Medicare

Back in the 1990’s the Gingrich led Congress enacted Medicare Advantage—a transparent attempt to undermine traditional Medicare. Maggie Mahar reports on the ongoing battle:

When Congress created Medicare Advantage, the program that allows private insurers to offer Medicare to seniors, it agreed to pay for-profit insurers about 12 percent more per patient than traditional Medicare would spend if it were covering those patients directly. Add up those extra payments and they amount to a $16-billion-a-year subsidy for the health insurance industry.

Why the sweetener? Lobbyists argued that the government would have to pay more to persuade for-profit insurers to join the Advantage program. Moreover, they promised that the insurers would use the $16 billion to offer patients extra benefits like acupuncture and eye exams that they would not receive under traditional Medicare. And Congress agreed. Now, think about this for a minute: legislators agreed to use our tax dollars to help for-profit insurers draw customers away from a government program that most people liked—and that cost taxpayers less. This is not about saving money by transferring Medicare to the supposedly more efficient private sector. This is about the conservative agenda: some politicians are determined to try to outsource government to for-profit corporations.

Predictably, private insurers structured their plans to siphon off the healthiest seniors… .

What is certain is that the program has proved a boon for UnitedHealth, the nation’s biggest medical insurer, and Humana, the No. 4 player in the private health insurance market. As the New York Times explained last week, Humana, which has 1.1 million seniors enrolled, and UnitedHealth, which has 1.3 million signed up, are relying on Medicare Advantage “to cope with a sales slump in the private-sector parts of their business.”

Some private insurers are suffering, the Times pointed out, because “corporate customers are cutting back on the medical coverage they give employees.” So insurers need taxpayer dollars to keep their bottom line strong. “Humana is transforming itself into a big-time government contractor. It will get almost three-fourths of its projected $1.28 billion in pretax profit this year from Medicare, mainly from the Advantage program,” the Times reported, “while UnitedHealth, the industry giant, draws about 15 percent of this year’s projected pretax profit of $7.48 billion from Medicare.” One in five of the nation’s 43 million Medicare enrollees is now in the Medicare Advantage program and by 2009 “government spending on Medicare Advantage is projected to exceed $100 billion annually.”

Having wasted billions subsidizing insurance companies, Congress is now looking to save money by cutting Medicare fees paid to physicians by 10%. Of course that will piss off physicians, but it will also result in more physicians refusing to accept Medicare beneficiaries.

Beneficiaries leaving. Physicians leaving. The privatization proceeds apace—and count not the cost.

President Bush has his eyes on the prize. As with the SCHIP veto, he plans to veto any bill that stops wasting money on private insurers. Why? Private is good. Public is bad. As Mahar reports:

“President Bush will have a say in all this. He stepped into the fray yesterday by sending a letter to Capitol Hill promising to veto any measure that cuts the Medicare Advantage plans. According to Congressional Quarterly, he recommended Congress cut hospital payments instead. The insurance industry, which is moving aggressively to sign up more seniors for their HMO plans, is betting that the president will come through for them.”

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Filed under healthcare finance, social insurance

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