Medicare Smackdown

As we progressives dream of universal health coverage, one overriding fear clouds the horizon. Who can take on the health insurance lobby? Based on a vote in the House of Representatives last week, one worthy opponent appears to be American Medical Association. The House voted Tuesday on a plan to restrain Medicare spending. One option was to cut reimbursements to the insurance industry’s favorite program, Medicare Advantage; the other option was to cut reimbursements to physicians by 10%. The vote result: AMA lobby-355; insurance lobby-59.

Take that, Humana!

Even more astonishing, Bush has threatened to veto the law should it get to his desk, but Senate Republicans so far have successfully filibustered it.

My question: how in the world did the GOP end up going to the mat to defend the health insurance industry against the docs? In an election year, no less. Bush and the GOP of course will say they are desperately, desperately, concerned about budget deficits and tough choices have to be made.

Right. This, from the $5 trillion man.

The answer is that the modern GOP hates and fears social insurance programs like Social Security and Medicare. Remember that Bush’s first priority when it came to using his political capital from the 2004 election was an attempt to privatize Social Security. Now he’s now willing to alienate a powerful constituency, the docs, to force fellow Republicans to defend Medicare Advantage, the GOPs attempt to privatize Medicare.

How does Medicare Advantage privatize Medicare? Here’s a brief history:

  • 1997- Congress enacts “Medicare Choice (Part C) allowing private insurers to offer a competing product to traditional Medicare. Medicare had always offered a fixed benefit package; private insurers could offer different types of policies as long as they were at least a good as traditional Medicare.
  • 1997-2003 – few people enroll in Medicare Choice
  • 2003 – Congress overhauls Medicare Choice and renames it Medicare Advantage. New rules permit increased payments to private insurers and richer benefit packages to enrollees (dental, vision, lower co-pays) in effect paying insurers to market Medicare Advantage and rewarding seniors who enroll in private Medicare.
  • 2008 – It works. Humana reports that 66% of its profits come from Medicare Advantage policies. Seniors like it too; enrollment hits 25% of all Medicare beneficiaries.

One problem. Medicare Advantage costs taxpayers 13-17% more per enrollee than traditional Medicare. Thus, the budget problem.

I just have to laugh at this. Let’s take a step back and ask “why were private insurers brought into Medicare to begin with?” To lower costs, of course! But it turns out that, given a level playing field, insurers weren’t very interested. So Congress sweetened the pot. Paid them to write Medicare policies and paid beneficiaries to enroll in private Medicare. The fact that the entire enterprise accomplishes exactly the opposite of it’s stated intention is apparently irrelevant to Bush and the GOP. They are so delighted with the program, they are willing to cut physician’s reimbursements by 10% to defend the program.

So what will happen? I don’t think there is any chance physician fees will be cut and the GOP doesn’t want to cut them. They just got maneuvered into a bad political situation. Likely Congress will gets some cut in privatized Medicare and will punt on everything else. But I’d like to hope that this entire episode highlights that the problem of healthcare cost isn’t going to be solved by private insurers.

One other thing: the GOP is far more interested in delivering loot to the insurance industry than it is in solving actual problems.


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Filed under corporate welfare, healthcare finance, social insurance

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