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Medicare is under attack, but you can’t tell it by most press coverage

ASK THIS | January 07, 2008

Medicare, the great American health program, is under threat, its costs spiraling and benefits decreasing for millions who are leaving traditional Medicare for privatized versions. This article is the first in an occasional series aimed at sparking the interest of reporters and editors in news organizations of all sizes. Judith Stein, the writer, is executive director and founder of an activist group, Center for Medicare Advocacy, based in Connecticut with offices in Washington, D.C., and throughout the country.

By Judith Stein

Medicare was enacted in 1965 when half of Americans aged 65 or older had no health insurance and were terribly vulnerable; the private insurance sector had failed them. Since then the federal Medicare program has served the country well. Today it provides health insurance and access to health care for approximately 43 million people. More than 95 percent of older people and people with disabilities have health insurance through Medicare.

The program has saved millions of families from being impoverished by health care expenses. In addition, Medicare coverage is known to sometimes improve the health of previously uninsured people. A Journal of the American Medical Association report shows that to be particularly true for people with cardiovascular disease and diabetes.

Regrettably, the current enthusiasm of key decision-makers for privatizing Medicare threatens to return us to a time when families had to make great sacrifices to pay for their parents’ and grandparents’ health care and when, even with these efforts, many older people went without the care they desperately needed. Following are a few key questions about the current status of Medicare.

Q.  What has happened to threaten Medicare?

The Balanced Budget Act of 1997 introduced a variety of managed care and other private plans into Medicare under a new Medicare Part C.  The new options were called Medicare+Choice plans. As the name of the Act that created Part C implies, the idea was to save money by using private Medicare plans to finance care, while providing the same level of coverage as the traditional program – or more. Bruce Vladeck, formerly the Medicare Administrator, said in Congressional testimony in 2003 that “participation of private plans in Medicare has yet to save the Medicare program a nickel." That is still true.

The lack of success of Medicare+Choice, however, did not end the privatizing of Medicare – nor did the departure of private insurers from Medicare in the late 1990s, when profits were deemed insufficient. The exodus then left many beneficiaries confused and scared that they were “losing their Medicare”. Instead, the Medicare Modernization Act of 2003 changed the Medicare+Choice name to “Medicare Advantage,” authorized over $150 billion in subsidies to encourage private plans to enter and remain in the Medicare market, and introduced the entirely private, Part D prescription drug system.

Q.  Aren’t we trying to reduce costs and preserve Medicare for the infamous influx of “baby boomers”?

Just the opposite. Congress and the Executive branch have failed to deal with lavish private Medicare subsidies and cost overruns. The subsidies result in costs of about 12 percent more, on average, to cover an enrollee in a private Medicare plan than in the traditional program.

In the last Congressional session, a powerful minority in the Senate blocked protection of the integrity and stability of the Medicare program by refusing to cut Medicare Advantage subsidies. Further, the Bush Administration threatened to veto any bill that even trimmed them. (NY Times, Medicare Private Plan Abuses, 12/26/2007; NY Times, Two Insurers Increase Bet on Medicare, Milt Freudenheim, 12/5/2007. The Times stands almost alone among news organizations for its coverage of Medicare issues.)

Thus it appears that cost-saving is no longer the mission of privatizing Medicare. Corporate Medicare subsidies continue into 2008, notwithstanding repeated studies, and little debate, about their wastefulness. Unless action is taken, private Medicare plans will collect their $150 billion in subsidies while doctors who care for Medicare patients face a 10 percent cut in pay in mid-year.

Q.  Who pays for the subsidies to private Medicare plans?

The cost of private Medicare is borne by taxpayers and by all people with Medicare. These unnecessary expenses lead to increases in Part B premiums and encourage plan proliferation and marketing abuses by companies looking to benefit from the robust Medicare payments. The overpayments affect all Americans by weakening the financial stability of the Medicare program and by increasing federal expenditures. Even a recent study by a for-profit insurance industry group shows that, at best, private Medicare plans spend 300-400 percent more on administration than traditional Medicare. (Council for Affordable Health Insurance, Medicare’s Hidden Administrative Costs: A Comparison of Medicare and the Private Sector, Merrill Mathews, 1/10/2006.)

Q.  Who are the winners and losers from privatizing Medicare?

The lavish subsidies to private Medicare plans continue at the same time that we are repeatedly told that "we just can’t afford Medicare" for our ever-increasing aging population. On the whole, private plans do not provide meaningful new coverage, more flexibility, or more stability than the traditional Medicare program. Nor do they provide more care coordination or choice of health care providers. As a result, taxpayers, most people with Medicare, and doctors, lose. Private corporations win – big time.

Certified Elder Law Attorney
Posted by Don H. Chapin
07/19/2008, 05:04 PM

In Ohio, I find fear and misunderstanding about Medicare and the Medicare Choice decisions. Obfuscation helps the private insurers. We need a 2-tiered Medicare program to deal with the 'Boomers' and elimination of Medicare "HMO's" Judy is a modern day heroine. I'm grateful for her scholarship and continued advocacy.

Posted by Thomas Gibson
11/06/2010, 03:28 PM

I find the comparison between Original Medicare which is a totally unmanage system that leaves beneficiaries paying huge and many times unaffordable health care bills with Medicare Advantage plans that cap those expenses and provide a level of management and communication that Medicare is incapable of. Medicare is bringing reimbursements to carriers down to parity with Original Medicare costs but it isn't certain that dropping the management functions will save money due to the lack of oversight by Medicare of fraud, waste, and abuse by providers.

Ms. Stein might be a good attorney but in following her work I found that she thinks that we can fix a broken overblown government program by creating an even bigger one, Medicare for all. Clearly government policy and how to invest public money wisely isn't something that she has any practical experience in other than her claims to that effect. This would put us on track to repeat experiments that are still being fixed in Canada and Great Britain which have had some success but an unacceptable number of problems and cost over runs where care isn't simply being rationed ahead of a determination of need as it is for many services in Canads.

This irrational repeating of the worst examples we have must have a reason but I find it totally unreasonable since we have many examples of things that have worked in countries like Germany, Norway, and Japan. We can create our own hybrid system of public/private partnerships using examples that we have seen in this and other countries. Ms. Stein's suggestions basically would result in deregulating the health care industry, an industry that needs to be brought under more scrutiny to bring our spending on health care from 17% of GDP down to something closer to 8%. Failing to do so would mean that we will have only short term economic recoveries and our children will have no economic future at all.

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