Wayne O’Leary

The Big Con: Privatizing Medicare

As the 2016 presidential-election season shifts into high gear, the usual suspects are beginning to make the usual fatuous claims and proposals. Case in point: Jeb Bush, favorite of the Republican establishment, has started channeling the GOP’s resident Big Thinker, House Budget Committee Chairman Paul Ryan of Wisconsin, and his austerity agenda.

Ryan, who wants to downsize the federal government and turn its functions over to the private sector, would voucherize the Medicare program as part of this process — he euphemistically calls it establishing a “premium-support” system — and Bush the Younger is fully sympathetic. Last month, the supposedly smarter and more moderate of the Bush brothers laid claim to the nomination of America’s crazy party by all but endorsing this truly crazy initiative. While those already on Medicare would keep their government benefits under his presidency, Jeb announced, “We need to figure out a way to phase out this program for others.”

Of course, those currently on Medicare will eventually die, and Medicare “as we know it” will expire with them; that’s the ultimate goal. Under premium-support, its presumed successor, seniors would be thrown into the unforgiving private-insurance market, given an indeterminate voucher, and told to buy the best available health plan within their means.

Jeb himself doesn’t need to worry, however; he’s made millions as paid board member of a for-profit hospital chain, and his medical coverage is secure. Tenet Healthcare, his former employer, probably has a private room reserved for him. In the meantime, if his stated objective comes to pass, those Americans already signed up for bare-bones Obamacare can expect to have lots of company in future years as existing Medicare disappears and employer-based retiree health plans are phased out. And don’t plan on Medicaid; Republicans intend to block-grant that program out of existence, too.

Such is the strategy, as laid out by GOP visionaries. Most sobering, it’s the vision of a Republican “moderate.” Imagine for a moment the perilous future of elder health care should a red-state gunslinger like Scott Walker or Ted Cruz reach the White House. The likelihood of that happening is admittedly remote; more likely (and bad enough) is a continuation, under centrist Democrats or garden-variety Republicans, of the gradual, slow-motion transition of Medicare into a privatized or semi-privatized program light-years removed from the one created by liberal Democrats in the mid-1960s.

Despite its popularity, Medicare has been under siege by the privatizers almost from the beginning. It began to change as early as the 1980s, when the Reagan administration created incentives for private insurers to contract with the program. A larger shift took place the following decade under Bill Clinton, with the 1997 creation of Medicare Part C, the so-called Medicare-Plus-Choice program, which was the start of what we now know as Medicare Advantage.

Under Medicare Advantage, or “private Medicare,” beneficiaries leave the established fee-for-service government program and sign up with a private insurer (UnitedHealth Group, Humana, Anthem, et al.), pay an added premium for which they receive a few additional benefits, and are placed in a managed-care plan with a limited, preselected network of providers; Medicare pays the insurer a fixed amount per member per month. The theory, never proven, is that advantage plans will deliver benefits cheaper and more efficiently than government can, a spurious claim nevertheless enticing enough to have attracted nearly a third of Medicare’s 55 million beneficiaries.

Medicare Advantage received its biggest boost in 2003 under George W. Bush, whose administration, through the disingenuously termed Medicare Modernization Act, gave the program its current name and, more importantly, larded it with generous federal operating subsidies so insurers could advertise their wares, compete with low-cost government Medicare, and make a healthy profit besides. By 2009, those administrative subsidies had added 14% to the cost of running advantage plans as opposed to traditional Medicare. The Obama administration has been trying since, with mixed success, to reduce or end this corporate welfare.

The need for subsidization puts the lie to Medicare Advantage’s myth of economic efficiency, and its actual performance undermines the associated marketplace claim of the inherent superiority of a private benefit-delivery system. The nonprofit Center for Medicare Advocacy points out that advantage plans, geared to younger, healthier seniors, are notoriously stingy with benefits, especially as applied to the very sick, who can’t get nearly as good home-nursing or physical-therapy services as they can under traditional Medicare.

Then, there are the other twin privatization plagues weakening America’s elder health-care system: the soaring cost of prescription drugs and rising doctors’ salaries. By failing to provide for required price negotiations between the Medicare program and the profit-mongering pharmaceutical companies, Congress has allowed Medicare drug spending to steadily rise; it went up nearly 14% overall in 2014, and it’s headed higher in 2015. And by relying on biased American Medical Association recommendations when setting Medicare’s physician pay schedules, the government has allowed the market to further inflate the program’s budget.

The failure to control market forces and, indeed, the encouragement of their creeping inroads into Medicare has left federal policy makers only one recourse in controlling costs: sticking it to the patients by cutting the program itself, thereby weakening its effectiveness and legitimizing calls for further privatization. The Budget Control Act of 2011 made across-the-board austerity cuts to Medicare, and the Obama administration’s new budget proposal for 2015 calls for another $400 billion in Medicare and Medicaid reductions over the next decade.

The president has tentatively introduced such counterproductive proposals as a co-pay for new Medicare beneficiaries getting home health-care services, a premium surcharge on those buying overly “generous” Medigap policies, and reduced Medicare support for teaching hospitals and small, rural hospitals or nursing homes caring for the disabled. Worst of all, perhaps, is the White House acceptance of the old skin-in-the-game argument (shades of Jonathan Gruber and the ACA Cadillac tax), with its misleading claim that good supplemental Medicare insurance “reduces the incentive for people to consider the cost of health care.”

In other words, if we make it more out-of-pocket expensive to see the doctor, maybe the public won’t use the system as much, thereby saving Medicare dollars. Sounds like an idea Jeb Bush and Paul Ryan could endorse.

Wayne O’Leary is a writer in Orono, Maine, specializing in political economy. He holds a doctorate in American history and is the author of two prizewinning books.

From The Progressive Populist, October 1, 2015


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