Alert: Past & Present Privatization of Medicare

January 28, 2022

Summary: Medicare’s privatization has two phases. Past: Medicare Advantage, an explicit option for enrollees to join private for-profit capitated health plans, with the promise of saving money and improving care; it did neither. Present: Direct Contracting Entities, a covert subterfuge to place traditional Medicare enrollees into private-for-profit capitated health “entities”. The principal of public insurance is in peril. We must stop this theft of traditional Medicare.

The Dark History of Medicare Privatization
The American Prospect
January 24, 2022
By Barbara Caress

Medicare Advantage was supposed to be a money-saver. It’s now become a costly, unaccountable cash cow for private insurance companies that is swallowing traditional Medicare.

The growth of Medicare Advantage is a 35-year-long saga of a program conceived as a cheaper, better Medicare transformed into a behemoth that has not saved one cent nor produced better outcomes. Yet MA has beaten back every attempt to make it accountable for its cost and care.

Traditional Medicare leaves lots of holes that retirees must otherwise fill out of their own pockets. It does not cover vision, hearing, dental, or long-term care. Beneficiaries are responsible for monthly premiums, deductibles, and coinsurance (known as “cost-sharing”). … The extra cost added up to $6,509 per person in 2018, according to an AARP-commissioned study.

Twenty-six million people find MA a deal they cannot refuse. They gave up their hard-earned red, white, and blue Medicare card for one supplied by Humana, UnitedHealth, Anthem, Aetna, Kaiser, or another company. Like HMOs, the plans offer less freedom of choice, with limited provider networks and prior-approval requirements in exchange for sharply reduced and capped out-of-pocket expenses, and additional benefits like gym memberships.

The MA profit-making formula is simple: get a large sum of money from the Feds, spend less than traditional Medicare, give some of the excess to beneficiaries, and pocket the difference.

No one even mentions MA as a cost-containment strategy anymore. The larger and richer the plans have become, the less leverage the feds have to regulate the industry. While the funding still comes from the U.S. Treasury, dispersed under the aegis of Congress, most of the power has passed to the companies.

Drawing on the MA experience, Direct Contracting Entities (DCEs) would serve as intermediaries between traditional Medicare beneficiaries and their medical-care providers. The DCE would receive an MA-like monthly payment for a specific population. It would make deals with networks of providers, “manage” beneficiary care and costs, and pay the bills, while keeping the difference. Medicare’s only role would be as banker.

HHS senior official Liz Fowler (an architect of the Affordable Care Act) projects the transition of all traditional Medicare to DC to be complete by 2030.

The private Medicare companies have succeeded in getting the feds to turn over more and more to them while obliterating the notion that HMOs would save money or improve care. Their power to extend their reach to all $880 billion in Medicare spending is embedded in the program itself. The more money and beneficiaries they control, the more juice they have to control more.

Taking Medicare Public, Again

To put a stop to MA’s distortions and its systematic theft would require a campaign to make Medicare a more public health insurer. From the start, it ceded significant financial authority to private hospitals, doctors, pharmaceutical, and insurance companies. The more beneficiaries and money handed over to MA, the greater its power to resist. The ascendency of DC is the latest and most serious warning sign that the private profit-maximizers are close to victory. Nothing short of full public control can keep that from happening.

History shows that the federal government’s attempt to harness the perceived benefits of managed care to Medicare by attempting to separate for-profit entities from profit-maximizing behavior has failed. Instead of throwing more money at MA to reform it, trying to cut MA payments, or regulating, perhaps the solution is starving the beast.

A campaign to improve Medicare might be the only political avenue open to those who want to save it.

Comment by: Don McCanne

Many of us have had hopes of transitioning our health care financing system into Medicare for All – an efficient, equitable program that would assure affordable access to health care for all of us. Yet under our very eyes traditional Medicare has been transitioning into a cash cow for the private insurance industry and is predicted to be gone by the end of this decade. With it, it is likely that with the private insurance industry being in complete control, our single payer dreams will have gone up in smoke.

If you read the full American Prospect article by Barbara Caress, you will see much of the damage from Medicare privatization has already taken place without the public understanding the consequences. But if we are to have an ideal single payer Medicare for All health care financing program that will serve all of us, we must immediately realign our policy goals. The first is to protect traditional Medicare as an equitable, public administered and publicly financed health program for all of us, and we do that by eliminating the control by the private insurance industry that is currently changing the mission of Medicare from a program designed primarily to provide health care for the people to a program primarily designed to provide great wealth for its investors.

The urgency of taking action immediately cannot be overstated. We need to be building our Medicare for All program now, and allowing our traditional Medicare program to wilt away before us could remove the very foundation on which we should build our program. We need to get rid of the Medicare Advantage thieves who are draining the system. Then we need to fill in the holes in the traditional Medicare program and expand it to include everyone. The policy agenda should be pretty straightforward. It’s too bad we have to choose politicians to dictate policy; that has been a major source of our inertia.

One place to help stop DCEs: PNHP Stop DCEs