MEDICARE, like other single-payer health insurance plans is extremely cost-effective. Private for-profit insurers have costs of management, marketing and profits-distributed which exceed public plan overhead 3x to 4x.
So why are costs accelerating? Simple, the excessive costs are due to Congress’ attempts to “reform” the system. In the mid-90s the private insurance industry was miffed because it was not in on the take. Medicare then was a wholly public system. So after some heavy-duty lobbying and arm-twisting Medicare was ordered to carve out about 20% of its coverage and turn it over to private for-profit insurers. This is what is known as MEDICARE Advantage. What it should be known as “cutting the BIG INSURERS in on the take”. Medicare recipients were required to buy private-market policies to supplement their Medicare policies. In addition, the Feds guaranteed the insurers a government subsidy. So as it works out in such a “Socialism for the Rich” scheme, the losses are covered by the taxpayer while the profits are privatized.
This great reform was added to an earlier one where Congress, in the employ of the Insurance Industry, ordered MEDICARE to contract-out certain management and clerical functions. The taxpayer must then pay the insurance companies whatever they bill it. Not quite a cost-reduction measure!
So MEDICARE is now in trouble. We often hear that it will go broke. Now we never hear that the Pentagon will go broke. Whenever the Pentagon runs out of money, and they do regularly, no one talks about the need to cut the budget. No, when the Pentagon runs out of money, Congress just gives them more money.
A report which will be published in the INTERNATIONAL JOURNAL of HEALTH SERVICES on Medicare found that past “reforms” are bankrupting the System:
“In total, we find that Medicare has overpaid private insurers by $282.6 billion, or 24.4 percent of all MA payments, since 1985. In 2012 alone, we find that MA plans are being overpaid by $34.1 billion, or 6.2 percent of total Medicare spending.
In 2012, 13.5 million Medicare beneficiaries are in private plans, 27 percent of total enrollment. Some proposals would push millions more beneficiaries into private plans (e.g. voucher-type Medicare reform).
Risk adjustment does not and cannot work in the setting of for-profit MA plans, which have a strong financial incentive, and the data and ingenuity, to game whatever payment system Medicare devises. It is time to end Medicare’s long experiment with privatization and look toward proven-effective methods for controlling costs and improving coverage.”*
So if we need to “fix” Medicare let’s end the contracts with the private health insurance companies, eliminate the so-called Advantage plans and reincorporate the supplemental coverage into general coverage. Then if we still need more money we could rename it the “National Defense MEDICARE Program” and appropriate whatever money is needed.
Ultimately, the solution which boosts medical care for seniors AND meets the health needs of those under 65 would be to extend MEDICARE to all. The largest possible insurance pool translates into the greatest cost-effectiveness. MEDICARE for ALL is the best reform.
*Complete report may be found at https://salsa.democracyinaction.org/o/307/images/Medicare%20Advantage%20Overpayment%20Report%2010.10.12.pdf