CMA Health Policy Blog

Private Medicare Plans – Bullies On The Playground?

November 16, 2009 at 9:12 pm Judith Stein Leave a comment

Medicare “Advantage” private plans were created not-equal in 2003. Not equal to “regular Medicare” because the law gave private plans a windfall of about 14% more per covered beneficiary than is paid for the same coverage in regular Medicare. We have all  been paying for this – to the tune of about $10 billion a year!  So, if paying the private plans the same as the traditional program means they take their balls and go home, so be it. We simply can’t afford to pay for the kind of profit the private plans seem to insist they make at the expense of Medicare and taxpayers.

The Center for Medicare Advocacy has long been concerned about the extraordinary costs of private Medicare. The movement towards fragmenting and privatizing Medicare was advanced by the Medicare Act of 2003.The lessons from privatizing Medicare should be applied when developing health care reform: No matter how much some people may want to believe that the private market is always a more cost-effective model than a public program, it just isn’t so. Medicare proves the point.
• When Medicare private plans were paid 95% of what it costs to provide the same coverage in the public Medicare program, they left the program in droves. They couldn’t make enough profit. (“Medicare+Choice,” enacted in 1997 as part of the Balanced Budget Act of 1997.)
• Under the “Medicare Advantage” program, passed in 2003, private Medicare plans are paid about 14% more than the same coverage would cost in the traditional public Medicare program. And, not surprisingly, private insurance plans have flocked back into the system. The insurance industry is making a windfall from this system – at the expense of all Medicare beneficiaries, including the vast majority of beneficiaries who still choose “regular Medicare.” Taxpayers overpay too. (CBO, MedPAC, Commonwealth Fund.)
• The private Medicare plan program is bleeding the Medicare trust fund, reducing Medicare’s solvency by about 8 years.
If Congress passes a requirement that all Americans have health insurance, but does not provide for a public option, we will have been taken to the cleaners yet again. Private insurance will gain tens of millions of new customers and we taxpayers will all pay a much higher bill than is necessary. Medicare’s experience proves this.

Entry filed under: Health Care Reform, Public Option, Public vs. Private Health Coverage.