When I was 21 my exhilaration at buying my first automobile was tempered by the necessity of insuring it. At that time there were two dominant schools of thought about car insurance:
1. Go with the least expensive premiums (least expensive being a relative term for male drivers under 25) and hope you never have a claim.
2. Go with an established company that will be there when you make a claim.
I went with Option 2 and wasn’t sorry.
What I have learned this week about Medicare, and the health insurance plans built around it, follows the exact same pattern. Medicare covers some but not all health expenses, so most Medicare-eligible adults opt for additional health insurance coverage. It comes in two basic flavors:
1. Medicare Advantage comes with low initial premiums, but you must accept restrictions on which physicians you see and a cap on how much the policy will pay in any year. An insurance company decides whether a treatment your doctor recommends is medically necessary.
2. Medicare Supplemental plans are designed to fill gaps and to kick in when Medicare doesn’t. The monthly premiums are higher, but once you meet the deductible, they pay for all medical services authorized by your doctor.
I learned all this from Nancy Schwartz, a licensed Medicare broker. (You can hear her clear description of these plans on my latest podcast. Nancy feels most of her clients are better served by Medicare Supplemental insurance, which is truly a mix of government and private plans. Medical Advantage plans, in contrast, are totally private-sector plans. Medicare transfers to insurance companies the funds it has to meet the healthcare expenses of the policyholders. Insurers can earn profits by spending less than they receive from Medicare. They have incentive, in other words, to deny payment for expensive services.
The Campaign Is On
It’s good to have choices. But what disturbs me is that large healthcare companies and hungry investors have almost convinced the federal government to privatize Medicare totally. Like a gigantic “Medicare Advantage on steroids,” they want Medicare to turn over all $880 billion of its funding to them to administer. Medicare administrators are so gung-ho that they say all Medicare recipients could be enrolled in these plans by 2030. Medicare recipients would no longer have other options.
The name for this scheme was originally Direct Contracting, although it is being renamed Accountable Care Organizations (ACO) next year to provide additional obfuscation.
Direct Contracting first appeared during the Trump Administration, which is not surprising. What is surprising to health experts is that the Biden Administration hasn’t killed it. The current administration halted a major rollout but is still permitting tests of the plan in several dozen markets.
Medicare administrators are pitching the program as a way to advance health equity for underserved communities. Maybe it can. Then again, Medicare Advantage plans and managed care were originally promoted as a way to reign in healthcare costs, and they haven’t come close.
What Medicare Advantage has done is take Medicare funding, 98% of which goes directly to paying health care costs, and found ways to make profits by squeezing more revenue from the Treasury and denying treatments that original Medicare pays without question. From 2009 through 2021, Medicare paid Medicare Advantage plans $140 billion more than would have been spent if the same insureds stayed in Medicare. The plans generate enough profit to enable large insurance firms to make $150 million in campaign contributions (to both Democrats and Republicans). Perhaps there is a correlation between those contributions and the lack of raised eyebrows in Washington, from either side of the aisle, at this Medicare takeover scheme.
“Some will rob you with a six-gun,” Woody Guthrie wrote, “and some with a fountain pen.” All the players in Washington seem committed to Medicare’s transition from a public good to a private, less-good managed-care system.
There is no outcry in Washington over the concept of giving away $880 billion, collected from taxpayers to protect their health in old age, to the private sector so they can provide taxpayers less care at greater cost and profit handsomely thereby.
Sorry, but I have a problem with that. If no one in Washington is inclined to stand up and declare the public good is not for sale, then maybe it’s time to light a fire under them.
Maybe it’s time to make some good trouble.
Wow! And I thought I was being radical!
Agree. And also time to abandon the working assumption, grounded in the New Deal, that current powers that be have any sort of goodwill for the public. A political system that elevates people to power and money via corporate campaign contributions (regardless of party label) is one that rewards greed and fear of missing out among politicians, not care for the common good. The incentives are all for asset-stripping what's left of the middle class. The wearing-down of Medicare, so much more effective than a direct attack, is, unfortunately, an excellent example.