What Republicans Don’t Want You To Know About Medicare

by John Lawrence

According to Mitt Romney and Paul Ryan, President Obama is taking $716 billion away from Medicare and giving it to Obamacare. News flash: No, he’s not. We attempt to set the record straight.

The crux of the matter has to do with what’s called Medicare Advantage which is a privatized version of Medicare. Neither side will use the word privatization, but in a nutshell that’s what this issue is all about. That $716 billion represents a push back by the Obama administration against the forces of privatization which have been at work against government run Medicare for years.

In 1997 our old friend, Newt Gingrich, established the privatization camel’s nose under the tent of traditional Medicare with the Balanced Budget Act, which included a provision for something called Medicare+Choice, the precursor to Medicare Advantage. This act let private health care companies compete with traditional government-run Medicare. This was step 1 in the privatization of Medicare.

During the Bush administration the name was changed to Medicare Advantage. It was an advantage all right — for the private health care corporations who were paid more for each procedure than doctors were paid under government-run traditional Medicare. A total of 14 percent more. In other words, Republican congressmen made Medicare Advantage a more attractive program then traditional Medicare, and this lured seniors in opting for Medicare Advantage rather than sticking with traditional Medicare. It was hardly a level playing field. Medicare Advantage was a disadvantage for traditional Medicare.

It is this “advantage” of the Medicare Advantage program that Obamacare seeks to take away, which leads to the charge by Romney-Ryan that Obama is taking $716 billion from Medicare and giving it to Obamacare. What he is really doing is taking the $716 billion from the privatized version of Medicare, Medicare Advantage, and using that money to cover poor people — thus approaching universal health care coverage for all. Of course, covering poor people at the expense of the private health care corporations’ profits is anathema to Republicans.

But let’s step back a little in order to try and understand the bewildering array of programs which constitute the social safety net of Medicare.

First you pay payroll taxes your entire working life. They’re called FICA (Federal Insurance Contribution Act) if you’re an employee and SECA (Self Employment Insurance Act) if you’re self-employed. It turns out that if you’re self employed you pay twice as much in payroll taxes as you do if you’re an employee — all thanks to changes made by Alan Greenspan and Ronald Reagan giving the lie to the Republican meme that they’re all about helping the small business person, but that’s another story for another day. FICA taxes consist of two parts: social security tax and hospital insurance tax. Hospital insurance tax is what pays for Medicare Part A when you’re 65 and enroll in Medicare.

Medicare Part B is a whole different story. This is the part that pays your doctor and is entirely optional. You can choose to enroll in it and pay a premium (for about $100 per month) or to not enroll. Medicare Advantage, which is also called Medicare Part C, is only about Medicare Part B. Confused yet? An enrollee can choose traditional Medicare (Part B) or Medicare Advantage (Part C). Both require a monthly premium.

The Republican plan is to lure seniors away from traditional or government-run or “socialized” Medicare and direct them to Medicare Advantage programs run by private insurance corporations. Eventually and stealthily, this would privatize Medicare in and of itself as Medicare Advantage enrollees reach critical mass. Traditional Medicare would then be left to wither on the vine.

How do the private insurance companies attract enrollees away from traditional Medicare, you might ask? Good question. They offer some services that traditional Medicare doesn’t – like free annual check ups. Thanks to Republican monkeying this logical cost reducing preventative measure has been denied to traditional Medicare recipients … until Obamacare. Obamacare gives traditional Medicare recipients free preventative benefits – an annual physical exam, colonoscopies and so on. This nullifies the advantage of Medicare Advantage, and is why the Republicans are up in arms. Their carefully laid plan to privatize Medicare is being nullified by Obamacare.

How does Medicare Advantage offer free services that traditional Medicare doesn’t? It’s all about that 14 percent advantage of traditional fees-for-service that the government pays to the private health care corporations. They then have the option of paying doctors more than they would get for the same service provided to a traditional Medicare enrollee. Or they can provide more services than a traditional Medicare enrollee is offered. Or they can keep the money and pay their CEOs more. That’s one reason why administrative costs for Medicare provided by private insurance companies are 30 percent and administrative costs for government run traditional Medicare are 3%.

When Romney-Ryan assert that Obamacare would be taking Medicare away from seniors, they may be partly right because that 14 percent advantage enjoyed by Medicare Advantage will be taken away. That’s what constitutes the $716 billion. Doctors who are receiving more for providing the same service may not be too happy about that. As it is, many doctors refuse to take on Medicare patients because the reimbursements are so low. Also, the private health care corporations may cut back on their “lures” — the freebies like gym membership and visual care they offer that traditional Medicare doesn’t. That’s why the Obama administration is hesitant to confront this issue head on. They don’t want to piss off doctors and seniors who are already enrolled in Medicare Advantage. Many of the advantages of Medicare Advantage will be nullified.

But Medicare Advantage has a dark side. With traditional Medicare you can go to any doctor you want, even specialists, without a referral. You can get a second opinion, even a third if you choose. With Medicare Advantage you have to stick to a certain network of doctors, and you can even be refused treatment under some circumstances. Ah, there’s the rub. Medicare Advantage will offer you lures — cheap lures but, when it comes down to those expensive operations, you might be refused the permission to undergo the operation by the insurance corporations. After all, that’s how they make their money – denying service for the expensive stuff while luring you in with the cheap stuff.

Step 2 in the privatization of Medicare has to do with the fact that Medicare Part B (traditional Medicare) only pays 80 percent of the doctor’s fees. That other 20 percent could amount to a lot of money with today’s skyrocketing medical costs. But no worries — private health care corporations to the rescue! They offer Medicare supplemental, or Medigap insurance. For a small premium (yeah, right) they pay the other 20 percent.

So why doesn’t the government offer 100 percent coverage for a slight additional premium? Right now, Medicare Part B costs around $100 per month for 80 percent coverage. Why not charge a $120 premium for 100 percent coverage?

Instead, private health insurance corporations are charging as much or more for the additional 20 percent as folks are paying the government for the first 80 percent! Republican meddling and monkeying is responsible for getting the private health insurance corporations’ camel’s nose under the tent of traditional Medicare Part B. Jeez, thanks Republicans for letting me pay as much to the private health insurance corporations for 20 percent coverage as I pay the government for 80 percent coverage. Why isn’t this a major issue? You’ll never hear Brian Williams, Scott Pelley or Wolf Blitzer talk about it.

Step 3 in the privatization of Medicare is the by now famous Paul Ryan plan to ‘voucherize’ Medicare. Whereas the Gingrich plan resulting in Medicare Advantage (remember, advantage to the private corporations) is a Trojan horse sneak attempt, the Ryan voucherization plan is a headlong assault on Medicare. It would pay seniors X amount of dollars and then they could go fend for themselves in the private health insurance market.

Seniors would have to pony up greater and greater amounts as the government-supplied stipends fall increasingly short of the amount required. Also all the old health insurance corporation tricks — such as rescission — would be reinstated. That means that sick seniors would have to pay astronomical premiums even to get any health insurance at all, and desperate seniors might be denied a life saving operation. The insurance company — not your doctor — would decide.

At the root of Medicare’s problems is the sky-rocketing cost of health care. Cancer drugs are coming on the market which delay death by only a few months yet cost astronomical amounts. For instance, the cost of the drug Perjeta when combined with Herceptin costs $188,000, but delays the final denouement of death by only six months. It costs $120,000 for four injections of Yervoy, which extends the life of advanced melanoma patients by about four months.

A recent Newsweek article discussing the rising cost of cancer treatments asked just how much a little more time was worth? Whatever the (exorbitant) price, you can bet your bippie that Paul Ryan’s privatized Medicare wouldn’t foot the bill. This means expensive therapies and life-extending operations are inevitably going to be available only to the rich regardless of whether or not Medicare is privatized or left entirely to the government.

But don’t take it from me that taking money away from the privatized Medicare Advantage program and putting it back into traditional Medicare is a good thing. Take it from Wendell Potter who was an insurance industry insider turned whistleblower:

While private  insurers like the part of Obamacare that would require all Americans not eligible for Medicare or Medicaid to buy coverage from them, they didn’t like the provision that would eliminate the overpayments from the federal government for participating in the Medicare Advantage program — a steady stipend since Republicans controlled both chambers of Congress in the late ’90s.

A little history: A provision of the Balanced Budget Act of 1997, written primarily by the insurance industry and backed by House Speaker Newt Gingrich and Senate Majority Leader Trent Lott, gave Medicare beneficiaries the option of getting their benefits through private insurers. Republicans envisioned this as the first step toward the total privatization of Medicare.

The problem was that insurers were reluctant to jump in unless they could be assured of a substantial profit. To get them to market Medicare Advantage plans, the [Republicans in] government agreed to give them a big bonus. As a result, we the taxpayers now pay private insurers 14 percent more than the per-patient cost of the traditional Medicare program. These overpayments have contributed significantly to the record profits insurance companies have been posting in recent years, even though only 22 percent of people eligible for Medicare have bought what they’re selling.

The insurers were not able to keep the Democrat-controlled Congress of 2010 from eliminating those bonuses when they passed the Affordable Care Act. The law will indeed reduce future Medicare spending — not benefits — by an estimated $500 million over the next 10 years in a variety of ways, one of which is to stop overpaying insurers. This means that they will not get an extra $136 billion that they — and their shareholders — had been counting on, and they’re really bummed about that.

As per usual, you won’t get the straight scoop from either the Republicans or the Democrats but at heart Obamacare versus Paul Ryan’s Vouchercare is an ideological struggle. It’s all about privatization versus government-run health care or “socialization.” Neither side will mention this ideological struggle or the words “privatization” and “socialization” because they have been so thoroughly demonized.

The Democrats will not try to convince you that you will be better off if the government runs the Medicare program, and the Republicans will not tell you what’s in store if private health insurers run the program. So neither side will get near the root of the issue. After all, we don’t think we want “Big Government” and we don’t want to be at the mercy of the profit seeking, highly-paid CEOs at their corporate desks either. And so this essentially ideological debate is trivialized.

John Lawrence is enrolled in traditional Medicare Part B and has opted out of supplemental Medicare or Medigap coverage.



John Lawrence

John Lawrence graduated from Georgia Tech, Stanford and University of California at San Diego. While at UCSD, he was one of the original writer/workers on the San Diego Free Press in the late 1960s. He founded the San Diego Jazz Society in 1984 which had grants from the San Diego Commission for Arts and Culture and presented both local and nationally known jazz artists. His website is Social Choice and Beyond which exemplifies his interest in Economic Democracy. His book is East West Synthesis. He also blogs at Will Blog For Food. He can be reached at j.c.lawrence@cox.net.


  1. avatarjudi says

    Great article, John. I have Secure Horizons as my medicare advantage program and will now reassess my coverage to see if I should drop it or not. Thanks for the eye-opener.

  2. avatar says

    I too was suckered into Medicare Advantage when I first became eligible. But when I realized it was private health insurance, I transferred back to traditional Medicare after the first year. I don’t believe in supporting the privatization of Medicare, and I’ve heard some horror stories about Medicare Advantage patients being denied expensive but needed services. Also I like being able to go to a specialist of my own choice without being referred first by a family doctor.

    Next I’m going to write about dentistry in Tijuana which costs less than a third of what it costs here, and, hopefully, will extend this to medical services as well.

    I already did an article for my blog on dentistry in Tijuana several years ago:


  3. avatardennis byron says

    Your tag says “John Lawrence is enrolled in traditional Medicare Part B and has opted out of supplemental Medicare or Medigap coverage.” (I assume you mean you are enrolled in Medicare Parts A and B?)

    In what way did you opt out? In my state, you have to opt in to Medigap/supplemental Medicare (mean the same thing here/not there?)

    Could you share your reasons? Are you independently wealthy and therefore can afford the high co-pays and deductibles (basically do you self insure?)? Are you not concerned about catastrophic costs?

    (By the way, the major PPACA cuts are to hospitals and nursing homes providing services to Part A and B beneficiaries, not to Part C.)

  4. avatarJEC says

    A detail I didn’t see mentioned – perhaps because it’s data. Allow me to share – in 1996 I cared for my mother. She had Secure Horizons. What I learned at the time. First, your Medicare account is limited – not endless. When my mother signed up for Secure Horizons the Feds paid a signing bonus fee to Secure Horizons from my mother’s account. And then monthly payments are paid from that same account. A day the light went on – my mother in medical crisis; the director of the visiting nurses association and the Sr. Medical Social Worker from Secure Horizons. My mother’s condition exceeded the limits of the visiting nurses charter – she needed to be in a skilled nursing facility (snf) – at the same moment the Secure Horizons representative told me she did not qualify for a snf. But, in passing he added, “good thing she signed up (for Secure Horizons) at 82 – there’s skill money left in her Medicare account.” I learned that our Medicare account can be depleted based on usage. My understanding is having part B helps reduce the charges applied to Part A but if you sign up with Secure Horizon (or similar) they get a monthly check regardless and if you live too long your account will be empty. Oh yes, a single letter from an attorney and Secure Horizons reimbursed me – a year later and eight months after my mom died. It is their business model to always deny and wait for the challenge.

  5. avatardennis byron says

    Dear sir. You are giving your readers some very misleading information in the following:

    ” Thanks to Republican monkeying this logical cost reducing preventative measure has been denied to traditional Medicare recipients … until Obamacare. Obamacare gives traditional Medicare recipients free preventative benefits – an annual physical exam, colonoscopies and so on…”

    Medicare was begun by Democrats and has never included an annual physical exam. I am sorry to tell you that it still does not contain an annual physical exam after PPACA. I think you are confusing annual wellness visit with annual physical exam. An annual wellness visit is just a vist, not an exam, and it is not physical.

    The good news though is that the colonoscopies are not annual.

    • avatarAndy Cohen says

      Actually, the Affordable Care Act DOES include free preventive care as a part of Medicare, including annual physical exams. It’s part of the deal. John Lawrence is right, and you are dead wrong.

      • avatardennis byron says

        No sir you are wrong.

        Did you not understand what I was saying. An annual wellness visit is not an annual physical exam. It is not an exam, it is a visit. It is not physical ( no one takes your temperature; no one asks you to cough or say ahh!, etc.). How much more explicit do you want me to get ?

        Or are you purposely trying to deceive senior citizens for some other purpose?

  6. avatardennis byron says

    I am afraid you do not understand how Medicare Part B works. You say

    “So why doesn’t the government offer 100 percent coverage for a slight additional premium? Right now, Medicare Part B costs around $100 per month for 80 percent coverage. Why not charge a $120 premium for 100 percent coverage? Instead, private health insurance corporations are charging as much or more for the additional 20 percent as folks are paying the government for the first 80 percent! ”

    You are not taking into account the fact that Medicare Part B costs $400 a month in total. We seniors pay $100 and the government provides $300 in premium support. Depending on what state you’re in, private insurers charge about $100 more for that extra 20%, right in line proportionately with the total cost of Medicare Part B services. (But again this varies widely state to state.)

  7. avatarJEC says

    I agree with Dennis, both parties helped make this mess. My question – is this debate worth the effort. I mean, here’s what I can see; medicine for profit is the foundation – the ethical reasoning employed to justify the design; Health insurance CEO’s are, on average, the highest compensated of any industry; we are losing doctors, less than a half million now practicing and 20-25% of the new medical professionals added to our ranks each year are H-1 immigrants. Yet our medical schools do not produce enough doctors to meet our needs and operate on average at less than 80% capacity. Hospitals are closing – 68 in California by last count over the last ten years. I had open heart surgery – only 12% went to the doctors and nurses who actually did the work. At last count 287 pharmaceuticals were unavailable in the U.S. – many are life dependent drugs. Some of these drugs are available in Mexico, even Cuba. Our life expectancy is at the bottom of first world countries; our infant mortality rate ranks with many third world countries. As a percent of our GDP we pay 45% more than any other nation on health yet 18% or so of our population has no access. What we call a system is flying apart. It seems like we’re debating over who gets to own a house while it’s in the process of burning down. For me, I believe we have fallen so far down the rabbit hole that a national solution is out of reach. Let each State come up with their own solution – socialized medicine, or for profit, let the people who use the service decide.

  8. avatar says

    Dennis Byron,

    You are automatically enrolled in Medicare Part A by virtue of the fact of having worked 40 quarters in the US and having paid payrole taxes. Medigap and supplemental Medicare are the same thing and one opts out by just not purchasing them. I do get a lot of junk mail practically every day offering them to me. By not purchasing them, I do take a chance of a sky high doctor bill. That’s the chance I take.

  9. avatar says

    Dennis Byron,

    Andy is right. Obamacare makes a free annual physical exam (not a wellness visit as you suggest) available to traditional Medicare recipients as of 2011. You are confusing this with the one time wellness visit that was available before Obamacare.

    • avatarDennis Byron says

      sir, you and Andy are wrong. See page 53 of the Medicare and You booklet. PPACA does not include a free annual physical exam. I am not confusing anything. You are confusing seniors, I think purposely.

  10. avatar says

    I am the Program Manager for the Health Insurance Counseling and Advocacy Program (HICAP) for San Diego and Imperial counties. We offer anyone who is about to become eligible for or already is eligible for Medicare free and unbiased information about all the various plans available under Medicare. We also assist with appeals, billing issues, low-income application assistance and prescription drug plan comparisons, among other services.
    I would suggest making an appointment with a HICAP counselor to review all the complex issues and choices related to healthcare coverage under Medicare. We hear many stories of beneficiaries finding out the hard way, that a provider or doctor is not available because of enrollment in a Medicare Advantage plan or the supplement plan you chose at age 65 may become unaffordable at age 85. Our San Diego office number is 858-565-8772 and appointments are available throughout the county at many senior centers, Social Security offices and other convenient locations.

    • avatarDennis Byron says


      Would you start by explaining to readers that the annual wellness visit begun under PPACA is not an annual physical exam.

      • avatarDavid says

        The Annual Wellness Exam is not equivalent to what most people would consider a “physical” exam. It has some of the same features, like blood pressure checks, heart rate and height and weight measurements but is not meant to be a full-blown annual physical. A doctor will review medications, perform the screenings above and discuss a patient’s medical history and concerns. Any additional tests or services may be billed at routine Medicare rates and co-pays, unless they fall into one of the preventive service categories that do not require a co-pay. This link from the Medicare.gov website will provide more info: http://www.medicare.gov/coverage/preventive-and-screening-services.html
        You can also call the HICAP office if you have any questions or concerns about billings for Medicare services: 858-565-8772.

        • avatardennis byron says


          It’s not equivalent to what any person would consider a physical. Why the weasel wording? Unless you combine the “annual wellness visit” with some actual MD-related physical activity such as a DRE for men for prostate cancer (for which there is a co-pay depending on your supplemental policy), it is most likely you will not actually see a doctor (when’s the last time your doctor weighed you?).

          Why can’t you be straightforward about this subject for the readers? The link you posted lists a lot of tests that are mostly not annual and/or again almost always relate to lab work, not a doctor’s visit.

          Seniors, here’s the story David won’t tell you for some reason: You need a physical exam at least annually at our age. Medicare doesn’t pay for it. Never has. Didn’t start to under Obamacare. But you still need the physical so pay the $200 — plus or minus depending on where you live — and get yourself a physical every year. Or if you prefer look for some private Medicare supplemental insurance that does cover the physical (although if you pay more than $20 a month for the private insurance — or $20 more than you otherwise would have spent for private Medicare supplemental insurance — you’re probably better off just taking the $200 out of your pocket. Do the math to decide which way you go.)

          Ok, was that hard?

  11. avatar says

    This is from “An Advocate’s Guide to the
    Annual Wellness Visit Benefit in Medicare”

    “The prevention and wellness benefits that are offered under Medicare for free went into effect on January 1, 2011. Medicare beneficiaries can now work with their doctors to develop personalized prevention plans and take advantage of many important preventive services, such as vaccinations or screenings for diabetes, high blood pressure, high cholesterol, and cancer. And beneficiaries won’t have to worry about the out-of-pocket costs for these services, because the law eliminated copayments and other cost-sharing for them.”

    So blood work is done to determine cholesterol levels and many other preventative services. I don’t know what else you want in an annual exam. Are you parsing the terms “annual wellness visit” and “annual physical exam.” Most doctors proceed as if they amounted to the same thing.

    The same report states: “The annual wellness visit offers services that are not included in the Welcome to Medicare physical, such as an opportunity to develop a personalized prevention plan, which includes planning for the preventive screenings and services a beneficiary may need over the next five to 10 years.”

    So the annual wellness visit offers MORE services than are included in the introductory physical, not less as you imply.

    Here are some that are included:

    The annual wellness visit includes the following services:
    – Routine measurements, such as a beneficiary’s height, weight, blood pressure, and
    body mass index (BMI);
    – Review of a beneficiary’s individual medical and family history;
    – Review of the medications, supplements, and vitamins the beneficiary is currently
    – Discussion of the care that the beneficiary is receiving from other health care
    – Review of a beneficiary’s functional ability and level of safety, including any
    cognitive impairment, as well as a screening for depression;
    – Discussion of personalized health advice that takes into account a beneficiary’s
    risk factors and specific health conditions or needs, including weight loss, physical
    activity, smoking cessation, fall prevention, and nutrition;
    – Discussion of referrals to other appropriate health education or preventive
    counseling services that may help a beneficiary minimize or treat potential health
    risks; and
    – Planning a schedule for the Medicare screening and preventive services that are
    appropriate for the beneficiary over the next five to 10 years.

    Dennis Byron, it’s not only “equivalent”; it’s MORE than equivalent.

  12. avatardennis byron says

    You don’t know what you are talking about and this is a waste of time. But I reply because you are endangering senior citizens with your left wing propaganda. Why would I go to a left wing web site when everything I need to know is right on medicare.gov?

    Yes, there is a difference between a physical exam and the annual wellness visit. I am not parsing anything. It is important for senior citizens to have an annual physical exam. An annual wellness visit is not an annual physical exam.

    Obviously you didn’t want to take the word of the HICAP guy above so how about AARP (see

    Almost everything else you wrote in your post is also total nonsense but the rest of it — except for the annual wellness visit misinformation and the totally nuttymisinformation about how the Part B premium is derived — cannot hurt seniors. Your guidance about wellness vistis can harm seniors.

    • avatar says

      Now, Dennis, you’re really getting desperate with your comments. Your own reference to the AARP has this to say: “Among doctors in general, there is no agreement of what should be done in an annual physical…” So despite all your accusations about left wing propaganda, the AARP, which is really a front group for selling supplementary Medicare health care insurance tied to United Health Care, admits that it’s really up to the doctor to decide what a physical or a wellness exam is. So some doctors may bill for services that other doctors would include under the “annual wellness visit.” Some doctors are more greedy than others to be sure. I’m satisfied with the “annual physical exam” (or if you want to call it an “annual wellness visit”) that I get from my doctor. Of course, if you want the “Cadillac” of physical exams you should pay more. And the AARP wants you to believe that you need to buy supplementary insurance from them in order to get your annual “physical”. Your persistence and attacks on my veracity, Dennis, tell me that you probably are a flack for the private health care industry.

  13. avatarFrank says

    Great article John but I gotta correct you on a few points.

    “Medicare Part B is a whole different story. This is the part that pays your doctor and is entirely optional. You can choose to enroll in it and pay a premium (for about $100 per month) or to not enroll. Medicare Advantage, which is also called Medicare Part C, is only about Medicare Part B. Confused yet? An enrollee can choose traditional Medicare (Part B) or Medicare Advantage (Part C). Both require a monthly premium.”

    Not entirely true. You are required to take out Medicare part B if you are on an “Advantage” plan so you are paying BOTH. The optional pat of Medicare part B has a caveot. If you dont take part b and dont have credible outpatient coverage you will be penalized 10% annually for not having it when you finally activate it.

    You never addressed from where or just how much Advantage plans get for taking over the administation of your Medicare Earned Benefit. Many people think that the $99.90 they pay for Medicare part B now goes to the Advantage plan carrier, False.

    The $99.90 still goes to the federal government. When you sign up with an MA plan you are moving the administation of your earned benefits over to said MA carrier. What people dont realize is that that allotment ranges from $800 to $1,200 per month! then you add the 15% stipend you get overthat and its a mind boggling amount. Here’s the wrost part. If they dont spend it they keep it meaning that there is an insane level of conflict of interest when doling out the money that seniors have earned for their healthcare.

  14. avatarEd Buck says

    Every American citizen should contact their congressman or state legislator to pass legislation that will require any doctor or any medical institution that has received
    state or federal funds to finance their programs or their education to accept any senior
    patient on Medicare. These people should repay the the taxpayers who have helped them.