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.
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.