Privatization of Medicare is a Looming Danger

All League members are invited to attend the LWVC Healthcare Interest Group Zoom meeting on Tuesday, July 26 from 7:00 to 7:45 PM when Dr. Ana Malinow will explain how Medicare is being privatized and how it must be protected to survive as a public program. To attend, register HERE.

For the past year, the LWVC Healthcare Interest Group (HCIG) has worked to support involvement in healthcare reform. For issues of national import, we need to promote interest at all levels — local, state, and national. That brings us to the need to alert our CA Leagues to the looming danger of Medicare privatization.

Recall that when Medicare went into effect in 1966, it was a public program that paid healthcare providers on a reasonable-cost basis. Original Medicare (OM) still pays according to a fee schedule with beneficiaries having freedom to choose any providers, including specialists, who accept Medicare (most do).

Medicare was modified to accommodate prepaid health plans (Health Maintenance Organizations – HMOs) in the 1970s, and in 1997 Medicare Advantage (MA) was adopted as an HMO-type alternative to OM. Due to aggressive marketing, about 45% of the 64 million Medicare enrollees are now in MA plans.

The HMO/MA model is intended to constrain costs by inserting an insurance company or health plan (contractor) between the payer (Medicare) and the patient. The contractor has responsibility to pay for care for its enrolled population, thereby assuming financial risk and an incentive to limit costs. If costs go down, the contractor gets a financial reward, inducing efforts to reduce inappropriate care, but also inevitably to denying or cheapening care. Thus in many MA plans we find severe limitations on access to mental health care, restricted access to specialty care, exorbitant bills for “out-of-network” care, etc.

For contractors, MA has been a winner with huge financial returns. However, from the standpoint of patients and taxpayers, MA has been a loser with no significant cost savings or improvements in quality. But at least until 2020, the choice of OM or MA, with pros and cons for each, was decided by the enrollee (you, if you’re eligible due to age, disability, or end-stage renal disease).

However, in the Trump administration, the door to privatization was opened further with the advent of so-called Direct Contracting Entities. Now, hedge funds and other financial speculators can buy clinics and primary care practices and acquire control over access to care without gaining the permission of patients.

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