By 2030, traditional Medicare (TM) as we know it, particularly those of us who depend on it for our health care, just might cease to exist, marking the end point of fifty years of attempted privatization and the gradual transfer of Medicare’s Trust Funds and their management to private for-profit insurance companies. Lots of money is at stake – over $900 billion in benefits were paid in 2020 to almost 63 million subscribers. Wall Street private equity firms are salivating.
Backstory: How did this happen? Can it be stopped? It began soon after the Medicare program became law in 1965, enacted to ensure that older Americans would have ready access to good health care as they aged and became ill. By 1973, Medicare had proved so popular that Nixon identified rising health care costs as a serious budget problem and took the following steps to contain them:
1st – he formulated basic operating principles, in effect today, aimed at containing costs:
- health care is a commodity governed by market forces of supply and demand;
- curb Americans’ – and their physicians’ — demand for health care, costs will decline.
2nd – to accomplish this, he introduced legislation establishing mechanisms to govern market forces — Health Maintenance Organizations (HMO’s) and Professional Provider Organizations (PPO’s), market-based, private, for-profit enterprises, to serve as gatekeepers to healthcare for their subscribers. They would control costs by controlling demand.
They didn’t, proving unpopular because their healthcare provider panels were too limited. The quest then began, pursued by every President since, for a programmatic response to healthcare costs that have risen today to $4.1 trillion annually, $900B for Medicare alone.
Medicare Advantage: Bush II made the next ambitious cost control attempt. In 2003, he proposed and Congress approved the Medicare Prescription Drug Improvement and Modernization Act (MMA), which established the Medicare Advantage program as Medicare Part C and a Prescription Drug plan as Part D. Both were designed to fill gaps in Traditional Medicare which has never offered dental, eye, hearing or prescription drug benefits. Again, both would be provided via policies purchased from private, for-profit insurance companies, to mixed reviews from subscribers. The Prescription Drug program has been singularly disappointing: drug costs remain exceptionally high – Part D programs are forbidden by law to negotiate lower prices with Big Pharma suppliers. Medicare Advantage, on the other hand, has proven very popular, with 29 million of Medicare’s current 63 million enrollees transferring their healthcare coverage to MA by 2022.
Industry journals, particularly Kaiser Health News, cite the positive experiences of those recently retired, newly enrolled and essentially healthy subscribers, who express their appreciation of MA’s additional benefits, dental, eyecare, hearing and pharmacy benefits, and the extra perks like health club memberships. KHN goes on to report that once an enrollee becomes seriously ill, her/his situation changes, often dramatically – deductions and co-payments increase; and a limited provider network makes it difficult to access needed specialists. This last often requires MA enrollees to transfer back to TM, where specialty care is more readily accessible.
As has occurred with every cost-saving innovation, MA does not cut costs: MA’s average annual cost per enrollee exceeded TM’s cost by approximately $321 per person, $11.8K v. $11.5K in 2021. More dramatically, MA’s total program costs in 2019 exceeded TM’s by $7B, attributable largely to bonus payments and diagnosis upcoding, which awards additional funding to MA programs for enrolling seriously ill persons. Over the next 8 years, MA programs’ total costs are expected to rise from $348B in 2021 to $664B, attributable to increased enrollment plus bonus payments and diagnosis upcoding. Growth in program size also brings with it an increase in monies needed for overhead, which includes program administration and profit set-aside, totaling 15% annually, all of which are paid by MA enrollment fees and by Medicare
In any event, the cat’s out of the bag. None of the several programs established to cut costs, including MA, has ever done so. As KHN has documented, the only sure way to reduce program costs is to reduce services, which a narrow provider network coupled with high deductibles and co-payments and frequent denials are designed to do. What’s really going on?
Direct Contracting Entities: The DCE’s constitute an initiative of the Trump Administration to which Biden has appeared to acquiesce. Their objective is to close down TM permanently. According to the plan currently being piloted by the Center for Medicare and Medicaid Services (CMS), the Federal agency which manages Medicare and Medicaid, step 1 obliges CMS to assign all its management responsibilities for Traditional Medicare to Direct Contracting Entities (DCE’s), a consortia of private insurance companies that will serve as intermediaries between Medicare enrollees and their health care providers, approving or disapproving all requests for care. The Medicare Trust Funds will continue to function as a bank, paying requests for reimbursement for services provided. MA programs will remain as they are.
In step 2, all 36 million persons currently enrolled in Traditional Medicare, with or without their consent and with no right to opt out, will automatically be assigned to one of 53 DCE’s charged with providing services in one of several large geographic areas. These GEO DCE’s will assume 100% responsibility for an enrollee’s medical services and will be financed similarly to MA programs, with certain key exceptions:
1st – Payments for administrative overhead and profit set-aside will amount to 40% of all monies received, in comparison to 15% for MA programs and 2% for TM programs.
2nd — More than half – 28 of 53 – are controlled by investors not providers.
In sum, all the programmatic shenanigans of the past 50 years have had one objective – privatize Medicare and its Trust Funds and leave them exposed to exploitation by Wall Street and other investors.
Pushback: If DCE’s are implemented in accordance with CMS’s plan, Medicare for All, the perfect antidote to all this looting of public taxpayer money, will also be dead. How can we stop all this from happening?
Medicare for All faces a long uphill battle and that’s another Op-Ed. Rest assured it’s not a Socialist program but a pragmatic approach to provide us all with universal access to comprehensive and affordable medical care. Take a look at the single payer article published in the Almanack — https://www.adirondackalmanack.com/2021/12/the-single-payer-ny-health-act-universal-access-to-comprehensive-healthcare.html. More immediately, you can join the petition and call-in initiative being sponsored by Physicians for a National Health Plan. Request a link to PNHP’s anti-DCE petition and I’ll get the link to you.
These are the elected officials you should contact in Washington asking them to do two things:
1st — pressure Biden and Secretary Xavier Becerra of Health and Human Services to put an end to the DCE pilot project. Also contact leading Congressional DCE opponents and ask them to pressure Biden and Becerra: Congresswoman Pramila Jayapal; Senator Bernie Sanders; Senate Majority Leader Chuck Schumer. (The Washington office addresses and ‘phone #s of the individuals just listed can be googled.)
2nd – Pressure those same individuals to push the Medicare services section of the Build Back Better bill through Congress, either as a part of BBB or as a stand-alone bill. That section would allocate public tax monies to add to TM dental, hearing and eye care services. Such an addition would certainly entice a good number of MA enrollees to transfer back to TM and stop the DCE pilot in its tracks.
For those that don’t know, Medicare is already quite expensive for many retirees. Part B premiums are currently $170.10 per month and I purchase a Medicare supplement plan to cover all the stuff that Part A doesn’t cover. That makes my total Medicare cost right now around $350 a month. Many Medicare Advantage plans cost nothing or just modest amounts per month compared to purchasing a supplement plan like I do. Plus, they bundle in all sorts of perks like reduced vision and dental plans, wellness benefits, etc. The problem is the Advantage plans put you right back into the old grind of trying to figure out what is in network, what is actually covered, etc. You end up paying out of pocket for things you thought were covered, but aren’t due to some gotcha.
Absolutely correct. Congress has refused to invest in upgrading Medicare for years, preferring the privatization model. No need for any of that segmenting with attached costs. Federally funded healthcare opponents have been active and successful since Nixon. Which is why I cite Bernie’s attempt to upgrade Medicare in BBB, soon to be a failed attempt as conservatives have rallied opposition, abetted by media, and Biden, inept, has willingly surrendered. Only option at present, also a tough sell, Medicare for All orf NY single payer. If DCEs left to stand, M4A dead. Tough to get anything beneficial to ordinary Americans enacted when the opposition is the ruling class and the Federal Govt.
Remember — pessimism of the intellect v. optimism of the will.
Maybe Elise Stefanik could grab some headlines working on this issue that directly effects her voters. Or is CRT and voter fraud on the front burner?
Stefanik is now performing for a national constituency known as the “base,” apparently referring to their base instincts and beliefs.
Of course the naysayers of universal healthcare will cry “socialist” and then staunchly defend their Social Security. The loudest of them have most likely never been to or experienced the actual healthcare reality in most all the other Western democracies or places like Israel.
The reality here is that it’s all about the money. It’s the same trickle down economics that is really a smoke screen for corporate profits and greed mostly controlled by the ultra rich investors that have outside influence on many of our lawmakers; think Citizens United.
Many of the very people most adversely affected by the cost and inefficacy of our healthcare system consistently vote against their own interests. The why is multifaceted. The dumbing down of America is a good start. 🙁
I can’t wait to see certain reactions… 🙂
So true, just look around, you can see it happening right before your eyes. $4.1 trillion in healthcare cost in the US makes the elites too much money while “we the people” stay divided and rally around bullshit causes. “It’s my right not to wear a mask and help spread the virus” all because some politician or talking head says so.
Bill, two separate issues. Mask mandate is just that, a mandate, which you’re free to observe or not. DCE’s represent a loss of what we have without our consent, a gift of billions of dollars to for-profit insurance companies and to Wall Street — a looting of our taxpayer dollars. If you think the “elite” has has too muchn money, they’re about to have even more.
Not a partisan issue, but a struggle between the billionaire class and ordinary Americans. Like us.
Yes, they are separate issues, but my reference to the mask mandate is an example on how a divided populace is oblivious to what else is happening that will have an effect on their lives. Corporate media keeps the “Covid mandates” and the “big lie” front and center while issues like DCE’s controlling Medicare slides under the radar. It’s always been a struggle between the billionaire elitists and ordinary Americans because most of the politicians are owned by the billionaires and their campaign funding. Thanks for the article it was very informative but some what depressing believing that these changes will probably happen.
Bob Meyer, You describe it all so well. Hypocrisy, and class warfare all kept in play by the politicians bought and paid for by the “Citizens United” crowd to make sure the poor and the needy of all races never catch a break no matter how hard they try.
Say Bob, I spent a lot of time around Loon Lake back in the day. Even had a boat there once upon a time. Good memories around Loon Lake back in the 1950s,
No, folks ! This is serious stuff ! No name calling or snarky partisan remarks. We are or all will be senior citizens someday perhaps totally dependent on Social Security and Medicare. Life and death stuff ! We have to discuss this often and loudly and advocate for the best system possible. But not only for seniors but for everybody, young snd old. Let’s not depend on anecdotal stories but on hard statistics as expressed in this article. Our lives really do depend on it !
Sorry Joan but this issue is intensely partisan. One side has openly declared war on Medicare, Medicaid, and Social Security and the other side wants to strengthen and expand these vital programs. The main thing that every citizen can do that is effective is to never vote for anyone, local, state or national, in the former party and always vote for the latter party.
There cannot be a cost-effective healthcare system as long as Big Insurance and Big Pharma dictate their desires to Congress and Congress take their cash. Think those insurance companies and pharm companies have ANY interest in reducing their profits? They set their own prices and profits. Wailing and gnashing of teeth about how to prop up Medicare will get us nowhere.
Wait for all of the associated costs of COVID treatments and hospitilizations get passed on to us. The insurance companies aren’t about to take THAT hit.
Thank you. Division amongst the people is the best common denominator and strategy for Congress, Big Pharma and Insurance Cos. to continue to flourish- for themselves! This is no way a one party, one politician issue, particularly when those collectively making the decisions, claiming it’s ‘for the people’ are the very ones making the secret deals & buying/trading stocks that miraculously seem to go up weeks after the purchase. Frankly, I’m surprised people are not squawking more about the massive profits being made (in the billions) from the vaccine/booster shots, with more to come and possibly a yearly dose. This is quite a profitable venture for all involved and until people wake up to the backroom deals and handshakes at their expense, and start demanding accountability and transparency, nothing will change.
People aren’t squawking because they have yet to be handed the bill! Consumers and taxpayers are the only true PAYERS out there. Everything else is smoke and mirrors – corporations making a profit on simply shuffling our money around. NO VALUE ADDED!
And yet people continue to vote the same people in office, for decades, that continue to mismanage our tax $, while exempting themselves from the same standards they legislate and impose on others. If I sound skeptical to trust those making decisions in the ‘system’, [particularly, healthcare] that they truly have Americans best interests at heart, it’s because I unashamedly am! They have not earned trust by their own actions or lack thereof; who cares what they ‘say’ during an election year! MOST have mastered the art of tickling the ears of the masses, pretending to genuinely care for the people in front of the cameras, as they comfortably retreat to their 2nd or 3rd vacation home that they earned from ‘public service’. Uh-huh.
If the pandemic did not open people’s eyes to the level of greed / corruption / profitable agreements and unchallengeable power among the politicians, big pharma, big tech and big corporate news outlets, nothing will!
OF COURSE, we will be the ones footing the bill! Who else would it be? Duh! They rely on our stupidity and laugh at us all the way to the next backroom deal.
Hey this is a great topic, thanks for posting! I’m all for the Almanack branching into current events once in a while, as you know lol, and am glad this one seems to strike a cord.
Again since a fussy baby prevents my previous long winded nature: imo the most important thing to remember is that American healthcare is stupid expensive, unparalleled for the rest of the world and especially for the quality! We pay 100s for a mediocre Starbucks latte when much of the world pays a few bucks for your fanciest Italian espresso in bulk, to use a metaphor.
So of course I support a Natl healthcare system and have also done for a while, as I believe the author has. But beyond govt using its power to maintain a popular and effective social program, govt should also just straight up control costs, as is done elsewhere in the world. Want to stick it to Big Pharma? Price controls. I know pharma execs who endorse this as the most effective single step that can be taken.
With the oligarchic nature of the federal govt, this step will be hard to implement. But talking about all of these topics is a small & necessary start.
Name me something the government runs well! Medicare isn’t one of them, and you want to add millions of users to the process.
BS. I’ve been on Obamacare and Medicare, and my kids have been on various government health programs and they have all been 100% better run, less costly, and provided better care than any private insurance I have paid through the nose for. Medicare is like a breath of fresh air after fighting insurance companies most of my life. Call them up and you get quickly to real human beings here in the USA who are very helpful too. Plus, they cost a lot less per person than any private insurance. Private insurance is about maximizing profit, not maximizing good for people.
Medicare is actually run very well. The problem is its funding is political.
Stefanik sums up her party’s position on Medicare and Medicaid. https://auburnpub.com/opinion/columnists/hiltzik-stefanik-gop-smear-everything-they-don-t-like-as-socialism/article_8a7ad6bc-7a54-54cd-acc4-27c4070d91db.html
It is much easier to attack the status quo than come up with actual plans of your own. I am waiting to hear ONE reasonable solution that could actually work. Don’t tear down systems before you have a replacement. Expecting people with little to no income to pay exorbitant prices for healthcare is nothing less than a death sentence. Or is that the plan – survival of the richest??
The alternative is to look at what seems to work well in most other developed countries. Have a think tank assimilate the best points of other countries’ systems and use that as a starting point – out of earshot of the constantly haranguing of lobbyists.