Gray Panthers of San Francisco
February, 2006 Newsletter

Medical Privatization & Cost Reduction


Under Medicare Part D, drug coverage will be available only through private insurers, and new $30-40/month premiums are being charged to each Medicare recipient who signs up for the drug benefit. Medicare doctor’s care will start privatizing in 2010 by issuing fixed payments to many beneficiaries, letting them choose between HMOs, with lower premiums because they solicit healthy customers, and Medicare, with higher premiums because it takes both sick and healthy. Likewise, several states (not California) are planning to issue Medicaid beneficiaries fixed payments and throw them to the mercy of private HMOs. So patient damage and obscene profits make privatization look like the primary problem.

But cost containment is the bigger story. The US will freeze Medicare funding in a few years, although 70 million new retirees with longer life spans and more chronic diseases are expected. The US plans to cut $42 billion over 10 years from Medicaid, which covers 46% of nursing home costs. Employee and retiree health plans are either being eliminated or shifted onto patients. Virtually all sections of government and business agree that having 15% of the GDP in healthcare is too much, because American products cannot compete internationally and still maintain desired profit levels.

Eliminating private health insurance and its complicated billing would save 21-25% in health costs. Would corporations settle for these reductions, or would they demand more? Manufacturers have many times higher health costs for retirees than for current workers. A 2004 study showed only 16% of the $365 billion in post-retirement health costs owed by S&P 500 companies has been set aside. Companies will want single-payer’s reductions, but a lot of big cuts also.

We demand universal, comprehensive, low-cost healthcare, with the same benefits and costs for all. But business will be a dubious ally.

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