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Privatize Medicare? No Way!
How the Medicare Modernization Act
Threatens Medicare

Much attention has focused on how the Medicare Part D Drug Plan has upset, confused, and even endangered seniors and disabled people, disrupting their access to medicines, making them buy drugs from private companies that give inadequate and confusing information, and making the poor pay more than before. Meanwhile, the drug companies are getting some $139 billion in additional profits.

But the 2003 Medicare Modernization Act is about much more than the Medicare Drug Program. The Medicare Modernization Act threatens to privatize and bankrupt the entire Medicare program. Here’s how:

Privatization will leave Medicare as a small program for sick people

The Carrot: Before 2010, the Medicare Modernization Act encourages Medicare patients to use private plans. The Act gives private “Medicare Advantage” plans 14 billion dollars to provide additional services that traditional Medicare should provide, but doesn’t. These Medicare Advantage overpayments amount to 12-19% percent more money than regular Medicare doctors get for equivalent patients. These subsidies are expected to increase the private plans’ share of Medicare patients from 15% to 40% by 2010, and the private plans will get the younger, healthier, and more profitable patients who can risk the private plans’ practices of limiting access to medical specialists.

The Stick: After 2010, the Medicare Modernization Act coerces Medicare patients into private plans. Starting in 2010, in 6 urban and 4 rural test markets, Medicare will no longer pay for whatever healthcare patients use. Instead, Medicare recipients will be issued voucher checks, and they will have to shop for their own health care, either traditional Medicare or a private “Medicare Advantage” plan. The premiums of the private plans will go down because they can market themselves to healthy people at gyms, marathons etc. The premiums of traditional Medicare will go up because Medicare must accept sicker, more expensive patients. Those sicker patients remaining in traditional Medicare will have to pay the premium increase mostly out of their own pockets, because the dollar value of the vouchers will be largely based on the lower premiums of the private plans. This will drive more healthy people out of Medicare. Over time, Medicare would go into a death spiral, with fewer and sicker patients paying higher premiums, and Medicare receiving less funding as its patient base decreases.

Privatization will leave Medicare as a small program for poor people

The Medicare Modernization Act encourages higher-income seniors to leave Medicare in two ways. First, higher-income recipients who remain in Medicare will be charged additional premiums. The additional premiums are modest at first but will become significant after a few years. Second, higher-income people will be given tax breaks if they leave Medicare and set up Health Savings Accounts, which allow them to make tax-free deposits and withdrawals for medical purposes. Over time, as higher-income people leave Medicare and Medicare has a higher proportion of sick people, Medicare would become a program for poor people, a welfare program, and vulnerable to the funding cuts all welfare programs have suffered.

The Medicare Modernization Act will limit Medicare’s future funding

You and I pay for our hospitalization under Medicare by payroll deductions during our working lives. But the more rapidly-growing costs for doctors care, drugs, and other Medicare services are paid by the Federal government. According to the MMA, the federal government cannot pay for more than 45% of total Medicare costs . If the Medicare Trustees predict twice in consecutive years that this will happen in the future, the President and Congress must clamp down to limit federal spending on Medicare, by premium increases, service cuts, or cuts in payments to medical provides. The Medicare Trustees did issue the first of these warnings last year, in the expectation of 70 million people reaching retirement age with longer life-spans and expensive chronic diseases.

The Medicare Modernization Act promotes worthless, high-deductible health insurance

Health Savings Accounts are only issued in conjunction with health insurance policies with cheap premiums, but high deductibles, which kick in only after the patient has spent thousands of dollars. Now employers are “giving” their workers these high-deductible policies instead of comprehensive health insurance. The lesson is that Medicare privatization is a threat to working families long before they retire or become disabled.

Privatize Medicare? No Way!

See the SF Gray Panther video, Privatize Medicare? No Way!

These issues are explained more fully in a Center on Budget and Policy analysis.
(See http://www.cbpp.org/11-18-03health2.htm)

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