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More Evidence of the Damaging, Expensive Results of Privatizing Medicare

November 2012

Sidney M. Wolfe, M.D.

Some studies of health care in the U.S. have looked at federal overpayments to private Medicare Advantage (MA) plans (also known as Medicare Part C or Medicare HMOs), which compete with traditional, fee-for-service Medicare. Until now, none of these studies have calculated the total amount of overpayments to private plans since the inception of the Medicare program.

Our longtime colleagues at Physicians for a National Health Program, Dr. Ida Hellander, Dr. Steffi Woolhandler and Dr. David Himmelstein, have just finished such an analysis, to appear in a forthcoming issue of International Journal of Health Services. Its findings raise further doubts about the viability of market-based reforms of Medicare and, more generally, of our health care system as a whole.

The authors find that “the inclusion of private plans in the Medicare program has cost taxpayers $282.6 billion, [or] 24.4 percent of the total amount Medicare has paid private plans since 1985,” mostly in the past eight years.

Looked at another way:

In 2012 alone … MA plans are being overpaid by $34.1 billion, or 6.2 percent of total Medicare spending. In 2012, 13.5 million Medicare beneficiaries are in private plans, [or] 27 percent of total enrollment. Some proposals would push millions more beneficiaries into private plans (e.g., voucher-type Medicare reform).

The authors conclude by stating:

Funds wasted on overpayments to private MA plans could instead have been used to improve benefits for seniors, extend the life of the Medicare Trust Fund by more than a decade, or reduce the federal deficit. Private insurers have enriched themselves at the expense of the taxpayers. It is time to end Medicare’s long and costly experiment with privatization. Alternative models of controlling costs that are proven-effective deserve a closer look.

By “alternative models,” they refer to a single-payer, improved Medicare-for-all-system, similar to what most civilized countries already have. Why doesn’t our country belatedly become civilized and grant all people in the U.S. health care as a right, not an often unaffordable privilege?

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