Privatizing Medicare? Already Done.

I happen to be the new expert on health care reform, at least the Medicare part.  Like all such expertise, this took many hours to acquire.  Hard research, head scratching, spreadsheets and flow charts on the backs of envelopes and scratch paper.  The progression from ignoramus to expert happened quite quickly, and by necessity.

Next month my husband turns 65.  My private insurance will dump him and he'll be one of the millions navigating the Medicare system.  We began our study with the myriad of insurance company brochures arriving in the mail, the annoying salesmen calling on the phone and a developing distaste for the whole business.  Why were insurance companies suddenly interested in his eligibility for government benefits? Still, he has surgery scheduled a week after his Medicare begins (but before his birthday, so we were caught unawares) and we had to figure this mess out quickly.

The simplest information was the hardest to find, even on the government website:  Here are the basics:

Regular Medicare:  $140 deductible, physicals 100%, most medical covered 80%.  Premium Cost:  $100/month.  Much better than our current private policy.

Prescription Coverage:  This has to be purchased through a private insurance company (subsidized by government) though there are three ways to do it.  We planned to skip it since we pay less by paying 100% than by paying our copays.  Unfortunately though, there's a stiff penalty for NOT buying prescription coverage.  If you want it later, you pay a fee based on the number of months you chose not to pay for it.  (So if the Supreme Court rules that it's illegal for Congress to require people to buy insurance, will this be overturned too?)

Medicare Advantage:  This is buying your Medicare policy from an insurance company.  Every policy is different -- different coverage, different premiums.  Generally you pay both the $100 Medicare Premium and an additional premium.  Advantage policies can be bought with or without prescription coverage.

Medigap or Medicare Supplements:  This is an add-on to your regular Medicare policy but with prescribed benefits outlined on the Medicare website.  Additional premiums are charged by the insurance company you purchase from.  All of them cover at least the 20% patient portion.

So I studied the options.  Initially I was quite satisfied with Regular Medicare, already a big improvement over what we have now.  But for just a little more each month, we could eliminate the 20% patient portion.  With an expensive procedure looming, we decided that was well worth it.  I wanted my insurance from Medicare directly.  Nothing about the insurance industry inspires trust and I'd rather deal with policies that have some basis in law.

But adding prescription coverage and Medigap turned out to be more expensive than switching to a Medicare Advantage plan, in other words, buying private (government subsidized) insurance.  I was stunned.  How did the private companies provide so much more coverage at only a little higher cost?  Is it true that private enterprise can provide this service for less?  Reluctantly, we signed up for an Advantage plan.

And I began the second stage of my research.  Just exactly what does Medicare pay private companies to cover seniors?  Is it less, the same or more than what Medicare pays to provide the coverage directly?  In the process, I learned why insurance companies might not be so hot about the Affordable Care Act (aka Obamacare) and why Medicare costs ballooned under President Bush.

In 2003, Bush not only added the prescription drug benefit (and did so with no cost control measures) but also increased the benefits to private insurers wanting a piece of the Medicare action.  Medicare began generously subsidizing private companies to offer coverage.  Medicare pays private companies substantially more to cover seniors than it costs for Medicare to do so directly.  The windfall has made Medicare the boondoggle it is regarded as today.  Before 2003, at $250 billion it was a highly efficient provider of healthcare to America's highest cost patients.  In 2011, the costs doubled to $490 billion, in large measure because of privatization.

One of the important cost-saving measures in the Affordable Care Act was reducing the subsidies to private insurance companies.  Scott's Medicare will cost the government MORE because we contracted with a private insurance company.  This subsidy will begin to fade away if the Act stands.  And we'll return to regular Medicare, still terrific coverage and a quite reasonable benefit.

Overturn "Obamacare" and watch Medicare subsidies continue to spiral out of control.  I for one don't mind paying taxes for services I use.  I do mind paying taxes that are foolishly handed over to private businesses.  Taxing all of us to pad corporate ledgers doesn't sound like Adam Smith's capitalism.

Want to privatize something?  Privatize risk.