Liberals’ fear and loathing of private Medicare plans

COMMENTARY Medicare

Liberals’ fear and loathing of private Medicare plans

Dec 12th, 2016 2 min read
COMMENTARY BY
Robert E. Moffit, Ph.D.

Senior Fellow

Robert E. Moffit is a senior fellow in The Heritage Foundation's Center for Health Policy Studies.

Key Takeaways

Most Americans like their private health plans, particularly their employer plans, and want to keep them if they can.

Liberals frantically trying to stop Medicare “privatization” have a problem.

President-elect Donald Trump has picked Rep. Tom Price, Georgia Republican, to be the next secretary of Health and Human Services (HHS), and incoming Senate Minority Leader Charles E. Schumer, New York Democrat, doesn’t like it one bit. To hear Mr. Schumer tell it, Mr. Price will wage a “war on seniors,” trying to “privatize” Medicare and thereby putting “seniors’ health care at risk.”

Actually, Mr. Price favors expanded choice and competition in the Medicare program — as recommended by House Speaker Paul D. Ryan, The Heritage Foundation and many others. He would allow private health plans, including employer plans, to compete on a level playing field with traditional Medicare as well as each other.

And that makes Mr. Schumer’s rhetoric weird.

Most Americans like their private health plans, particularly their employer plans, and want to keep them if they can. Moreover, Medicare is already a rich mixture of public health care financing and private health care delivery.

Unlike the Veterans Administration, which literally owns hospitals and pays government salaries to its doctors, Medicare’s delivery system is almost entirely private, including nearly 5,000 Medicare-certified hospitals, over 15,000 skilled nursing facilities and almost 700,000 physicians, as well as most other medical professionals. Most are reimbursed by “traditional Medicare.”

However, a large and growing part of the Medicare program is a system of competing private health plans called Medicare Advantage (or, sometimes, “Competitive Medicare”). These are private, defined-contribution health plans, but Medicare Advantage is still a public program, mostly financed by public dollars and governed by federal rules and regulations.

Nationwide, these plans serve nearly one-third (31 percent) of the total Medicare population. In Mr. Schumer’s home state, they are even more popular, serving 37 percent.

In Medicare Advantage, the government gives health plans a per capita payment for their enrollees based on the plans’ competing bids to provide Medicare benefits. Today, those bids average only 94 percent of traditional Medicare’s costs. That means they are economically more efficient at delivering Medicare’s traditional benefits than traditional Medicare itself.

And plans that bid below the administratively determined benchmark receive “bonus” funds that can be used to lower premiums, provide richer benefits, or both. According to The Kaiser Family Foundation, the average monthly Medicare Advantage (MA) premium is now $37, and 81 percent of Medicare enrollees have access to at least one MA plan that includes drug coverage where they pay nothing beyond their regular Part B premium payment.

Liberals frantically trying to stop Medicare “privatization” have a problem. Medicare participants like it; that’s why Medicare Advantage enrollment is surging. The Kaiser Family Foundation estimates that, by 2026, 41 percent of all Medicare enrollees will choose Medicare Advantage.

The left’s perennial campaign against “privatization” assumes that government-managed health care financing and delivery is somehow safer, superior and more secure. So why is the Veterans Administration such a disaster? Its poor management and cold-hearted indifference to patients have damaged veterans’ health and, according to CNN, cost thousands of lives.

Seniors do have good reason to worry about their health care, though. And it’s because of Obamacare. To help fund Obamacare, the Affordable Care Act authorizes cutting hundreds of billions of dollars in Medicare payments. This year’s report from the Medicare Trustees warns: “By 2040, simulations suggest that approximately half of hospitals, 70 percent of skilled nursing facilities and 90 percent of home health agencies would have negative total facility margins, raising the possibility of access and quality of care issues for Medicare beneficiaries.”

Congressional liberals are not helping. They’re simply indulging in another round of “Mediscare” — a transparently cynical political strategy to frighten the living daylights out of vulnerable older Americans to prop up and further entrench the federal bureaucracy’s control of their health care.

This piece originally appeared in The Washington Times

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