The Common Good
February 2004

Privatizing Medicare

by Harry C. Kiely | February 2004

The bill will force millions to pay more for drugs, not less.

Medicare, the crown jewel in Lyndon Johnson’s War on Poverty and one of the government’s most popular programs, has been torpedoed under the guise of "improving" it. Its demise comes as the consequence of stealth legislation ruthlessly rammed through Congress by conservative Republicans and a few Democrats. "Government by Juggernaut," editorialized The Washington Post.

The United States is the only industrialized nation that does not have universal health care. Only in America is health care treated as a profit-making venture, and the new Medicare bill was designed precisely with that as its guiding principle.

Consider these facts about Medicare:

• Since its inception in 1965, this program has reduced poverty among the elderly by nearly two-thirds.

• Contrary to Medicare opponents, the program is not going broke. The Medicare Part A Trust Fund (which is financed through payroll taxes paid by workers and employers) will maintain a positive balance through 2026, according to the Medicare Board of Trustees.

• Medicare’s administrative costs are only 2 to 3 percent, in contrast to private insurance—Health Maintenance Organizations (HMOs) and Preferred Provider Options (PPOs)—costs of 9.5 percent.

A major yet easily correctable defect in existing Medicare is the lack of a prescription drug benefit. Advocates of Medicare reform exploited this vulnerability by offering a drug benefit as the highlight of its legislation. But is this actually good news? New York Times columnist Paul Krugman wrote, "As the Center on Budget and Policy Priorities points out, the bill will force millions of beneficiaries to pay more for drugs, thanks to a provision that cuts off supplemental aid from Medicaid."

So much for prescription drug benefits. The insults to seniors and the disabled only get worse.

The original Medicare program has consistently been so popular with its subscribers that the profit-oriented HMOs and PPOs have been unable to compete successfully. Writers of the new bill corrected this "inequity" by granting a tax-free $12-billion supplement to the private providers so they could offer attractive inducements to current Medicare subscribers. However, unlike Medicare, the HMOs and PPOs will be free to cherry-pick the most healthy applicants and leave the least healthy in Medicare. Over time, a weakened Medicare will then be forced to raise its premiums, eventually pricing so many out of the program that Medicare will slowly "wither on the vine," as Newt Gingrich put it, expressing his own wishes.

THE NEW BILL provides for Health Savings Accounts in which individuals may invest $1,000 per year and couples $2,000, tax free, to help pay for medical expenses. The result: another tax shelter for the rich.

The passage of the radical new legislation was aided by the surprising vote of support by the directors of the 39-million-member AARP. More than 10,000 members, feeling betrayed, resigned in protest the first week.

The payoff to supporters of the legislation is a blatant example of government-for-sale. For instance, pharmaceutical manufacturers gave an average of $28,504 to each of the 204 Republicans who supported the bill, but only $8,112 to the 25 Republicans who opposed it. The Democrats were similarly rewarded.

The tactics by which the new Medicare bill was slipped through Congress expose the dishonorable intentions of its authors. A committee made up mostly of Republicans designed the bill, 681 pages long, in secret. This legislation is so sweeping and of such historic significance that it deserved ample time for study and debate. Yet, with barely two days for members to review the measure, the House GOP leadership called for an up-or-down vote, at which time the Republicans discovered they were two votes short of passage. The voting period traditionally is 15 minutes, but the Republicans stretched that to almost three hours while its leaders stiff-armed and cajoled enough recalcitrant and fatigued colleagues into voting for the bill in the early morning hours. With President Bush’s signature, privatization of Medicare is on the road to completion.

Stay tuned, folks. Social Security is next.

Harry C. Kiely is a Medicare subscriber and a United Methodist minister living in Silver Spring, Maryland.

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