When I wrote last week supporting renewal and expansion of the State Children Health Insurance Program (SCHIP), I had no idea how determined President George W. Bush and many congressional Republicans are to stop subsidized health care for poor children and to privatize Medicare, the highly successful 40-year program that help seniors and the disabled get medical services. But I learned when the Republican-sponsored megaphones opened up.
For example, the Wall Street Journal op-ed and editorial pages published five articles in six days warning Americans against expanding “government medicine,” and/or “Hillary-care,“ by helping states insure kids. And shouting the praises of Medical Advantage, a taxpayer subsidized program to lure Medicare recipients into private insurance programs.
The propagandists suffered a temporary set-back when health insurance company Humana announced 19% quarterly income gains, mostly from their growing Medicare Advantage program.
Today’s Medicare Advantage was passed in 2003 as part of Medicare D legislation that helps some seniors--and many pharmaceutical and health insurance companies--with expensive American drugs.
Explaining how insidious Medicare Advantage is requires some figures.
We Americans are paying an average of $7,100 each for health care, a total of $2.2 trillion, nearly one-sixth of the gross national product. Yes, that’s right, a family of four is paying an average of $28,000 each year for health care.
A part of this large pie is Medicare, which costs more per person because it covers 44 million seniors and permanently and totally disabled, about one in seven Americans. In 2006, Medicare cost $374 billion, 12% of the federal budget. In addition, Medicare recipients pay several thousand dollars out of pocket each year for physician insurance, supplementary insurance, deductibles and co-pays.
Per person cost of Medicare’s decades-old, traditional fee-for-service program varies across the country. For our example, we’ll use an about-right figure of $8,000 per recipient for region A.
But Medicare Advantage pays insurance companies in region A $9,000, a $1,000, 12 percent (unconscionable) subsidy intended to be used to seduce Medicare patients into becoming wards of private insurance companies.
The insurance companies place their new profit centers into company-structured HMOs, PPOs, or fee-for-service arrangements.
They also selectively market, avoiding sick people and finding younger and healthier enrollees. Some companies are being investigated for aggressive marketing and misleading advertising that have resulted in confused purchasers who have to pay bills they never expected.
But, with 12 percent subsidies and time-tested tactics, it is no surprise Humana is reporting great profits--and a 1.2% stock price increase for its recent reporting day alone. And with subsidies, insurance companies can ignore administrative costs and profits that average 15%, ten times traditional Medicare’s administrative costs.
(If companies lose subsidies, they’ll cut benefits to pay administrative costs and profits. By that time, it will be too late for enrollees--but not for many retired multimillionaire executives.)
However, if you are just now becoming aware that Republicans intend to privatize Medicare, let me tell you while we slept, they have successfully privatized 70% of Medicaid, the other similarly-sized government health program.
Medicaid is a state-federal program for the poor that cost $304 billion and covered 47 million people in 2006. States determine eligibility and administer programs--at least until they turn enrollees over to private insurance companies. (SCHIP builds on state Medicaid programs by adding previously ineligible children.)
What we think of as government programs (add military, VA, etc.) pay for some health care for about one in three Americans, or 100 million people. Add 155 million with employer-based health insurance or individual private insurance, and 45 million with no health insurance, and you have us all, just over 300 million.
But federal and state governments are making suckers of taxpayers by turning their 100 million designated beneficiaries over to private insurance companies that take a 10-30% administrative-profit slice (versus 1.5% traditional Medicare administrative costs).
Government willingness to act as premium-collector for private insurance companies--who then do as they see fit with Medicaid and Medicare enrollees and health care providers--explains in part why we pay about one and one-half times as much for health care as anyone else in the world, but don’t get any more of it.
Dr. Roy may be reached ar email@example.com