Caring for elders, disabled people and families is an American value. For decades the public Medicare program has honored these values, bringing health and economic security to millions of older and disabled people and their families. The new president should make the preservation and expansion of Medicare, as a vital social insurance program, a top domestic priority. Here's why.

Why is Medicare Important?

People forget what life was like before Medicare. Private industry failed to insure older and disabled people. When Medicare was enacted in 1965, half of Americans aged 65 or older had no health insurance. For 43 years, Medicare has provided quality health insurance and access to healthcare for older people and, since 1972, for people with disabilities.  Over time Medicare has:

• Kept older people out of poverty;

• Relieved the next generation of the worry and reality of having to pay their parents' medical bills at the expense of their own needs;

• Helped to increase life expectancy.  In 1950, the average life expectancy at age 65 was another 13.9 years. By 2004, that number had increased to 18.7 years.

What are the Consequences of Medicare Privatization?

Medicare was designed to be an understandable, stable, and uniform social health insurance program. However, recent developments have resulted in an increased reliance on hundreds of subsidized private plans, annual plan and benefit changes, income-based benefits and cost-sharing. These developments confuse beneficiaries and, left unchecked, will lead to the erosion of Medicare's community of interest and the destruction of Medicare as a dependable, valued public program.

Until recently Medicare was a balanced public-private partnership but experiments with delivering benefits through private plans, purportedly to save money, have broken the balance. Medical coverage has proven more expensive under private plans than under traditional Medicare. (The Congressional Budget Office, the Government Accountability Office, the Medicare Payment Advisory Commission, the Commonwealth Fund and numerous other studies have come to this same conclusion). 

The Medicare Modernization Act of 2003 provided lavish subsidies to private "Medicare Advantage" plans that amount to over $15 billion a year.  These subsidies have led to an extraordinary proliferation of private plans.  Indeed, the average payment to private plans is 13% more than payments to traditional Medicare. The Congressional Budget Office estimates that equalizing the payment policies for Medicare Advantage plans with those for traditional Medicare would save Medicare at least $150 billion over the next nine years.

Still, with all this, many private plans fail to actually provide beneficiaries in need with the same level of coverage that is provided by traditional Medicare. Private plans limit access to providers available to beneficiaries in traditional Medicare; most plans are not available nationwide; and most change benefit packages and provider networks every year. Thus, it is clear: private Medicare not only doesn’t save money, it threatens Medicare’s promise and future.

Private Medicare Advantage is Too Expensive and Too Often Inadequate

Medicare wasn't broken, but because of the ever-increasing private Medicare options, it is breaking.  The number and costs of private Medicare plans have increased exponentially as a result of the design of Medicare Part D and "Medicare Advantage".  The myriad private plans have created confusion and barriers to care for real people.

The Center for Medicare Advocacy is contacted every day by people who were inappropriately marketed to, people who did not understand what they were getting into, people who have been unable to get the health care services they need from their Medicare Advantage (MA) plan, and people who are "locked into" their MA plan. Further, the Center gets calls for help from people who thought they had MA "on top of" their regular Medicare and/or Medigap and are surprised to find out that this is not true.  This is especially so when the service or provider they need is not covered by their MA plan.  Medicare privatization costs taxpayers billions of dollars, while it hurts many people with Medicare and strangles the traditional Medicare program. Consider these recent stories from Center clients:

• Mrs. P is a 67 year old woman who was diagnosed with ALS three years ago. She contacted the Center for help because her private Medicare plan cut off all her home care, saying she was "stable" and no longer needed home health services. CMS said the coverage decision was up to the plan and would not intervene. The Center for Medicare Advocacy filed a case in federal court seeking continued coverage for Mrs. P.  The Court ordered Medicare to cover Mrs. P's home care.  She was therefore able to stay at home with the health care she needs. Without Medicare coverage and this necessary home care, Mrs. P. would have been forced to enter a nursing home.
   

• A Congressman called the Center to obtain help for a constituent whom he met at a local town hall meeting.  Mr. B and his wife were members of a Medicare Advantage plan in Connecticut.  They went to Florida for vacation where Mrs. B fell and was sent to the hospital to treat her injuries. Tests at the hospital showed that, unbeknownst to Mrs. B, she had a brain tumor. Doctors determined she needed treatment immediately.  Because Mr. B is frail himself and the couple's daughter in Utah is a nurse, they decided to go there for Mrs. B's chemotherapy.  Upon receiving the chemotherapy, however, Mrs. B had a life threatening reaction that resulted in her being in the Intensive Care Unit for days. She ultimately died. The hospital bill came to $100,000 and was completely denied by the Medicare Advantage plan because Mrs. B was "out of network".  The Center appealed. Finally, after an administrative hearing most of the bill was paid in recognition that the care received after Mrs. B's reaction to treatment consisted of emergency services.

"Medicare Advantage" is starving the successful public Medicare program and hurting beneficiaries. Despite taxpayers spending 13% more on private plans than it would cost to serve the same people in the traditional Medicare program, private Medicare has proven far less able to provide secure health insurance and a wide choice of doctors and other healthcare providers for older people and people with disabilities.

Part D Premiums Reflect the Costs of Privatization

According to figures from the Center for Medicare & Medicaid Services[i], the average 2009 Part D premium is up 23% since 2007. Some plan premiums have risen by over 400%. In Connecticut, for example, the premium for the least expensive Part D plan available for 2009 will have increased by 165% since 2006.  One Connecticut Part D plan that cost $7.32 per month in 2006 will cost $41.40 per month in 2009.  Acting CMS Administrator Kerry Weems acknowledges that many Part D enrollees will face significantly higher premiums in 2009.

In contrast, traditional Medicare Part A has no premium for the vast majority of beneficiaries. The Part B premium will not increase from 2008 to 2009, and only increased 3% from 2007 to 2008.  Private plans simply cost beneficiaries more.

Part D Privatization Creates Insecurity for Low-Income Beneficiaries

A sad corollary to the desire to maximize profits in the lucrative Medicare business that was provided by Medicare Part D is that private companies are not interested in serving the neediest populations.  This is clearly evident in trends in Part D "Benchmark" plans.

"Benchmark Plans" are plans offering basic Part D benefits with a premium that is at or below the benchmark amount (a weighted average, essentially) for a given plan year. Part D Low-Income Subsidy (LIS) beneficiaries may be automatically enrolled in Benchmark plans, and those who are eligible for the full low-income subsidy pay no premium for these plans.  The Benchmark plan threshold premium for 2009 is $34.17/month.  There are 308 such Benchmark plans for 2009, down from 495 in 2008; a decrease of almost 40%.  For beneficiaries, the most significant change is that Humana is no longer a benchmark plan. Humana, which was Medicare Part D's initial low-cost plan, will no longer be a Benchmark plan anywhere in the country.  Private plans are dropping the poorest beneficiaries from their Part D offerings, just like in the 1990s when they dropped out of Medicare because it became insufficiently profitable.

Medicare is a Successful Model for National Health Coverage

The United States pays more per capita for health care than any other industrialized nation, yet almost a fifth of our population goes uninsured.  A disproportionate number of those uninsured are young adults.  Right now approximately 33% of young adults lack health insurance, compared with about 16% of the population overall.[ii]  As stated earlier, Medicare changed this picture for older Americans.

Access to health insurance coverage meant that more older people received needed medical care… Access to health insurance also meant that Medicare beneficiaries and their families no longer had to bear the full cost of their care, helping to reduce poverty among older people and their families.[iii]  The inception of the Medicare program solved the dilemma of health care for a forgotten population 43 years ago.  An expanded Medicare program holds that same promise for the latest generation left behind by private health insurers.

"Most people overlook the most affordable way to achieve universal coverage; putting all of us under the Medicare umbrella," says Merton C. Bernstein, a founding member of the National Academy of Social Insurance and the Coles Professor of Law Emeritus at Washington University in St. Louis. "That single-payer system would reduce non-benefit spending by doctors, hospitals, clinics, laboratories and health care insurers by about $300 billion a year, providing funds to insure everyone without additional outlays."

"Other savings measures could supplement Medicare-for-All," Bernstein says. "Only a single-payer plan enables savings on a scale sufficient to make universal coverage feasible. And as with Medicare today, patients would choose their own doctors — the choice most of us cherish and that private insurance often limits."[iv] 

Conclusion

President-Elect Obama: please recognize these Medicare truths. Medicare was enacted in 1965 because private industry failed to meet the needs of older people. It would be a terrible irony if privatization condemned Medicare now, returning older and disabled people to the vagaries of the private, for-profit insurance industry. The way to sustain Medicare is not to increase the eligibility age or decrease benefits, but to stop privatizing it at the expense of older people, people with disabilities and taxpayers.

Despite repeated partisan attempts to scare us about Medicare and give it away to private industry, the traditional Medicare program remains a reliable, cost-effective source of care for its beneficiaries.  Rather than trusting the private sector that continues to leave people behind as it chases profits, it is time for all Americans who need and value health care to look to Medicare as their model.  Medicare works because it is stable, guaranteed, cost-effective, and universally available.  A health care program as established and reliable as Medicare should not be dismantled, but expanded. 

We urge the new Administration to cut the unfair subsidies to private industry rather than cutting the peoples' benefits and their health care providers' payments. Use Medicare’s successful, public-private partnership model as it existed before 2003 to address our nation's health care crisis. Preserve and expand Medicare, our nation's most successful social health insurance program that has cared for our older and disabled citizens for over 40 years.  Open the traditional Medicare program to all and shut down the private plan earmarks to help pay for it.