Medicare Privatization

Last week, members of Congress’s bipartisan “supercommittee,” which was charged with coming up with a plan to cut the federal budget deficit by $1.2 trillion over the next 10 years, announced that they would not reach an agreement before their deadline of last Wednesday. This means that unless Congress creates a separate plan or the supercommittee reaches a late agreement, automatic spending cuts affecting Medicare, the military, and other programs will take place starting in 2013. As we noted in a post in August, the Medicare cuts would represent about 2% of the program’s budget and would most likely result in slightly lower reimbursements for health-care providers.


But many members of Congress, in both parties, are unhappy with the automatic spending cuts and would like to reduce the federal deficit differently. Most Democrats insist on raising taxes on the wealthy, so that spending cuts need not be as deep as they would be otherwise. Most Republicans insist on not just cutting 2% from Medicare, but taking more drastic measures to limit how much is spent on the program. To this end, many of them support privatizing Medicare in some manner. What, exactly, would this mean?

A recent article from Reuters examines the common features of privatization proposals — such as those offered by Rep. Paul Ryan, chairman of the House Budget Committee, and presidential candidate Gov. Mitt Romney — and how they would affect the federal budget as well as seniors. According to the article, privatization could take the form of premium supports — payments to seniors that would be tied somehow to the cost of private health insurance plans they would be expected to purchase — or vouchers, which would not be tied to the cost of insurance. Currently, Medicare defines the benefits that seniors receive under the program and pays health-care providers directly, without a private insurance company in between. (The one exception is the Medicare Advantage program, in which the government pays private insurance companies a certain amount per enrollee to administer their own plans — but these plans must cover at least everything that regular Medicare does and cost the same to enrollees.) Therefore, privatization would shift some financial risk from the government to individual seniors, since they would need to directly cover any increase in premiums not covered by vouchers or premium supports.

There is no doubt that privatizing Medicare would reduce the government’s spending on the program, by directly limiting how much it spends — rather than under the current system, in which the government pays a defined price for each medical procedure or service but does not set an overall limit on spending. But Republicans and Democrats tend to disagree over whether privatization would lead to lower overall health-care spending, by both the government and individuals. Republicans claim that letting private insurance companies administer plans would create competition and thus lower costs. Democrats point out that government-run Medicare actually has a better record of controlling costs than private insurance does, with per-person spending growth between 1970 and 2009 that is one-third lower than the growth of private health insurance premiums during the same period. Furthermore, the nonpartisan Congressional Budget Office estimates that under the Ryan plan, which freezes Medicare spending, a typical 65-year-old in 2022 would pay $12,500 in yearly health insurance premiums, rather than $5,630 under Medicare. Many Republicans, however, disagree with this analysis, claiming that it does not account for the effects of competition.

What do you think — is privatizing Medicare a good idea? Would it most likely lower health-care costs by promoting competition, or would it shift too much risk to seniors? Would you support alternative ways to limit Medicare spending such as charging higher premiums to seniors with greater income, raising the age of eligibility for those without major health problems, or paying doctors a set amount to treat a health problem rather than by individual procedure? Or should Congress leave Medicare alone and focus on other ways to reduce the federal deficit — such as raising taxes or cutting military spending — even if Medicare costs continue to grow quickly? Leave a comment below!

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  • joan

    I would support increasing the age to qualify for Medicare. I would also support a careful analysis of Medicare, to eliminate fraud and abuse of this successful government program.

    I sense that history has proven that the insurance companies are mainly interested in making money. A voucher systems could mean additional limited care & supplies for diabetics and those with other chronic diseases.

    If everyone would pay their fair share of taxes our country would not have as much of a financial problem as it seems to be today. It really is a no brainer!

    There is nothing so uncommon as common sense used these days.

  • Ben Wood

    Very bad idea. One more item to help the rich and hurt the poor. “Occupy” needs to expand 100 or 1000 times more and fight back when the police abuse people excercising their freedoms. The republican terrorist must be stopped.

  • Dan schumacher

    Need to leave it along and give Medicare to every person in America and increase the payroll tax for Medicare. If other countries can do so can we . The insurance co need to be taken out of the system. They are the ones that are making us pay more.

  • Deb

    Awful idea. Terrible idea. Proposed by people who have the best health care paid by the rest of us. The healthcare system is bad enough without privatizing more of it. When will these people get it? Medicare is not the problem. It is a system into which working people have paid, not an entitlement, and it is not there to be plucked by politicos.

  • Susan McCracken

    Do not change the age for Medicare eligibility. We do live longer, but we live longer as old people; old age still comes at 65. Ask any old person. Ask any employer who tries to retire people at age 62, or even 60. We just live longer because we have means to treat the aches, pains and problems of age.
    However, reducing the fraud in medicare would help somewhat — enough to be worth the pursuit. This fraud in Medicare among people under 65 is fairly frequent. A follow-up every five years after enrollment as to health care and/or economic needs might reveal those wealthy who are still enrolled in the subsidized plans of Medicare even though they no longer qualify for the subsidy.
    Often government wastes money; therefore, it seems a good idea to privatize the system, but insurance companies are for-profit organizations with the highest paid CEO’s in the nation; to allow them to get their hands on the monies being exchanged for care of the old would be a joke. Perhaps they would cut the costs, but old people would die while waiting for or trying to fight denied claims and procedures. There would be no representation for the voice of the old. At least through the system of Congress, old people have some voice. They can learn to vote as a block and have their concerns heard. That is the American way. This problem of healthcare is major — it deals with the right to one’s life (liberty and pursuit of happiness.) It belongs with the national concern, not with business.

  • Vern Olson

    Leave Medicare alone. Why punish seniors for sake of the young generation thinking of their
    own selfs. Older people have and are paying the bulk share of goverment’s budget. Cut grants,cut welfare programs and non taxable agency spending. Seniors deserve to treated fairly and not the target of polticians looking to gain votes for 2012. We need honest politicians. My wife both worked our entire life and deserve to allow live a few more years.
    Vern Olson
    Plattsburgh , New York

  • daveincolorado

    Remember that there are no non-profit or not-for-profit insurance companies; they all work to make a profit for shareholders. They will not hold down costs by charging less for Medicare; even with a larger base of ‘customers’ from the Medicare payees, they will always look at the bottom line for their companies. Don’t trust this republican gimmick.

  • Amaze02

    An approach to lowering Medicare health care cost is not, government intervention, or take over, or bureaucratic oversight,Look to the Massachusetts plan, the most expensive plan in the country. Allowing each of us to spend our medical dollars with those providers that do a good job for us.

    FUTURE citizens:
    The government could set up Health Saving Accounts, Younger citizens where, pre-taxed money accumulates. If spent on Medical needs, no taxes paid, if spent for any other reasons it would be taxable. These monies would travel with you from job to job.$25.00 into a Health care account, grows to $380,000.00, tax deferred. $40.00 equals $680,000.00 (start at 20 years old until 65 years)
    If some don’t want to prepare for the future, why should the rest of society pay for the

    Taking the middleman (the insurance companies) out. Would cause us to see, directly, what we spend for our medical needs, and make decisions, as we do on any other service we buy.

    You watch and compare when you are spending you dollars directly.

    Competition will drive the cost down, just as it has, in all cases, of elective surgery. IE: cosmetic surgery, Lasik surgery etc. All not covered by insurance.

    The cost for these medical services have been dropping each year.

    Let free enterprise work.
    It always does!

  • G Whelton

    I have no idea what my Doctor will charge. How do I know if it is fraud. He piles up tests and procedures and sends me home with devices (that mostly don’t work) and bills MC and my MC supplement payor. Worst yet Veterans Affairs (VA) charges my MC account for all kinds of things they can think of and tell me if I don’t go along with their program they will drop me all together. Some choice, tipical govt burocracy providing employment for the otherwise unemployable.