Selling out medicare

by Les Bayless

This article was reprinted from the December 16, 1995 issue of the People's Weekly World. For subscription information see below. All rights reserved - may be used with PWW credits.

WASHINGTON - A previously hidden plan by the GOP Congressional leadership to "save Medicare" contains provisions to privatize the nation's health care system for older people, resulting in billions of dollars of windfall profits for HMOs and other forms of managed care.

While Republican budget proposals strip increases in traditional fee-for-service arrangements, where a recipient sees a private doctor who receives a set payment for service, last-minute changes in the legislation written by lobbyists for managed care groups provide a healthy 8 percent increase in reimbursements for private plans next year while limiting increases for regular Medicare to a little more than 5 percent.

Another change won by the industry allows private plans to use a generous funding formula as a basis for future payments which will widen the gap between funding levels for private plans and traditional Medicare services.

Terence Carroll, president of the National Association for Public Health Policy, called the provisions unconscionable. "It's outright thievery to provide additional funds to insurance companies that own and operate HMOs while slashing funding for Medicare," he told the World.

Carroll said the proposed changes were a "long step toward doing away with Medicare and the first step toward doing away with the Social Security system itself."

Carroll is not alone in his concerns. Dixie Horning, executive director of the Gray Panthers, a seniors' organization with chapters in 32 states, charged that the Republican effort to "save Medicare" would be costly to senior citizens.

"As a baby boomer, I'm concerned about my parents. These changes will mean they'll have to pay more for basic services, which means that ultimately I'll pay more. Whenever you lower the base of a service, more people will do without. With 40 million Americans already uninsured, we can't afford any more cuts," she said in a recent interview.

Horning compared efforts to "reform" Medicare to President Reagan's attempt to privatize Social Security a decade ago. She accused Republicans of creating a "false reality" that Medicare is in trouble and needs fixing.

"I'll tell you what needs fixing," she said. "We need to do something about cutting the defense budget. We need to do something about jobs. We need health care for the uninsured. And we need to leave Medicare alone."

Republicans have attempted to hide two other pro-managed care changes in Medicare in their budget proposals. One, a "fail safe" mechanism, automatically reduces payments to fee-for-service providers -- but not to managed care providers -- if spending limits are not met.

If the limits are exceeded and benefits are cut, something critics say will almost assuredly happen, doctors and hospitals will stop seeing Medicare patients who will have little choice but to flock to managed care plans, further eroding the base of the system. If most healthy patients leave Medicare for managed care plans, the system will be left with only the sickest and poorest recipients, jeopardizing it's financial stability.

The GOP proposal also establishes Medical Savings Accounts (MSAs), which would allow healthy or wealthy seniors to opt out of Medicare and put premiums in private, IRA-like savings accounts.The MSAs would have a $10,000 limit, but "non-medical withdraws" would be allowed for accounts over $6,000.

Critics charge that this provision is a payoff to an industry that has contributed more than $25 million over the last 10 years to Congressional candidates of both parties. Citizen Action, a public advocay group, says the eight leading insurance companies have contributed roughly $375,000 to representatives and senators this year with roughly 80 percent going to Republicans, including Speaker Newt Gingrich.

The biggest chunk in Medicare "savings" of $270 billion in the GOP proposal comes from reduction in payments to private physicians, hospitals and nursing homes -- about $90 billion in all. Another $47 billion comes from increases in Part B premiums, which were scheduled to decline in January from 31.5 percent to 25 percent of total program costs.

Critics charge that the cuts will dramatically increase old- age poverty. The Health Care Financing Administration estimates that out-of-pocket expenses will increase $900 per senior per year. Half of all senior citizens have incomes of less than $17,000 a year.

Another possible consequence of the cuts will be the closing of an estimated one-half of all rural hospitals in the U.S. that depend on Medicare and Medicaid for 45 percent of total revenue. The result will be less access to emergency medical care and layoffs of health care workers in small towns that may already be economically depressed.

Republicans argue that turning Medicare over to the private sector would be cost efficient. Critics point out, however, that nearly 25 cents on every dollar collected by private insurers is spent on administrative costs, while Medicare spends only 2 cents of every dollar for this purpose.

President Clinton, much to the dismay of health care activists, includes provisions expanding "choice" of health care plans in his seven-year balance budget proposal released last week. The president's plan cuts $124 billion from projected increases, using the same methodology as the Republicans.

The president's budget does, however, maintain Part B premiums at 25 percent of program costs. It also contains $25 billion in new spending, including grants to states for health care for the uninsured.