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Will Trump privatize Medicare, or might he just finish the job?

Will Trump privatize Medicare, or might he just finish the job?

Picture of Trudy  Lieberman
House Minority Leader Nancy Pelosi (D-CA) speaks at a press conference.
House Minority Leader Nancy Pelosi (D-CA) speaks at a press conference last week urging President-elect Donald Trump and congressional Republicans to “keep their hands off the American people’s earned Medicare benefits.” (Photo by Win McNamee/Getty Images)

Is Medicare up for grabs in the new Donald Trump administration? You bet it is! The new regime in Washington may well speed along plans for the program that have been gestating for more than 20 years.

Way back in the time of Bill Clinton’s presidency, Beltway think tanks began spinning out studies and drawing up plans to change Medicare. Their aim was to transform the program into a private insurance arrangement like Obamacare instead of a social insurance program similar to Social Security where everyone paid into the system and was entitled to a common benefit at age 65. Ultimately the government would give seniors a contribution — a voucher or “premium support” — they could use to buy any insurance they chose in the private market, just as people receive subsidies to buy policies on Obamacare shopping exchanges today.

At the end of 2014, the new House speaker Paul Ryan told Politico that “the best days are yet ahead on comprehensive Medicare reform and premium support … It’s an idea that has been normalized.” Even as politicians and the media avoided the word “Medicare” during the campaign, Congressional Republicans were quietly crafting proposals for “redesigning” the program, as they put it, to fit “seniors’ needs more closely” and offer “new options so seniors can take that backpack into their retirement years.” That backpack will surely hold more choices sold by private insurers.

Since the election, the press has suddenly discovered Medicare is a story, and Democrats have gotten media attention with defiant quotes such those from incoming Senate Minority Leader New York Sen. Chuck Schumer. After Thanksgiving Schumer came out swinging, “We say to our Republicans that want to privatize Medicare: Go try it. Make our day.” And at a Capitol Hill news conference last week with leading Democrats, Schumer declared, “Republicans are plotting a war on seniors next year,” and vowed that, “Democrats will not let them win that fight.”

Democrats have already let them win the fight. As Robert Moffit, senior fellow at the Heritage Foundation, which provided the blueprint for a premium support plan in the mid-1990s, told me, “Those of us at the Heritage Foundation and allied public policy institutions like the American Enterprise Institute have effectively defined the terms of the debate on Medicare reform. The Democrats are debating our proposals. We’re not debating theirs.”

A lot of Medicare is already privatized, and as I’ve recently written in Harper’s, the government began to privatize the program years ago “using a combination of salami tactics and stealth.” To understand the coming debate on Medicare, a brief review of what has already happened is in order.

"Those of us at the Heritage Foundation and allied public policy institutions like the American Enterprise Institute have effectively defined the terms of the debate on Medicare reform. The Democrats are debating our proposals. We’re not debating theirs." — Robert Moffit, Heritage Foundation

By pushing managed care HMOs, in particular Medicare Advantage (MA) plans, where private insurers receive payments from the government to provide the same benefits seniors get in traditional Medicare, the government began moving the program toward a very different vision than the one Congress laid out in 1965. They were motivated by the exploding costs of medical care and by the ideology that the private market could provide benefits more inexpensively. To further this new vision and encourage managed care companies to provide benefits, especially in rural areas, Medicare began paying insurers that sold MA plans more than it cost to provide exactly the same benefits to beneficiaries who remained in the traditional program. At one point, Medicare was paying insurers 12 percent more; this year MA insurers receive about two percent more.

Reducing those overpayments has become almost impossible because of pressure from both Republicans and Democrats in Congress. For the last few years, when Medicare has tried to limit yearly increases, slick PR campaigns by insurers using beneficiaries as cheerleaders for Medicare Advantage plans have successfully reversed proposed cuts and turned them into increases. This year none other than Charles Schumer was instrumental in making sure insurers got their increases.

Schumer and Idaho Republican Sen. Mike Crapo spearheaded a campaign to convince 59 of their Senate colleagues to send letters to the Centers for Medicare and Medicaid Services urging Medicare not to cut payments to MA plans. More than 350 House members did the same. It’s hard for an agency to ignore that kind of pressure.

Insurers argue that increases and the overpayments are necessary to provide extra benefits like eyeglasses and gym memberships, which in turn attract more seniors and further privatize the program — Medicare private plan enrollment has grown from about 7 million enrollees in 2000 to nearly 18 million today. It’s what Medicare expert Marilyn Moon calls a “gentle conspiracy.” Insurers use seniors to argue for higher reimbursements while seniors get free passes to the local gym. Today about one–third of all seniors are in private plans.

The 2003 Medicare prescription drug benefit brought more privatization and advantages for MA plans and insurance companies. As a condition for getting drug coverage, Democrats agreed that only private insurers — not the government — could provide the benefit, a move that gave MA plans a competitive edge. And Medigap plans, which provide extra insurance for costs not covered by traditional Medicare, could no longer sell drug coverage, which some did until then. Seniors had to choose MA plans if they wanted the benefit, or they had to buy a stand-alone drug policy, which made managing their insurance arrangements more complicated.

“The word privatization is a cover for lots of distasteful changes that fundamentally change Medicare from what it was expected to be by its social insurance advocates in the 1960s.”— Theodore Marmor, Yale Professor Emeritus 

The so-called doc fix law passed two years ago that repaired Medicare’s physician payment formula took another step toward undermining traditional Medicare in favor of MA plans. Millions of seniors still in the traditional program buy Medigap policies to cover what Medicare doesn’t pay. Two of those plans, Plan F and Plan G, provide coverage for anything doctors charge above what Medicare pays them. (In Medicare speak, those amounts are known as excess charges; to those under 65 and insured by commercial carriers, they’re called balance billing. The public is now complaining loudly about that practice.)

The doc fix law also prohibits insurance companies from selling Medigap plans that cover excess charges beginning in 2020. Economists and policymakers have argued such policies lead seniors to consume more health care than they need, which drives up costs. Eliminating such plans, however, makes the traditional program less attractive to new beneficiaries joining the program. Seniors who already have those policies can keep them, however. “I see this as the first volley in a step-by-step process to gut Medigaps,” a Pennsylvania Medicare counselor told me last summer.

Given how much privatization has already crept into Medicare and how methodically it has been accomplished, I’d expect more interim moves before there’s an all-out war over vouchers. “The word privatization is a cover for lots of distasteful changes that fundamentally change Medicare from what it was expected to be by its social insurance advocates in the 1960s,” says Yale Professor Emeritus Theodore Marmor. The Democrats and public outcry might well stave off a voucher plan for now, but destroying Medicare as we know it could come in more subtle ways if history is any guide.

What I’d watch for first is an attempt to end the balance billing protections beneficiaries now have. Currently most doctors accept what Medicare pays, but that’s beginning to change. When they do bill excess charges, Medicare limits the amount of the excess charge to 15 percent of the Medicare rate. Georgia Rep. Tom Price, an orthopedic surgeon who Trump picked to be the new Secretary of Health and Human Services, wants to change that. A few years ago he proposed that doctors treating Medicare patients should be able to bill them the full value of their services — in other words, he would scrap the 15 percent limit and allow doctors to charge as much as they can.

Beneficiaries who choose MA plans have no such protections from balance billing until they reach their plan’s out-of-pocket spending limits — this year a maximum of $6,700. After that doctors can’t bill them separately. This means that the change Price champions would put more people in the same situation as seniors who have MA plans — they’d have to pay more out-of-pocket. That’s the goal of privatization: shift the cost of health care from the government to patients. Such a move threatens the economic security of seniors who are at a time in their lives when they can least afford to pay for such costs.

Those most affected by privatization probably won’t hear much about its consequences. What’s more likely is they’ll hear reforms sold as a way to “save” Medicare and offer more “choice,” words that obfuscate the real purpose of changing the program.

Veteran health care journalist Trudy Lieberman is contributing editor of the Center for Health Journalism Digital and a regular contributor to the Remaking Health Care blog.

Comments

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I believe the author's paragraphs in this article about "balance billing" in Medicare -- both as balance billing will be handled in private Medigap insurance via MACRA in the future and are handled in public Part C health plans under existing law today -- are incorrect. It appears to me that the author has completely conflated the concepts of excess charges/balance billing, first dollar coverage, co-pays/deductibles, and "not covered at all."

About 20% of us on Medicare have added a private Medigap policy to our Original Medicare. In particular, vis a vis private Medigap insurance and the coming MACRA-based changes to Plan F (or elimination of Plan F, however they do it), the author is talking about very expensive policies -- selected by the very risk averse -- that cover the 20% of the fixed Medicare rate book fee per service that Medicare does not cover. Other private Medigap policies (not very popular) also cover the excess charge that a Medicare-participating provider who does not "accept assignment" (there are not very many) can charge above the fixed Medicare rate book fee per service. The 20% gap and the "balance bill" are two different things. Today you can buy a plan to cover the first but not the second or to cover both. Given that MACRA is 1000 pages long and the resulting regulations will be 10,000 pages long, then maybe there will be something in MACRA about balance billing under private Medigap policies. But I've near heard any discussion of it and that is not what the author is describing in these paragraphs.

About a third of us on Medicare have added a public Part C health plans to our Original Medicare. In a public Part C health plan the concept of balance billing is meaningless. The provider gets paid whatever the plan and provider agreed to. The beneficiaries have co-pays (or deductibles or co-insurance) as explained in their insurance policy. Typically there isn't even any billing (because the co-pay is paid at the time of service) but when a bill is sent it is for the co-pay/deductible/co-insurance outlined in the policy. That is not balance billing. However if someone on a Part C plan goes out of network without the plan sponsor's OK or even to an in-network provider without his or her PCP's permission, the policy is clear that he or she is then responsible for 100% of the cost. Again this is not balance billing.

(And of course the annual out of pocket spend limit in public Part C plans mentioned by the propagandist is a good thing, not the bad thing the propagandist always pretends to be the case. There is no out of pocket limit for anyone that sticks just with Original Medicare.)

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