Medicare Reform - Concerns About Privatizing Medicare

WILL MEDICARE COVERAGE OFFERED THROUGH
PRIVATE INSURANCE COMPANIES
REALLY BENEFIT MEDICARE BENEFICIARIES?

Members of Congress and the Administration have renewed discussions about fixing Medicare, the health insurance program for older people and people with disabilities. Some talk about a prescription drug benefit, while others want to do more and "reform" Medicare completely. Most of the options described by Congress and the Administration place expanded reliance on private insurance companies to provide "enhanced" Medicare benefits.

But will reliance on private insurance companies really help beneficiaries? Here’s what we’ve learned from Medicare+Choice, the Medicare managed care program, which is offered by private insurance companies:¹

C Private insurance companies are free to come and go from a community, disrupting health care for the people enrolled in their plans. Since 1999, almost half of all Medicare managed care plans stopped offering services completely or cut back on the counties they served, affecting about 2 million beneficiaries.

C Private insurance companies are free to increase their premiums. Between 2001 and 2002, the average Medicare managed care premium rose by almost 40%.

C Private insurance companies are free to reduce the benefits they offer. Between 2001 and 2002, the percent of managed care plan enrollees with any hearing benefits declined by 24%; the percent with some type of preventive dental coverage declined by 13%; and the percent with some form of vision benefit declined by 8%.

C Private insurance companies are free to change the prescription drug benefit they offer.

C The number of Medicare managed care plans that pay only for generic drugs and no longer pay for brand names increased from 17.8% in 2001 to 55.3% in 2002. Thus, people in those plans who need drugs that have no generic equivalent are without prescription drug coverage.

C Slightly over one-third of enrollees in Medicare managed care plans have no coverage if the drug they need is not on their plan’s formulary or approved list of drugs.

C Plans have increased the co-payments for all drugs; over 80% of enrollees whose plans do cover brand names pay $20 or more for brand name pharmaceuticals.

C Private insurance companies are free to increase the costs they pass on to plan enrollees. Seventy-eight percent (78%) of enrollees in Medicare managed care plans had a co-payment for an inpatient hospital admission in 2002, as compared to 33% in 2001. In some cases beneficiaries had to pay more for their hospital care than they would have paid had they been in traditional Medicare.

C Private insurance companies are free to impose greater costs for beneficiaries who require more care, thereby discouraging people with greater health care needs from enrolling in the plan. In 2002 plans increased co-payments for radiation and chemotherapy treatments.

Medicare was enacted in the 1960's because private insurance companies did not want to offer health insurance to older people. Older people either had to pay large premiums to get the insurance coverage they needed or do without health insurance. They were forced to pay for a large portion of their health care on their own. Proposal that increase reliance on private insurance companies, either for delivery of a prescription drug benefit or for delivery of all Medicare benefits, will return the program to the 1960's.

Instead of decreasing medical expenses for older people and people with disabilities, these proposals will result in Medicare beneficiaries having to pay more for their care or doing without needed services. These proposals will increase the number of older people and people with disabilities who lack access to health care. Reliance on private insurance companies to provide Medicare benefits will not benefit older people and people with disabilities.
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¹Achman, Gold, Trends in Medicare+Choice Benefits and Premiums, 1999-2002 (November 2002).