Privatizing Medicare

The Medicare bills passed by the Senate Finance Committee on June 12 and the House Ways and Means Committee on June 17 move the thirty-eight-year-old social insurance program one step closer to privatization. The committees outlined the acceptable framework for a drug benefit sorely needed by the 40 million seniors and disabled people covered by Medicare. Considering that the median income for beneficiaries is only $14,300, and a quarter of them spend more than $100 a month on prescriptions, the need for government help is obvious.

But all the talk of a drug benefit obscures the real reason Republicans are pushing hard for their brand of reform, which calls for privately run managed-care plans to provide the benefit. Adding government-subsidized drug coverage to Medicare doesn't require managed care. Congress could simply add a Part C drug benefit and be done with it. But many lawmakers have another agenda--to get the government out of the Medicare business. To do that, they would herd beneficiaries into managed care, either HMOs or the less tightly controlled PPOs (preferred provider organizations), which would provide all benefits instead of the federal government. The government would give plans a sum of money, as it does now, to pay for care, but over time it could give less and less. Beneficiaries would have to make up the difference, which could be huge, since costs are not likely to go down. Eventually there would be no Medicare, with its social insurance cross-subsidies that make it possible to insure huge numbers of people 65 or older, who are more likely to be ill. Everyone would get benefits in the private market.

Until June 12 the Bush Administration had hoped to entice beneficiaries into HMOs and PPOs by offering drug benefits only to those willing to leave traditional Medicare. But Bush changed his mind, and under the Senate Finance Committee plan, even those who stay in Medicare will get some drug coverage. That was enough to persuade some Democrats, including Ted Kennedy, to sign on. The House bill also gives a benefit to those remaining on Medicare but would not require the government to step in with a benefit if the private plans don't provide the coverage.

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