The Medicare Privatization Scam

In the next few weeks Congress will decide whether to cut $54 billion in overpayments to Medicare insurers, igniting a battle that may well determine whether the program survives. On one side are Medicare supporters, who want it to continue as a successful social insurance program. On the other is the insurance industry, which is spending millions and lobbying hard to put Medicare on a fast track to privatization, a goal long sought by fiscal conservatives and their allies in right-wing think tanks.

The seeds of the conflict were sown in 2003, when Congress passed the Medicare Modernization Act (MMA), which gives seniors a prescription drug benefit that is sold and administered by private insurers, not the government. This drug benefit, known as Part D, opened new markets for insurers, some of which have profited handsomely from the government's gift. The story of one of those companies, Humana, a forty-six-year-old carrier based in Louisville, Kentucky, shows what's at stake.

Before 2003 Humana, a regional company peddling health insurance, including HMOs, was hardly a household name. One of its policies had been a big money loser, and the company was struggling to dig its way out of a financial hole. Vice president Steve Brueckner called the MMA "an unprecedented opportunity to establish relationships," and his company made the most of it. Humana gained 4 million new policyholders and reported to stockholders in April that it had amassed "record breaking revenues." What's more, Humana has become a national brand poised to sell policies in the non-Medicare market, where people will increasingly be forced to buy their own health coverage, especially if an "individual mandate" becomes a solution for the country's healthcare woes. "Part D transformed the company," says Bridget Maehr, an analyst for A.M. Best, an insurance rating service.

Subscriber Login

User Name

Password

Subscribe Now!

The only way to read this article and the full contents of each week's issue of The Nation online is by subscribing to the magazine. Subscribe now and read this article -- and every article published since for the past five years -- right now.

There's no obligation -- try The Nation for four weeks free.

• Get The Nation at home (and online!) for 68 cents a week!
• If you like this article, consider making a donation to The Nation.
• Reprint this article. Click here for rights and information.