Privatizing Medicare Is Happening Right Before Our Eyes

Privatizing Medicare Is Happening Right Before Our Eyes

by Peter Shapiro. Posted August 3, 2022.

“Medicare for All” has been a popular demand among progressives, particularly since Bernie Sanders made it a cornerstone of his presidential campaigns. And with good reason—-historically, Medicare has been one of the few bright spots in the train wreck that is US health care.

The world’s most market-driven health care system is also the most wasteful and expensive. We treat health care as a commodity rather than a human right, and—to a degree unknown anywhere else in the world—we rely on profit-making insurance companies to finance it. These companies make money by rationing care. Decisions about necessary treatment are made by claims adjusters who are paid to master the actuarial tables and know nothing about the practice of medicine. Competing health plans with constantly changing coverage create mountains of paperwork that drive up the cost of care and divert time and resources from treating patients.

Medicare for All rally, Los Angeles, Feb. 2017. Photo by Molly Adams via Flickr.

As a result, medical outcomes in the US lag well behind other developed countries. Life expectancy is shorter and continues to decline. Maternal and infant mortality rates are shamefully high (and likely to get higher in the wake of the Supreme Court’s recent decision on abortion). Medical bills are the leading cause of personal bankruptcy; even among those with insurance, it is not uncommon for people to forego needed treatment because they can’t afford it.  The consequences are dangerous and often fatal.

Traditionally, Medicare has avoided the system’s worst abuses by eliminating the middlemen and paying providers directly. It costs almost nothing to administer. Patients on Medicare can see any doctor they want, and the government will pick up most of the tab. Not so for people with private insurance plans; these plans contract with a limited network of providers, and patients who have to go “out of network” for the treatment they need can be stuck with huge bills.

Unfortunately, like so many needed public programs, Medicare is being privatized on the installment plan. There are certain things it never covered—dental, vision, hearing, prescription drugs. In years past, many seniors could make up for these gaps with employer-paid health plans providing “wrap-around” coverage. Thirty years ago, a sizeable majority of large employers (200 or more workers) offered them to their retirees. Today, only 17 percent do.

During the administration of George W. Bush, Congress responded to public demands to improve Medicare by passing a pair of “reforms”: Medicare Advantage and Medicare Part D, a prescription drug plan.   Both involve massive subsidies of private capital, using money that could have gone to actually treat people.

The prescription drug benefit was badly needed, but it costs far more than it should. The law requires Medicare to pay “full market value” for drugs under the plan. And most drugs are exorbitantly expensive: big pharma has mastered the art of price-fixing and manipulation of patent laws. (In Canada, where the health care system is government-run, the same drugs cost so much less that, before Medicare began picking up the tab, seniors would routinely cross the border to get their prescriptions filled.)

Hospital waiting room. Photo from Fraser Health website.

The prescription drug benefit wastes money, but at least patients get what they need. That’s not the case with Medicare Advantage. It makes Medicare subject to all the abuses that characterize our private insurance system. It has also created a $350 billion market for private investors. Don Berwick, who ran Medicare during the Obama administration, calls it a “money machine.” Two insurance giants, United Health and Humana, currently control nearly half the market.

Eligible Medicare enrollees are given a choice: traditional Medicare or one of the Medicare Advantage plans on the market (33 at last count). Medicare Advantage plans typically include the prescription drug benefit, dental, vision, and hearing. They also offer perks like free gym membership. They flood the mailboxes of potential customers with slick advertising brochures during Medicare’s yearly open enrollment season.

Because they offer coverage not available through Medicare, and because most retirees no longer have the option of getting that coverage from an employer-paid plan, people are picking up the bait. Five years ago, less than a third of those eligible for Medicare were in a Medicare Advantage plan. Today it’s rapidly approaching one-half.

For most people, Medicare Advantage works pretty well–until you get really sick. Subsidies from Medicare keep premiums low, but the co-payments and deductibles add up in a hurry when you need to make repeated trips to the doctor. Complex medical issues that require referrals to different specialists quickly become a nightmare of getting pre-approval from your plan for each appointment and having to fight tooth and nail every time a claim is denied.

Image from CareInnovations website.

Maybe you’ll need to see a doctor who isn’t part of your plan’s network. Under traditional Medicare, this wouldn’t be a problem. With Medicare Advantage, it could cost you thousands of dollars. For a retiree on a fixed income, that’s a prescription for disaster.

Medicare is financed with regular deductions from workers’ paychecks, and payments to Medicare Advantage plans come straight out of Medicare’s budget. With traditional Medicare, doctors are reimbursed for every procedure they perform. But Medicare Advantage plans are given a flat rate of around $12,000 a year for every patient they enroll.

This is supposed to save money, but it doesn’t. According to a recent study, Medicare has overpaid Medicare Advantage plans by over $100 billion over the past ten years.

The system, it turns out, is ripe for gaming. Insurers who are paid a flat rate per patient have a powerful incentive to avoid enrolling patients who cost more or, failing that, to skimp on their treatment. To keep that from happening, Medicare has what are called “risk adjustment formulas,” providing extra compensation for when plans enroll sicker patients. Doctors submit “diagnostic codes” to determine which patients pose a higher risk, and Medicare compensates the plan with anywhere from $1000 to $5000 more.

The result has been an epidemic of “upcoding”—diagnosing conditions for which patients are never actually treated. Federal and state investigators have found repeated cases of this scam, totalling $2.6 billion in 2017 alone. United Health and Humana are among the worst offenders. The scam is easy to pull off, because accurate “risk adjustment” is almost impossible, and insurance companies are in business to make money.

“When we talk about Medicare for all,” says an analyst for the Kaiser Family Foundation, “people may not realize that we already have a Medicare program that is coming to be dominated by some very large private insurance companies.” Incredibly, the march towards privatized Medicare is not happening fast enough for some government policy makers. The Trump administration created a program called Direct Contracting Entities that enrolled people on Medicare in private plans without their consent or even knowledge. It provoked a storm of protest, and many hoped Biden would get rid of it. Instead, he rebranded it (it’s now called Realizing Equity, Access, and Community Health, or REACH) and made some essentially cosmetic changes that are supposed to encourage insurers to expand their markets into currently underserved communities.

Image from

What can we do, besides demanding an end to REACH? One solution was inserted into Biden’s Build Back Better package but failed to make it into the version that passed the House. It would have expanded traditional Medicare coverage to include vision, dental, and hearing, essentially making Medicare Advantage plans unnecessary. Another, perhaps more likely, is allowing Medicare to negotiate prices with the drug companies. The Veterans Health Administration already does.

But ultimately, we need to take the profit motive out of health care altogether. If the slogan “Medicare for All” has become increasingly problematic, let’s just say “Guaranteed Health Care for All” instead. Let’s insist that health care is not a commodity but a human right, and that patients are not “consumers” but human beings. If we truly value human life, the language of the market has no place in the business of healing.


Author’s Bio: Peter Shapiro is a retired letter carrier. He served as labor editor of Unity and currently sits on the board of Healthy California Now, a statewide single payer coalition. He is a delegate to the Alameda Labor Council, representing the California Alliance for Retired Americans.

Featured Image:

National Nurses United rally.

5 thoughts on “Privatizing Medicare Is Happening Right Before Our Eyes”

  1. Is the author aware of the fight going in in NYC? Former mayor Bill deBlasio worked out a deal with the Municipal Labor Committee, which is dominated by the UFT and AFSCME DC 37, to switch 250,000 municipal retirees and their families to a Medicare “Advantage” plan without their consent. Supposedly to save the city $600 million a year, by larding the cost onto Medicare instead of providing the coverage that was supposedly guaranteed to the workers. We took the City to court, retirees paying legal fees out of our own pockets against our own unions! Judge found in our favor, but we may lose on appeal. New Mayor Adams and the MLC are pursuing, still only looking at MA options, no consideration for other options to preserve our Medicare status.

    Biden no different from Trump on this score. Out in Oregon (I believe), retirees *and their unions* fought similar move by city and won. In NYC we have to fight both city and union bosses. This is happening all over the country.

  2. A single payer bill appeared poised to pass the New York State legislature until the MLC deep-sixed it. Their argument was that they had fought hard to win good health benefits for their members, why should they give them up for a public plan?

    The deal Martha describes flies in the face of that reasoning. It’s understandable why a cash-strapped city government might want to shift the burden of paying the escalating costs of retiree health benefits onto the federal government. It’s equally understandable why New York’s municipal employee unions might want to free themselves of the burden of negotiating those benefits, especially when they get blamed for other shortfalls in the city’s budget.

    The logical solution would be a publicly-funded health care system that includes everybody, so people would not have to rely on their employers–be they private businesses or public agencies–to get the care they need. Unfortunately, Mayor de Blasio and the MLC leadership apparently opted for the easy way out. If this deal holds up, the result will be more looting of Medicare by private insurers, and retirees left to deal with those insurers on their own, without the support of unions fighting to win them the best possible coverage.

  3. One positive development since this article was written: thanks to passage by Congress of the Inflation Relief Act, Medicare will now be able to negotiate prices for at least SOME prescription drugs.

  4. Barbara Commins RN

    I wouldn’t count on Medicare drug price controls being much more than a ploy to get people to vote DEM in November.

    First off, the rollout will be over the next 4 years!
    Original Medicare was rolled out in SIX MONTHS in 1965 without computers!

    Second, nobody knows ‘which drugs’ and I suspect Big Pharma will help them decide!

    Third, the Part D deductible is going up to $505 from $480. That means another $25 out of your pocket before your drug plan premiums actually do anything.

    Finally, why are drug price controls not for everyone, instead of just those on Medicare?

  5. Perfectly written, Mr. Shapiro!
    The public must understand that Medicare Part C (or “Advantage” plans) is a scam….just another way for private entities to turn the delivery of health care into a for profit enterprise!,
    I am NOT a Socialist, but we cannot continue to treat health care as a commodity….like a car, or smart phone! Every other “first world” nation on the planet has some program providing health care to their citizens….and better health outcomes than we do!
    I pray it is not too late for our country to see the light!

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