Health Scare

Medicare privatization debate reaches boiling point

Kip Sullivan

A crucial debate in Congress on whether to privatize Medicare is rapidly coming to a head. As In These Times went to press, Republican congressional leaders had reportedly instructed Republicans on a House-Senate conference committee to decide by November 10 whether to endorse the provisions of a House bill that would privatize Medicare in 2010.

Republicans are under intense pressure to add Medicare drug coverage, however meager, to soften the GOP’s image as the party of the rich, and those on the conference committee are being pressured by the right wing to endorse HR 1’s privatization provisions.

Democrats have warned, however, that retaining privatization could doom the bill. On October 23, 41 senators, including one Republican and an independent, warned Bush not to pursue privatization. Democrats have expedient reasons to play hardball: Medicare drug benefits are popular among voters; privatization is not. Republicans could suffer voter retribution in 2004 if they sacrifice drug coverage.

The outcome of this debate will have a long-lasting influence on the entire U.S. health-care system, not just Medicare. Conservatives are acutely aware of this fact. In a June 23 op-ed, Wall Street Journal editors warned Republicans not to decouple privatization and drug coverage. If they did, the piece argued, “Republicans will have already spent their one reform carrot of a prescription drug benefit, private Medicare delivery will be discredited, and the baby boomers will start retiring, increasing the constituency against change.” Rep. Paul Ryan (R-Wis.) a member of the House Ways and Means Committee, lamented to the New York Times, “If we don’t get this right, we’re going to get European-style socialism in this country in order to finance the exploding costs of this program when the baby boomers retire.”

Ryan is talking trash when he says unprivatized Medicare amounts to socialism, but he is right to suggest that the program and the 40 million it insures resembles single-payer systems in which one tax-financed public agency sets limits on how much providers can charge and reimburses doctors and hospitals directly.

The presence of the traditional Medicare model on the American landscape makes it easier for single-payer advocates to explain how a single-payer system for all Americans would work and why it is superior to the private sector’s multiple-payer system. Indeed, in the last five years many single-payer advocates have called their proposal “Medicare for all.” Losing traditional Medicare would delay creation of a single-payer system here.

Democrats have done little to promote single-payer but most understand that privatizing Medicare would be a disaster. All evidence indicates that pushing seniors out of Medicare into HMOs would raise, not lower, costs, and would damage quality of care.

HR 1 would achieve privatization in stages by putting great financial pressure on seniors to leave traditional Medicare and enroll in HMOs. Under HR 1, Medicare’s guarantee of medical services would be replaced with a voucher that seniors would use to purchase coverage from either the traditional Medicare program (which would have to start charging a premium in 2010) or an HMO. Because sicker seniors would be more likely to stay in traditional Medicare, which neither limits choice of doctor nor interferes in the doctor-patient relation as HMOs do, the Medicare premiums would be higher than those of the HMOs. This would set off a “death spiral”: Higher premiums would drive even more disproportionately healthy seniors out of traditional Medicare, Medicare would thereby be forced to charge even higher premiums, and the program eventually would “wither on the vine,” in the immortal words of former House Speaker Newt Gingrich. Rep. William Thomas (R-Calif) chief architect of HR 1, was not exaggerating when he told MSNBC in June that he expected HR 1 to “end Medicare as we know it.”

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Kip Sullivan sits on the steering committee of the Minnesota Universal Health Care Coalition. He is the author of The Health Care Mess, available at author​house​.com.
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