Sometimes a health policy story comes along that should be shouted from the rafters — well at least reported by media that cover the subject. Brett Arends’ story for Dow Jones’ MarketWatch is one of those stories.
The revelations about overpayments come from the Medicare Payment Advisory Commission, MedPAC for short, some of whose recommendations over the years have resulted in high rate increases for Advantage plan sellers that helped make it possible for them to offer groceries, bits of dental care, and other goodies seniors have snapped up. The media’s role in revealing and dissecting those overpayments is long overdue.
The last several months news outlets have been paying more attention to the downsides of Medicare Advantage plans.
Arends’ story focused on one thread in the story: MedPAC’s latest report to Congress that revealed something health policy wonks — but not the public — have known for a long time. Medicare Advantage plans are taking advantage of the federal gravy train.
“The private insurers who now run more than half of all Medicare plans are overcharging the taxpayers by a staggering $83 billion a year,” Arends wrote. “They are charging us taxpayers 22% more than it would cost us to provide the same health insurance to seniors directly if we just cut out the private insurance companies as middlemen.”
MedPAC was set up by the Balanced Budget Act of 1997, “back when people in Washington were actually doing their jobs,” Arends points out. The commission’s job is to advise Congress on issues involving Medicare. MedPAC reports discuss the financial situation of the Medicare trust funds, and over the years those reports often revealed that the private health plans have been overpaid. Until recently, there has been little to no pushback from the government or most of the media, in effect leaving the insurance industry a clear path to sell Medicare Advantage plans to more than half of the Medicare market. The media have recently begun to ask why.
Arends calls the Medicare Advantage arrangement “a rip-off, pure and simple,” noting that what sellers of the plan are paid “is more than twice as much as it would cost simply to provide free dental, hearing and vision care to all traditional Medicare beneficiaries, not just those in private ‘Medicare Advantage’ plans.”
I have covered Medicare for decades now and have often asked the experts why there couldn’t be a level playing field that would allow beneficiaries in the traditional program to receive vision and dental benefits. The answer was always, “We can’t afford that.”
Arends debunks that thinking by directly quoting the MedPAC report:
“It reads: ‘We estimate that Medicare spends approximately 22 percent more for MA enrollees than it would spend if those beneficiaries were enrolled in FFS (fee for service or traditional) Medicare, a difference that translates into a projected $83 billion in 2024.’ MedPAC reported that its review of private plan payments suggests that over the 39-year history with private plans, they “have never yielded aggregate savings for the Medicare program. Throughout the history of Medicare managed care, the program (Medicare Advantage) has paid more than it would have paid if beneficiaries had been in FFS (fee for service) Medicare.”
I checked in with Fred Schulte, who now writes for KFF Health News, and who over his career has written many prize-winning stories documenting the shenanigans insurers have used to enhance their reimbursements from Medicare, such as upcoding. That’s the practice of billing Medicare for ailments that are more serious than what patients actually have. “For example, instead of reporting a patient has diabetes, the insurers would say diabetes with neuropathy or eye problems and receive higher reimbursement,” he explained.
“It took a very long time for the government and the Justice Department to understand what was going on here with this coding,” Schulte said. “The codes just kept getting higher and higher, and profits kept going up and up.”
A year ago, Paul Ginsburg, a senior fellow at the University of Southern California’s Schaffer Center, said, “The current Medicare Advantage structure results in overpayments, markedly higher than previously understood.”
Even Michael Chernow, who heads the Medicare Payment Advisory Commission authorized by Congress in 1997, recently admitted on Twitter that Medicare Advantage “has never saved Medicare money.” But he added, “that doesn’t mean Medicare Advantage isn’t a key pillar of Medicare sustainability. At its best it can provide better care at lower cost.”
Arends’ story doesn’t sound hopeful about the direction of Medicare. He concludes, “Medicare Advantage isn’t making the rest of Medicare better. It is putting the rest of Medicare out of business. And not by being more efficient, but by being less efficient. It is driving up the overall cost of Medicare by 22%. And not by being more efficient but by being less efficient.
The logical outcome is that traditional Medicare ceases to exist and that Medicare dollars pass through the hands of private insurance companies at 122 cents on the dollar.”
Arends’ prediction may well come true, but perhaps not without a fight. David Lipschutz, associate director at the Center for Medicare Advocacy, says a “confluence of factors have come together to make it harder to ignore the problems of Medicare Advantage by the press and policymakers.”
Hospitals’ business models are being upended by fundamental changes within the health care system, including one that presents a pretty existential challenge: People have far more options to get their care elsewhere these days.
Why it matters:
Health systems’ responses to major demographic, social and technological change have been controversial among policymakers and economists concerned about the impact on costs and competition.
Communities depend on having at least some emergency services available, making the survival of hospitals’ core services crucial.
But without adaptation — which is already underway in some cases — hospitals may be facing deep red balance sheets in the not-too-distant future, leading to facility closures and shutteredservices.
The big picture:
Many hospitals have recovered from the sector’s post-pandemic financial slump, which was driven primarily by staffing costs and inflation. But systemic, long-term trends will continue to challenge their traditional business model.
Many of the services that are shifting toward outpatient settings — like oncology, diagnostics and orthopedic care — are the ones that typically make hospitals the most money and effectively subsidize less profitable departments.
When hospitals lose these higher-margin services, “you’re starving the system that needs profits to provide services that we all might need, but particularly uninsured or underinsured people might need,” said UCLA professor Jill Horwitz.
And hospitals have long claimed that much higher commercial insurance rates make up for what they say are inadequate government rates.
But as the population ages and moves out of employer-sponsored health plans, fewer people will have commercial insurance, forcing hospitals to either cut costs or find new sources of revenue.
By the numbers:
Consulting firms are projecting a bleak decade for health systems.
Oliver Wyman recently predicted that under the status quo, hospitals will need to reduce their expenses by 15-20% by 2030 “to stay viable.”
Boston Consulting Group last year projected that health systems’ annual financial shortfall will total more than $200 billion by 2027, and their operating margins will have dropped by 10 percentage points.
To break even in 2027, a “typical” health system would need payment rate increases of between 5-8% annually — twice the rate growth over the last decade, according to BCG. If the load is borne solely by private insurers, hospitals will need a 10-16% year-over-year increase.
Between the lines:
This is the lens through which to view health systems’ spree of mergers and acquisitions, which have increasingly drawn criticism from policymakers, regulators and economists as being anticompetitive.
For better orworse, when hospitals have a larger market share, they are in a better position to negotiate and bring in more patients, and they can dilute some of the financial pain of poorer-performing facilities.
And when they acquire physician practices or other outpatient clinics, they’re still getting paid for delivering care even when patients aren’t receiving it in a traditional hospital setting.
“I think the hospitals have sort of said … ‘We can keep doing things the same way and we can just merge and get higher markups,'” said Yale economist Zack Cooper. “That push to consolidate is saying, ‘Let’s not move forward, let’s dig in.'”
Yes, but:
A big bonus of outpatient care is that it’s supposed to be cheaper. But when hospitals charge more for care than an independent physician’s office would have, or they tack on facility fees, costs don’t go down.
“They’ve protected their portfolio, and that’s added to the cost of health care,” said Johns Hopkins professor Gerard Anderson.
The other side:
Hospitals are typically on the losing end of negotiations with insurers right now, thanks to how large insurers have become, and are “in an extremely difficult competitive position,” said Ken Kaufman, co-founder of consulting agency Kaufman Hall.
Criticizing their mergers and acquisitions as anticompetitive is a “complete misunderstanding of the situation,” he said, and moving toward a new care model will take “an incredible amount of resources.”
Reality check:
Hospitals account for 30% of the country’s massive health spending tab, and they’ll have to be at the forefront of any real efforts to contain costs.
They’re also anchors in their communities and are powerful lobbyists, which helps explain why Congress has struggled to modestly reduce what Medicare pays hospital outpatient departments.
After covering the Medicare privatization crisis for over two years, an investigative reporter takes a step back and examines what’s at stake.
Medicare, the country’s largest and arguably most successful health care program, is under duress, weakened by decades of relentless efforts by insurance companies to privatize it.
A rapidly growing Medicare Advantage market — now 52% of Medicare beneficiaries, up from 37% in 2018 — controlled by some of the largest and most powerful corporations in the world, threatens to both drain the trust fund and eliminate Medicare’s most important and controversial component: its ability to set prices.
It is not an overstatement to call it a heist of historic proportions, endangering the health not only of the more than 65 million seniors and people with disabilities who depend on Medicare but all Americans who benefit from the powerful role that Medicare has historically played in reining in health care costs.
The giant corporations that dominate Medicare Advantage have rigged the system to maximize payments from our government to the point that they are now being overpaid between $88 billion and $140 billion a year. The overpayments could soar to new heights if the insurers get their way and eliminate traditional Medicare.
All of America’s seniors and disabled people who depend on Medicare could soon be moved to a managed care model of ever-tightening networks, relentless prior authorization requirements and limited drug formularies. The promise of a humane health care system for all would be sacrificed at the altar of the almighty insurer dollar.
The Medicare Payments Advisory Commission (MedPAC), the independent congressional agency tasked with overseeing Medicare, last month released a searing report which found that Medicare spends 22% more per beneficiary in Medicare Advantage plans than if those beneficiaries had been enrolled in traditional fee-for-service Medicare. That’s up from a 6% estimate in the prior year.
A similar cost trend exists for diagnosis coding.
Medicare Advantage plans and their affiliated providers increasingly upcoded diagnoses to get higher reimbursements. In 2024, overpayments due to upcoding could total $50 billion, according to MedPAC, up from $23 billion in 2023. These enormous overpayments drive up the cost of premiums — MedPAC’s conservative estimate is that the premiums paid to Medicare out of seniors’ Social Security checks will be $13 billion higher in 2024 because of those overpayments.
There is evidence that Americans and lawmakers are starting to wake up.
Medicare Advantage enrollment growth slowed considerably in 2023. Support within the Democratic Party for Medicare Advantage is cratering. In 2022, 147 House Democrats signed an industry-backed letter supporting Medicare Advantage. This year, just 24 House Democrats signed the letter. Earlier this month, the Biden administration cut Medicare Advantage base payments for the second year in a row(while still increasing payments overall), over the fierce opposition of the insurance lobby. The investment bank Stephens called Biden’s decision a “highly adverse” outcome for insurers. Wall Street has taken note, punishing the stock price of the largest Medicare Advantage insurers, with Barron’s noting that Wall Street’s “love affair” with Humana is “ending in tears.” The cargo ship is turning. It is up to us to determine if that will be enough.
We can’t attack a problem if we don’t know how to diagnose it. I spoke with some of the most knowledgeable critics of Medicare Advantage about the danger the rapid expansion of Medicare privatization presents to the American public.
Rick Gilfillan is a medical doctor who in 2010 became the first director of the Center for Medicare and Medicaid Innovation (CMMI). He would go on to serve as CEO of Trinity Health from 2013 to 2019. In 2021 he launched an effort to halt the involuntary privatization of Medicare benefits.
“Right now, all investigations are finding tremendous overpayments,” Gilfillan said. “The overpayments are based on medical diagnoses that may or may not be meaningful from a patient care standpoint. Insurers are using chart reviews, nurse home visits and AI software to find as many diagnoses as possible and thereby inflate the health risks of the patients and the premium they get from Medicare. The overpayments are just outrageous,” he said.
The problem could get worse if the Supreme Court curtails the powers of regulatory agencies, as it may do this year. “It would make a huge difference in what CMS would be able to do,” Gilfillan said.
The logic behind Medicare privatization is that seniors and people with disabilities use too much care, egged on by their doctors. If true, a solution could have been to enforce the Stark Law, which bans physicians from having financial relationships with providers they refer to, or other anti-kickback statutes. States could also enforce laws 33 of them have enacted that prohibit the “corporate practice of medicine.”
Instead, health insurers were invited and incentivized by previous administrations to compete with the original Medicare program and “manage” beneficiaries’ care. Under this model— set in its modern form in 2003 — Medicare Advantage insurers are paid a rate based on a complex risk modeling process and estimated costs.
But Medicare Advantage plans have never been cheaper than traditional Medicare, as MedPAC has repeatedly pointed out.
This is a far more complex approach than the fee-for-service model in which CMS sets prices in health care in a public and transparent manner, Gilfillan notes. The prices negotiated by Medicare Advantage companies, by contrast, are not disclosed.
“With fee-for-service, a patient is provided a service, treatment or medication. The physician who provides the service charges a specific amount for that service,” Gilfillan said. “And then Medicare pays whatever it decided it was worth for that service. The benefit is you pay for what you get.”
Some Medicare Advantage plans use a “capitated” approach in paying primary care physicians. The amount is based on the premium they receive for the patient. The more codes submitted, the higher the capitation, the greater the profit. That approach is having far-reaching economic impacts on health care, said Hayden Rooke-Ley, an Oregon-based lawyer and health care consultant who co-authored a recent New England Journal of Medicine article on the corporatization of primary care. It is the capitation model, he says, that drives the rampant upcoding among Medicare Advantage plans.
From Horizontal to Vertical
“An undercovered aspect of Medicare Advantage is the way it is fueling vertical consolidation” in the insurance business, Rooke-Ley added, noting that until recent years, insurers bulked up by buying smaller competitors (known as horizontal integration). “With so much government money, we’re seeing insurance companies restructuring themselves as vertically integrated conglomerates [through the acquisition of physician practices, clinics and pharmacy operations] to become even more profitable, especially in Medicare Advantage.”
“A key part of this strategy is to own primary care practices,” he said, citing Humana’s partnership with the private-equity firm Welsh Carson to become the largest owner of Medicare-based primary care, CVS/Aetna’s acquisition of Oak Street, and UnitedHealth’s roll up of doctors practices across the country.
As Rooke-Ley explained, control of primary care allows insurance companies to more easily manipulate “risk scores” to increase payments from the government by claiming patients are in worse health than they really are.
“The easiest way to increase risk scores, short of simply fabricating diagnosis codes, is to control the behavior of physicians and other clinicians,” he said.
“When an insurance company owns the physician practice, it can configure workflows, technology, and incentives to drive risk coding.
UnitedHealth, for example, can preferentially schedule Medicare Advantage patients – and it can choose to reach out to health plan enrollees it identifies with its data as having high ‘coding opportunities.’ It can require its doctors to go to risk-code training, and it can prohibit doctors from closing their notes before they address all the ‘suggested’ diagnosis codes.”
“While Medicare Advantage insurance companies tout all their provider acquisitions as investments in value-based care, the concern is that it’s really just looking like a game of financialization,” Rooke-Ley said. “MA was supposed to save Medicare money, but the exact opposite has happened.
According to MedPAC, the government will over-subsidize MA to the tune of $88 billion this year, with $54 billion of that due to excess risk coding relative to what we see in traditional Medicare. That’s a staggering amount of money that could go directly to patients and clinicians by strengthening traditional Medicare.”
Two Possible Futures
There are two options for the future of Medicare, said Dr. Ed Weisbart, former chief medical officer of the pharmacy benefit manager Express Scripts, which Cigna bought in 2018, who now leads the Missouri chapter of Physicians for a National Health Program.
In one future, he said, “We will change the trajectory and get rid of the profiteers, and manage to divert the funds that are being profiteered to patient care.”
In another future, the business practices of Medicare Advantage plans “will be unfettered and more damaging and harmful than they are today,” he said. “If we continue on this course we’ll find an increasingly polarized health care system that caters increasingly to the wealthy and privileged. The barriers to care will be worse.”
The Affordable Care Act turned 14 on March 23. It has done a lot of good for a lot of people, but big changes in the law are urgently needed to address some very big misses and consequences I don’t believe most proponents of the law intended or expected.
At the top of the list of needed reforms: restraining the power and influence of the rapidly growing corporations that are siphoning more and more money from federal and state governments – and our personal bank accounts – to enrich their executives and shareholders.
I was among many advocates who supported the ACA’s passage, despite the law’s ultimate shortcomings. It broadened access to health insurance, both through government subsidies to help people pay their premiums and by banning prevalent industry practices that had made it impossible for millions of American families to buy coverage at any price. It’s important to remember that before the ACA, insurers routinely refused to sell policies to a third or more applicants because of a long list of “preexisting conditions” – from acne and heart disease to simply being overweight – and frequently rescinded coverage when policyholders were diagnosed with cancer and other diseases.
While insurance company executives were publicly critical of the law, they quickly took advantage of loopholes (many of which their lobbyists created) that would allow them to reap windfall profits in the years ahead – and they have, as you’ll see below.
I wrote and spoke frequently as an industry whistleblower about what I thought Congress should know and do, perhaps most memorably in an interview with Bill Moyers. During my Congressional testimony in the months leading up to the final passage of the bill in 2010, I told lawmakers that if they passed it without a public option and acquiesced to industry demands, they might as well call it “The Health Insurance Industry Profit Protection and Enhancement Act.”
A health plan similar to Medicare that could have been a more affordable option for many of us almost happened, but at the last minute, the Senate was forced to strip the public option out of the bill at the insistence of Sen. Joe Lieberman (I-Connecticut), who died on March 27, 2024. The Senate did not have a single vote to spare as the final debate on the bill was approaching, and insurance industry lobbyists knew they could kill the public option if they could get just one of the bill’s supporters to oppose it. So they turned to Lieberman, a former Democrat who was Vice President Al Gore’s running mate in 2000 and who continued to caucus with Democrats. It worked. Lieberman wouldn’t even allow a vote on the bill if it created a public option. Among Lieberman’s constituents and campaign funders were insurance company executives who lived in or around Hartford, the insurance capital of the world. Lieberman would go on to be the founding chair of a political group called No Labels, which is trying to find someone to run as a third-party presidential candidate this year.
The work of Big Insurance and its army of lobbyists paid off as insurers had hoped. The demise of the public option was a driving force behind the record profits – and CEO pay – that we see in the industry today.
The good effects of the ACA:
Nearly 49 million U.S. residents (or 16%) were uninsured in 2010. The law has helped bring that down to 25.4 million, or 8.3% (although a large and growing number of Americans are now “functionally uninsured” because of unaffordable out-of-pocket requirements, which President Biden pledged to address in his recent State of the Union speech).
The ACA also made it illegal for insurers to refuse to sell coverage to people with preexisting conditions, which even included birth defects, or charge anyone more for their coverage based on their health status; it expanded Medicaid (in all but 10 states that still refuse to cover more low-income individuals and families); it allowed young people to stay on their families’ policies until they turn 26; and it required insurers to spend at least 80% of our premiums on the health care goods and services our doctors say we need (a well-intended provision of the law that insurers have figured out how to game).
The not-so-good effects of the ACA:
As taxpayers and health care consumers, we have paid a high price in many ways as health insurance companies have transformed themselves into massive money-making machines with tentacles reaching deep into health care delivery and taxpayers’ pockets.
To make policies affordable in the individual market, for example, the government agreed to subsidize premiums for the vast majority of people seeking coverage there, meaning billions of new dollars started flowing to private insurance companies. (It also allowed insurers to charge older Americans three times as much as they charge younger people for the same coverage.) Even more tax dollars have been sent to insurers as part of the Medicaid expansion. That’s because private insurers over the years have persuaded most states to turn their Medicaid programs over to them to administer.
We invite you to take a look at how the ascendency of health insurers over the past several years has made a few shareholders and executives much richer while the rest of us struggle despite – and in some cases because of – the Affordable Care Act.
BY THE NUMBERS
In 2010, we as a nation spent $2.6 trillion on health care. This year we will spend almost twice as much – an estimated $4.9 trillion, much of it out of our own pockets even with insurance.
In 2010, the average cost of a family health insurance policy through an employer was $13,710. Last year, the average was nearly $24,000, a 75% increase.
The ACA, to its credit, set an annual maximum on how much those of us with insurance have to pay before our coverage kicks in, but, at the insurance industry’s insistence, it goes up every year. When that limit went into effect in 2014, it was $12,700 for a family. This year, it has increased by 48%, to $18,900. That means insurers can get away with paying fewer claims than they once did, and many families have to empty their bank accounts when a family member gets sick or injured. Most people don’t reach that limit, but even a few hundred dollars is more than many families have on hand to cover deductibles and other out-of-pocket requirements.
Now 100 million Americans – nearly one of every three of us – are mired in medical debt, even though almost 92% of us are presumably “covered.” The coverage just isn’t as adequate as it used to be or needs to be.
Meanwhile, insurance companies had a gangbuster 2023. The seven big for-profit U.S. health insurers’ revenues reached $1.39 trillion, and profits totaled a whopping $70.7 billion last year.
SWEEPING CHANGE, CONSOLIDATION–AND HUGE PROFITS FOR INVESTORS
Insurance company shareholders and executives have become much wealthier as the stock prices of the seven big for-profit corporations that control the health insurance market have skyrocketed.
NOTE: The Dow Jones Industrial Average is listed on this chart as a reference because it is a leading stock market index that tracks 30 of the largest publicly traded companies in the United States.
REVENUES collected by those seven companies have more than tripled (up 346%), increasing by more than $1 trillion in just the past ten years.
PROFITS (earnings from operations) have more than doubled (up 211%), increasing by more than $48 billion.
The CEOs of these companies are among the highest paid in the country. In 2022, the most recent year the companies have reported executive compensation, they collectively made $136.5 million.
U.S. HEALTH PLAN ENROLLMENT
Enrollment in the companies’ health plans is a mix of “commercial” policies they sell to individuals and families and that they manage for “plan sponsors” – primarily employers and unions – and government/enrollee-financed plans (Medicare, Medicaid, Tricare for military personnel and their dependents and the Federal Employee Health Benefits program).
Enrollment in their commercial plans grew by just 7.65% over the 10 years and declined significantly at UnitedHealth, CVS/Aetna and Humana. Centene and Molina picked up commercial enrollees through their participation in several ACA (Obamacare) markets in which most enrollees qualify for federal premium subsidies paid directly to insurers.
While not growing substantially, commercial plans remain very profitable because insurers charge considerably more in premiums now than a decade ago.
(1) The 2013 total for CVS/Aetna was reported by Aetna before its 2018 acquisition by CVS. (2) Humana announced last year it is exiting the commercial health insurance business. (3) Enrollment in the ACA’s marketplace plans account for all of Molina’s commercial business.
By contrast, enrollment in the government-financed Medicaid and Medicare Advantage programs has increased 197% and 167%, respectively, over the past 10 years.
(1) The 2013 total for CVS/Aetna was reported by Aetna before its 2018 acquisition by CVS.
Of the 65.9 million people eligible for Medicare at the beginning of 2024, 33 million, slightly more than half, enrolled in a private Medicare Advantage plan operated by either a nonprofit or for-profit health insurer, but, increasingly, three of the big for-profits grabbed most new enrollees. Of the 1.7 million new Medicare Advantage enrollees this year, 86% were captured by UnitedHealth, Humana and Aetna. Those three companies are the leaders in the Medicare Advantage business among the for-profit companies, and, according to the health care consulting firm Chartis, are taking over the program “at breakneck speed.”
(1) The 2013 total for CVS/Aetna was reported by Aetna before its 2018 acquisition by CVS. (2,3) Centene’s and Molina’s totals include Medicare Supplement; they do not break out enrollment in the two Medicare categories separately.
It is worth noting that although four companies saw growth in their Medicare Supplement enrollment over the decade, enrollment in Medicare Supplement policies has been declining in more recent years as insurers have attracted more seniors and disabled people into their Medicare Advantage plans.
OTHER FEDERAL PROGRAMS
In addition to the above categories, Humana and Centene have significant enrollment in Tricare, the government-financed program for the military. Humana reported 6 million military enrollees in 2023, up from 3.1 million in 2013. Centene reported 2.8 million in 2023. It did not report any military enrollment in 2013.
Elevance reported having 1.6 million enrollees in the Federal Employees Health Benefits Program in 2023, up from 1.5 million in 2013. That total is included in the commercial enrollment category above.
At Cigna, Express Scripts’ pharmacy operations now contribute more than 70% to the company’s total revenues. Caremark’s pharmacy operations contribute 33% to CVS/Aetna’s total revenues, and Optum Rx contributes 31% to UnitedHealth’s total revenues.
WHAT TO DO AND WHERE TO START
The official name of the ACA is the Patient Protection and Affordable Care Act. The law did indeed implement many important patient protections, and it made coverage more affordable for many Americans. But there is much more Congress and regulators must do to close the loopholes and dismantle the barriers erected by big insurers that enable them to pad their bottom lines and reward shareholders while making health care increasingly unaffordable and inaccessible for many of us.
Several bipartisan bills have been introduced in Congress to change how big insurers do business.
And as noted above, President Biden has asked Congress to broaden the recently enacted $2,000-a-year cap on prescription drugs to apply to people with private insurance, not just Medicare beneficiaries. That one policy change could save an untold number of lives and help keep millions of families out of medical debt. (A coalition of more than 70 organizations and businesses, which I lead, supports that, although we’re also calling on Congress to reduce the current overall annual out-of-pocket maximum to no more than $5,000.)
I encourage you to tell your members of Congress and the Biden administration that you support these reforms as well as improving, strengthening and expanding traditional Medicare. You can be certain the insurance industry and its allies are trying to keep any reforms that might shrink profit margins from becoming law.
At the Annual Meeting of the American Hospital Association in DC last week, its all-out attack on “corporate insurance” was a prominent theme. In the meeting recap, AHA CEO Rick Pollack made the influential organization’s case:
“This year, there was special focus on educating policymakers that our health care system is suffering from multiple chronic conditions.These include continued government underpayment, cyberattacks, workforce shortages, broken supply chains, access to behavioral health, and irresponsible behavior by corporate commercial health insurance companies, among others — that put access to services in serious jeopardy.”
The AHA’s declaration of war came on the heels of last week’s Congressional investigation of Change Healthcare’ (UnitedHealth Group subsidiary) cybersecurity breech and the widely-noticed earnings release by Elevance (aka Anthem) that featured prominently its plans to build a $4 billion business unit focused on primary care and chronic care management. Per company CEO Gail Boudreaux:
“This will help us continue through having a focus on advanced primary care; it’s still very much focused on our chronic patients and complex patients. We are still building specialty care enablement, which is another very important component of what we’re trying to prime through… In time, Elevance Health will have full ownership of what we expect will be a leading platform for value-based care delivery and physician enablement at scale.”
To industry watchers, the war is no surprise.
It’s been simmering for years but most recently inflamed as operating margins for most hospitals eroded while profits among corporate insurers led by Big 6 (UnitedHealth, Humana, CVS-Aetna, Elevance, Cigna, Centene) swelled at double-digit rates.
To outsiders, it’s not quite so clear.
Big names (Brands) are prominent in both. Corporatization seems embedded in the business models for both. And both appear complicit in well-documented beliefs that the health system is failing as unnecessary higher costs make it less accessible, affordable and effective.
As the War intensifies, each combatant is inclined to make their cases aggressively contrasting “us” against “them.” Here’s where things stand today:
Consideration
Hospitals
Corporate Insurers
Advantage
Public Standing
Hospitals enjoy relatively strong public support but growing discontent about their costs, prices and household affordability. Hospitals blame insurers & drug companies for increasing health costs.Increased attention to affordability, value and low prices is a threat.
Insurers enjoy reasonably high support among middle & high-income consumers who think it necessary to their financial security. Insurers blame drug companies, hospitals and unhealthy consumer behaviors for increased health costs.
It’s a tossup. Though polls show trust in hospitals is higher than insurers, both are declining especially among younger, urban and low-middle income consumers
Regulatory positioning
Scrutiny of business practices & the impact of consolidation on consumer prices, workforce wage compression, competition et al is significant and increasing in 5 Congressional Committees and 3 Federal agencies. Hospitals also face state and local regulatory challenges around pricing, community benefits, et al.
Compliance with plan transparency rules, prior authorization requirements, Medicare Advantage marketing & coverage, and antitrust are targets. Levels of Congressional attention to business practices are relatively low. Insurers are primarily overseen by states, so the regulatory landscape varies widely except.
Insurers enjoy regulatory advantages today not withstanding current attention to UnitedHealth Group. Hospitals are “soft targets” for state legislatures, Congress and investigators in state and federal agencies.
Confidence of capital markets in their core businesses: Hospitals: inpatient, outpatient careInsurers: group & individual coverage, claims data commercialization
The acute sector, especially rural & systems operating in low-growth markets, face insurmountable headwinds due to reimbursement cuts, value-based purchasing initiatives by Medicare and private insurers and clinical innovations that drive demand away from inpatient care. Hospital Outpatient services are profitable for the near term despite growing competition from privately investors.
The consolidation of power, financial strength & influence among the corporate insurers is assuring to lenders & investors who value their performance and support their vertical integration expansion role.
Lenders and investors favor “corporate insurers” over others. The potential (likelihood) that hospitals will lose on high profile revenue-enhancer issues (facility fees, site neutral payments, et al) and restrict tax exemptions for NFP hospital operators is concerning to the capital markets.
Relationships with Physicians
Hospitals employ 58% of physicians directly & relate to all. Regulations (i.e. Stark Laws, et al), capital deployment for hospital programs and administrative overhead are factors of high importance to physicians seeking clinical autonomy & financial security. Hospitals are a viable option to physicians seeking income security though not without concern.
Insurers employment of physicians plus contractual relationships with network physicians are transactional. Physicians inclined toward business relationships with “corporate insurers” believe their role in healthcare’s future is more stable than that of hospitals based on the belief hospitals are wasteful and non-responsive to physician input.
Hospitals enjoy a relationship advantage with most physicians. Corporate insurers enjoy a transactional relationship with physicians that’s premised on shared views about the future of the system vs. hospitals that focus on protecting the past. Hospitals enjoy a near-term advantage but the long-term is uncertain.
Unity of voice
Relatively strong around “chronic ailments” of the system but unclear about long-term destination and limited to universal hospital concerns (i.e. 340B) vs. cohort issues (tax exemptions for not for profits). The delineations between not-for-profit, investor-owned and public/government restricts the strength of hospital voice overall as each seeks unique recognition and regulatory protections.
Corporate insurers have corporate boards, broader membership, stronger balance sheets and scale. Their messaging is customized to their key customers and influencers and aligned with but not controlled by their trade groups. And they direct considerable resources to their proprietary messaging strategies.
Corporate insurers have fewer constraints in their messaging and enjoy an advantage in opining to issues that resonate with consumers (prices, quality, value).
Long-term Vision for the U.S. Health System
A private connected system of health in which hospitals coordinate and provide services for patients across the continuum of their care: preventive, chronic, acute and long-term.
A private system of comprehensive, customized products and services that operates efficiently, effectively and in the interests of all consumers.
The public and Congress aren’t sure which is better positioned to develop a “new” system of health.
This war has been simmering. It’s now a blaze. The outcome is uncertain despite the considerable resources both will spend to win.
Stay tuned.
Paul
P.S. Last week, I participated in Scottsdale Institute’s Annual Leadership Summit in Arizona. It’s 62 institutional members and corporate partners include most of the major not-for-profit health systems and the biggest names in healthcare information technology solutions.
I left with two strong impressions I’ll share:
1-How GenAI and HCIT influence the future of healthcare services delivery is very much speculative but no-less certain. It’s a work in process for everyone.
2- To navigate its evolution, knowledge sharing (and mistake sharing) among those in the trenches is essential. SI afforded a great venue for both, and also a platform for those of us who are easily overwhelmed by all this to ask honest questions and get candid answers.
Today is the federal income Tax Day. In 43 states, it’s in addition to their own income tax requirements. Last year, the federal government took in $4.6 trillion and spent $6.2 trillion including $1.9 trillion for its health programs. Overall, 2023 federal revenue decreased 15.5% and spending was down 8.4% from 2022 and the deficit increased to $33.2 trillion. Healthcare spending exceeded social security ($1.351 trillion) and defense spending ($828 billion) and is the federal economy’s biggest expense.
Along with the fragile geopolitical landscape involving relationships with China, Russia and Middle East, federal spending and the economy frame the context for U.S. domestic policies which include its health system. That’s the big picture.
Today also marks the second day of the American Hospital Association annual meeting in DC. The backdrop for this year’s meeting is unusually harsh for its members:
Increased government oversight:
Five committees of Congress and three federal agencies (FTC, DOJ, HHS) are investigating competition and business practices in hospitals, with special attention to the roles of private equity ownership, debt collection policies, price transparency compliance, tax exemptions, workforce diversity, consumer prices and more.
Medicare payment shortfall:
CMS just issued (last week) its IPPS rate adjustment for 2025: a 2.6% bump that falls short of medical inflation and is certain to exacerbate wage pressures in the hospital workforce. Per a Bank of American analysis last week, “it appears healthcare payrolls remain below pre-pandemic trend” with hospitals and nursing homes lagging ambulatory sectors in recovering.”
Persistent negative media coverage:
The financial challenges for Mission (Asheville), Steward (Massachusetts) and others have been attributed to mismanagement and greed by their corporate owners and reports from independent watchdogs (Lown, West Health, Arnold Ventures, Patient Rights Advocate) about hospital tax exemptions, patient safety, community benefits, executive compensation and charity care have amplified unflattering media attention to hospitals.
Physicians discontent:
59% of physicians in the U.S. are employed by hospitals; 18% by private equity-backed investors and the rest are “independent”. All are worried about their income. All think hospitals are wasteful and inefficient. Most think hospital employment is the lesser of evils threatening the future of their profession. And those in private equity-backed settings hope regulators leave them alone so they can survive. As America’s Physician Group CEO Susan Dentzer observed: “we knew we’re always going to need hospitals; but they don’t have to look or operate the way they do now. And they don’t have to be predicated on a revenue model based on people getting more elective surgeries than they actually need. We don’t have to run the system that way; we do run the healthcare system that way currently.”
The Value Agenda in limbo:
Since the Affordable Care Act (2010), the CMS Center for Innovation has sponsored and ultimately disabled all but 6 of its 54+ alternative payment programs. As it turns out, those that have performed best were driven by physician organizations sans hospital control. Last week’s release of “Creating a Sustainable Future for Value-Based Care: A Playbook of Voluntary Best Practices for VBC Payment Arrangements.” By the American Medical Association, the National Association of ACOs (NAACOs) and AHIP, the trade group representing America’s health insurance payers is illustrative. Noticeably not included: the American Hospital Association because value-pursuers think for hospitals it’s all talk.
National insurers hostility:
Large, corporate insurers have intensified reimbursement pressure on hospitals while successfully strengthening their collective grip on the U.S. health insurance sector. 5 insurers control 50% of the U.S. health insurance market: 4 are investor owned. By contrast, the 5 largest hospital systems control 17% of the hospital market: 1 is investor-owned. And bumpy insurer earnings post-pandemic has prompted robust price increases: in 2022 (the last year for complete data and first year post pandemic), medical inflation was 4.0%, hospital prices went up 2.2% but insurer prices increased 5.9%.
Costly capital:
The U.S. economy is in a tricky place: inflation is stuck above 3%, consumer prices are stable and employment is strong. Thus, the Fed is not likely to drop interest rates making hospital debt more costly for hospitals—especially problematic for public, safety net and rural hospitals. The hospital business is capital intense: it needs $$ for technologies, facilities and clinical innovations that treat medical demand. For those dependent on federal funding (i.e. Medicare), it’s unrealistic to think its funding from taxpayers will be adequate. Ditto state and local governments. For those that are credit worthy, capital is accessible from private investors and lenders. For at least half, it’s problematic and for all it’s certain to be more expensive.
Campaign 2024 spotlight:
In Campaign 2024, healthcare affordability is an issue to likely voters. It is noticeably missing among the priorities in the hospital-backed Coalition to Strengthen America’s Healthcare advocacy platform though 8 states have already created “affordability” boards to enact policies to protect consumers from medical debts, surprise hospital bills and more.
Understandably, hospitals argue they’re victims. They depend on AHA, its state associations, and its alliances with FAH, CHA, AEH and other like-minded collaborators to fight against policies that erode their finances i.e. 340B program participation, site-neutral payments and others. They rightfully assert that their 7/24/365 availability is uniquely qualifying for the greater good, but it’s not enough. These battles are fought with energy and resolve, but they do not win the war facing hospitals.
AHA spent more than $30 million last year to influence federal legislation but it’s an uphill battle. 70% of the U.S. population think the health system is flawed and in need of transformative change. Hospitals are its biggest player (30% of total spending), among its most visible and vulnerable to market change.
Some think hospitals can hunker down and weather the storm of these 8 challenges; others think transformative change is needed and many aren’t sure. And all recognize that the future is not a repeat of the past.
For hospitals, including those in DC this week, playing victim is not a strategy. A vision about the future of the health system that’s accessible, affordable and effective and a comprehensive plan inclusive of structural changes and funding is needed. Hospitals should play a leading, but not exclusive, role in this urgently needed effort.
Lacking this, hospitals will be public utilities in a system of health designed and implemented by others.
Mississippi, one of the country’s poorest and least healthy states, could soon become the next to expand Medicaid.
Why it matters:
It’s one of several GOP-dominated states that have seriously discussed Medicaid expansion this year, a sign that opposition to the Affordable Care Act coverage program may be softening among some holdouts 10 years after it became available.
A new House speaker who strongly backs expansion and growing fears that the state’s rural hospitals can’t survive without it have kept up momentum in Mississippi’s legislature this year.
As many as 200,000 low-income adults could gain coverage if lawmakers clinch a deal in the closing weeks of the Mississippi session.
State of play:
Mississippi’s House and Senate this week began hashing out differences between two very different plans passed by each chamber.
The House bill is the traditional ACA expansion, extending coverage to adults earning 138% of the federal poverty level, or about $21,000.
The Senate’s version, which leaders have dubbed “lite” expansion, covers people earning up to the poverty line and wouldn’t bring in the more generous federal support available for full expansion.
Both plans include a work requirement, but only the House version would still allow expansion to take effect without it. The Biden administration opposes work rules, but former President Trump could revive them in a second term.
Zoom out:
State lawmakers in Alabama and Georgia gave serious consideration to Medicaid expansion this year, though they ultimately dropped it. Kansas’ Gov. Laura Kelly, a Democrat, is trying again to expand Medicaid, but the GOP-run legislature remains opposed.
Shuttering rural hospitals and an acknowledgementthat the ACA is unlikely to be repealedhave made Republicans more willing to take a closer look at expansion, Politico reported earlier this year.
The fact that the extra federal funding from the ACA expansion could lift state budgets as pandemic aid dries up has also piqued states’ interest, said Joan Alker, executive director of the Georgetown University Center on Children and Families.
Zoom in:
Mississippi’s expansion effort has advanced further than other states this year largely becausenew House Speaker Jason White has made it a priority. Lt. Gov. Delbert Hosemann, who presides over the Senate, has also pushed the issue.
“We see an unhealthy population that’s uncovered. And we see this as the best way” to insure them, White told Mississippi Today this week.
“I just think it’s time for us to realize that there’s not something else coming down the pipe.”
The state’s crumbling health infrastructure has also made expansion more urgent, said Democratic state Sen. Rod Hickman. More than 40% of the state’s 74 rural hospitals are at risk of closing, a report last summer found.
“The dire need of our hospital systems and the state finally recognizing that Medicaid expansion could assist in those issues is what has kind of brought that to the forefront,” he told Axios.
Yes, but:
Republican Gov. Tate Reeves has reportedly pledged to oppose any Medicaid expansion deal that may emerge before the legislature adjourns in early May,so lawmakers would likely need a veto-proof majority to approve an expansion.
Austin Barbour, a Republican strategist who works in Mississippi politics, said he expects lawmakers will reach a deal.
But if they don’t, “I know this will be an issue that’ll pop right back up next session,” he said.
On March 8, 2024, FDA approved Wegovy (semaglutide)opens in a new tab or window to treat cardiovascular disease risks — heart attack, stroke, and death — for obese or overweight adults with a history of cardiovascular disease, making it the first anti-obesity medication (AOM) to obtain such approval.Studies showopens in a new tab or window that semaglutide reduces heart disease risks when accompanied by blood pressure and cholesterol management and healthy lifestyle counseling. FDA noted that this approval is “a major advance in public health.”
Less than 2 weeks after FDA approved the new indication (semaglutide is also approved for chronic weight management and type 2 diabetes), CMS issued a memorandumopens in a new tab or window stating that Medicare Part D plans may cover AOMs if they are FDA approved for an additional medically accepted indication beyond only weight management. CMS’ guidance is prospective and is not limited to semaglutide. The guidance applies to all AOMs that may be approved in the future to treat other conditions. To ensure that AOMs are used for medically accepted indications, CMS clarified that Part D sponsors may employ common utilization management tools like step therapy and prior authorization.
Notably, FDA’s approval of semaglutide for cardiovascular disease is likely a harbinger of similar approvals in the near future — along with their coverage by Medicare. While the benefits are substantial, so too may be the costs as more and more drugs and patients receive coverage.
Analyses have foundopens in a new tab or window extraordinarily high prices for Wegovy , with a list price up to $1,349 and a net price (received by the manufacturer) of $701 for a 4-week supply. It is estimated that 6.6 million Americans opens in a new tab or window would benefit from medications like semaglutide for cardiovascular event reduction. Because AOMs are so costly, increasing their coverage and use could result in substantial Medicare spending, as well as higher premiums and cost-sharing for enrollees.
In 2022, Medicare gross total spending on semaglutide and tirzepatide for diabetes reached $5.7 billionopens in a new tab or window, up from $57 million in 2018. With FDA’s approval of these drugs as AOMs, Medicare spending for new indications can be expected to increase dramatically in the next few years.
In March 2024, the Congressional Budget Office (CBO) found that Medicare coverage of AOMs would result in considerable demand for and use of AOMsopens in a new tab or window by enrollees. CBO expects that generic competition, which could moderate prices and lead to higher rebates, would start in earnest only in the second decade of a policy allowing Medicare Part D to cover AOMs. However, even that assumption is not certain as pharmaceutical companies seek to “evergreen”opens in a new tab or window patent protection and market exclusives. CBO also acknowledges the possibility of new drugs that are more effective, have fewer side effects, or can be taken less often, which could translate to higher prices. Furthermore, if AOMs are stopped, weight then increases, meaning that these medications may have to be taken lifelong.
Arguably, reducing obesity rates could reduce the incidence of many chronic diseases such as diabetes and heart disease, potentially creating a net benefit in the long term. And even in the near-term, the Inflation Reduction Act (IRA) may help curb costs.
The IRA also has other mechanisms that may help address the high costs. The IRA’s rebate program, for example, ensures cost containment by requiring manufacturers of drugs that don’t have competitors to pay rebates to HHS if the prices of those drugs increase faster than the inflation rate. The IRA also caps out-of-pocket spending for prescription drugs at $2,000 starting in 2025opens in a new tab or window. (Although a $2,000 cap helps limit costs, spending that amount of money is still burdensome, especially for people of low socioeconomic status who are disproportionately impacted by obesity.)
In short, the IRA may alleviate, but not eliminate, Medicare spending concerns. The IRA’s ability to address the cost concerns of AOM coverage depends on various factors, and it is likely that those cost containment measures will take many years to materialize. As AOMs continue to be approved for new uses, the intense demand for these drugs coupled with their high costs are likely to place pressures on Medicare spending for years to come.
Takeaways
CMS has made clear that Medicare should cover semaglutide or other AOMs only when needed to avert cardiovascular or other serious diseases. This rule will have to be rigorously enforced and monitored.
Savvy Medicare enrollees could try to game the system, using medications primarily for weight loss purposes — which would be inconsistent with CMS’s approval. Some physicians might also engage in dishonest prescribing. Also, given the racial and ethnic disparities in access to obesity treatment, marginalized groups are unlikely to reap equal benefit from AOMs. For those reasons, robust and thoughtful strategies are needed to ensure that coverage for such drugs is not exploited. Without clear limits on the use of AOMs, Medicare could be overwhelmed with costs.
Beyond Medicare spending, there are wider equity concerns about access to drugs that treat medical conditions associated with obesity. Even if marginalized individuals can gain access to the medication, obtaining optimal health benefits of AOMs is likely to remain a challenge. FDA notes that semaglutide is most effective when it is taken together with other lifestyle or behavioral changesopens in a new tab or window, such as diet and exercise. Because healthy lifestyles and behaviors are mostly influenced by broader social and commercial determinants, the full health benefits of AOMs may elude those most at risk. To harness the public health benefits, AOMs must be seen as part of a broader approach to address health risks associated with obesity; they should not detract from the interventions targeted at socio-structural determinants of health that shape individual and population health outcomes.
To some, semaglutide and other AOMs are a miracle of modern science. Yet, we should entertain some skepticism about miracle solutions to deeply complex health threats. Medicare should extend coverage for AOMs under criteria that meaningfully considers the competing concerns and tradeoffs. Meanwhile, public health professionals and clinicians should continue to use all the tools at our disposal to reduce the burdens of disease caused by overweight and obesity, while also fighting against the stigma, shaming, and discrimination that are widely prevalent in our society.
If a picture is worth a thousand words, a video, if done well, can be worth thousands more.
Regular readers of HEALTH CARE un-covered know we have published lots of words about the barriers health insurance companies have erected that make it harder and harder for patients to get the care their doctors know they need.
It’s a perfect example of how something that was designed to protect patients from inappropriate and unnecessary care has been weaponized by health insurers to pad their bottom lines.
Prior authorization in today’s world all too often serves as a bureaucratic barrier, requiring patients and their doctors to obtain approval in advance from insurers before certain treatments, medications, or procedures will be covered.
While insurance companies argue that prior authorization helps control costs and ensure appropriate care, the reality is far grimmer.
Both patients and their health care providers suffer the consequences. Patients frequently face delays in receiving necessary treatments or medications, exacerbating their health conditions and causing unnecessary stress and anxiety. Many forgo needed care altogether due to the complexities and frustrations of navigating the prior authorization process. This practice not only undermines patients’ trust in their health care providers but also compromises their health, often leading to worsened conditions and, tragically, sometimes irreversible harm.
The burden of prior authorization falls heavily on clinicians and their office staff who must spend valuable time and resources navigating the bureaucratic red tape imposed by insurers. This administrative burden not only detracts from patient care but also contributes to physician burnout, dissatisfaction and moral crisis, according to many doctors.
Ultimately, the health insurance industry’s prioritization of profit over patient well-being is evident in its insistence on maintaining these barriers to care, perpetuating a system that defaults to financial gain at the expense of human lives.
The New York Times video cuts to the chase. Prior authorization, as practiced today by insurance companies, is “medical injustice disguised as paperwork.”
If Congress in the next year or two succeeds in transforming Medicare into something that looks like a run-of-the mill Medicare Advantage plan for everyone – not just for those who now have the plans – it will mark the culmination of a 30-year project funded by the Heritage Foundation.
A conservative think tank, the Heritage Foundation grew to prominence in the 1970s and ’80s with a well-funded mission to remake or eliminate progressive governmental programs Americans had come to rely on, like Medicare, Social Security and Workers’ Compensation.
Some 30 million people already have been lured into private Medicare Advantage plans, eager to grab such sales enticements as groceries, gym memberships and a sprinkling of dental coverage while apparently oblivious to the restrictions on care they may encounter when they get seriously ill and need expensive treatment. That’s the time when you really need good insurance to pay the bills.
Congress may soon pass legislation that authorizes a study commission pushed by Heritage and some Republican members aimed at placing recommendations on the legislative table that would end Medicare and Social Security, replacing those programs with new ones offering lesser benefits for fewer people.
In other words, they would no longer be available to everyone in a particular group. Instead they would morph into something like welfare, where only the neediest could receive benefits.
How did these popular programs, now affecting 67.4 million Americans on Social Security and nearly 67 million on Medicare, become imperiled?
As I wrote in my book, Slanting the Story: The Forces That Shape the News, Heritage had embarked on a campaign to turn Medicare into a totally privatized arrangement. It’s instructive to look at the 30-year campaign by right-wing think tanks, particularly the Heritage Foundation, to turn these programs into something more akin to health insurance sold by profit-making companies like Aetna and UnitedHealthcare than social insurance, where everyone who pays into the system is entitled to a benefit when they become eligible.
The proverbial handwriting was on the wall as early as 1997 when a group of American and Japanese health journalists gathered at an apartment in Manhattan to hear a program about services for the elderly. The featured speaker was Dr. Robyn Stone who had just left her position as assistant secretary for the Department of Health and Human Services in the Clinton administration.
Stone chastised the American reporters in the audience, telling them: “What is amazing to me is that you have not picked up on probably the most significant story in aging since the 1960s, and that is passage of the Balanced Budget Act of 1997, which creates Medicare Plus Choice” – a forerunner of today’s Advantage plans.
“This is the beginning of the end of entitlements for the Medicare program,” Stone said, explaining that the changes signaled a move toward a “defined contribution” program rather than a “defined benefit” plan with a predetermined set of benefits for everyone. “The legislation was so gently passed that nobody looked at the details.”
Robert Rosenblatt, who covered the aging beat for the Los Angeles Times, immediately challenged her. “It’s not the beginning of the end of Medicare as we know it,” he shot back. “It expands consumer choice.”
Consumer choice had become the watchword of the so-called “consumer movement,” ostensibly empowering shoppers – but without always identifying the conditions under which their choices must be made.
When consumers lured by TV pitchmen sign up for Medicare Advantage, how many of the sellers disclose that once those consumers leave traditional Medicare for an Advantage plan, they may be trapped. In most states, they will not be able to buy a Medicare supplement policy if they don’t like their new plan unless they are in super-good health.
In other words, most seniors are stuck. That can leave beneficiaries medically stranded when they have a serious, costly illness at a time in life when many are using up or have already exhausted their resources. I once asked a Medicare counselor what beneficiaries with little income would do if they became seriously ill and their Advantage plan refused to pay many of the bills, an increasingly common predicament. The cavalier answer I got was: “They could just go on Medicaid.”
The push to privatize Medicare began in February 1995 when Heritage issued a six-page committee brief titled “A Special Report to the House Ways and Means Committee”, which was sent to members of Congress, editorial writers, columnists, talk show hosts and other media. Heritage then spent months promoting its slant on the story. Along with other right-wing groups dedicated to transforming Medicare from social insurance to a private arrangement like car insurance, Heritage clobbered reporters who produced stories that didn’t fit the conservative narrative.
The right-wing Media Research Center singled out journalists who didn’t use the prescribed vocabulary to describe Heritage plans. Its newsletter criticized CBS reporter Linda Douglas when she reported that the senior citizens lobby had warned that the Republican budget would gut Medicare. The group reprimanded another CBS reporter, Connie Chung, for reporting that the House and Senate GOP plans “call for deep cuts in Medicare and other programs.” Haley Barbour, then Republican National Committee chairman, vowed to raise “unshirted hell” with the news media whenever they used the word “cut.” He wined and dined reporters, “educating” them on the “difference” between cuts and slowing Medicare’s growth. Former Republican U.S. Rep. John Kasich of Ohio, who chaired the House budget committee, called reporters warning them not to use the word “cut,” later admitting he “worked them over.”
As I wrote at the time, by fall of that year reporters had fallen in line. Douglas, who had been criticized all summer, got the words right and reported that the Republican bill contained a number of provisions “all adding up to a savings of $270 billion in the growth of Medicare spending.”
Fast forward to now. The Heritage Foundation’s Budget Blueprint for fiscal year 2023 offered ominous recommendations for Medicare, some of which might be enacted in a Republican administration. The think tank yet again called for a “premium support system” for Medicare, claiming that if its implementation was assumed in 2025, it “would reduce outlays by $1 trillion during the FY 2023-2032 period.” Heritage argues that the controversial approach would foster “intense competition among health plans and providers,” “expand beneficiaries’ choices,” “control costs,” “slow the growth of Medicare spending,” and “stimulate innovation.”
The potential beneficiaries would be given a sum of money, often called a premium support, to shop in the new marketplace, which could resemble today’s sales bazaar for Medicare Advantage plans, setting up the possibility for more hype and more sellers hoping to cash in on the revamped Medicare program. Many experts fear that such a program ultimately could destroy what is left of traditional Medicare, which about half of the Medicare population still prefers.
In other words, most seniors are stuck.
That can leave beneficiaries medically stranded when they have a serious, costly illness at a time in life when many are using up or have already exhausted their resources. I once asked a Medicare counselor what beneficiaries with little income would do if they became seriously ill and their Advantage plan refused to pay many of the bills, an increasingly common predicament. The cavalier answer I got was: “They could just go on Medicaid.”
The push to privatize Medicare began in February 1995 when Heritage issued a six-page committee brief titled “A Special Report to the House Ways and Means Committee”, which was sent to members of Congress, editorial writers, columnists, talk show hosts and other media. Heritage then spent months promoting its slant on the story. Along with other right-wing groups dedicated to transforming Medicare from social insurance to a private arrangement like car insurance, Heritage clobbered reporters who produced stories that didn’t fit the conservative narrative.
The right-wing Media Research Center singled out journalists who didn’t use the prescribed vocabulary to describe Heritage plans. Its newsletter criticized CBS reporter Linda Douglas when she reported that the senior citizens lobby had warned that the Republican budget would gut Medicare. The group reprimanded another CBS reporter, Connie Chung, for reporting that the House and Senate GOP plans “call for deep cuts in Medicare and other programs.” Haley Barbour, then Republican National Committee chairman, vowed to raise “unshirted hell” with the news media whenever they used the word “cut.” He wined and dined reporters, “educating” them on the “difference” between cuts and slowing Medicare’s growth. Former Republican U.S. Rep. John Kasich of Ohio, who chaired the House budget committee, called reporters warning them not to use the word “cut,” later admitting he “worked them over.”
As I wrote at the time, by fall of that year reporters had fallen in line. Douglas, who had been criticized all summer, got the words right and reported that the Republican bill contained a number of provisions “all adding up to a savings of $270 billion in the growth of Medicare spending.”
Fast forward to now. The Heritage Foundation’s Budget Blueprint for fiscal year 2023 offered ominous recommendations for Medicare, some of which might be enacted in a Republican administration. The think tank yet again called for a “premium support system” for Medicare, claiming that if its implementation was assumed in 2025, it “would reduce outlays by $1 trillion during the FY 2023-2032 period.” Heritage argues that the controversial approach would foster “intense competition among health plans and providers,” “expand beneficiaries’ choices,” “control costs,” “slow the growth of Medicare spending,” and “stimulate innovation.”
The potential beneficiaries would be given a sum of money, often called a premium support, to shop in the new marketplace, which could resemble today’s sales bazaar for Medicare Advantage plans, setting up the possibility for more hype and more sellers hoping to cash in on the revamped Medicare program. Many experts fear that such a program ultimately could destroy what is left of traditional Medicare, which about half of the Medicare population still prefers.
In a Republican administration with a GOP Congress, some of the recommendations, or parts of them, might well become law. The last 30 years have shown that the Heritage Foundation and other organizations driven by ideological or financial reasons want to transform Medicare, and they are committed for the long haul. They have the resources to promote their cause year after year, resulting in the continual erosion of traditional Medicare by Advantage Plans, many of which are of questionable value when serious illness strikes.
The seeds of Medicare’s destruction are in the air.
The program as it was set out in 1965 has kept millions of older Americans out of medical poverty for over 50 years, but it may well become something else – a privatized health care system for the oldest citizens whose medical care will depend on the profit goals of a handful of private insurers. It’s a future that STAT’s Bob Herman, whose reporting has explored the inevitable clash between health care and an insurer’s profit goals, has shown us.
In the long term, the gym memberships, the groceries, the bit of dental and vision care so alluring today may well disappear, and millions of seniors will be left once again to the vagaries of America’s private insurance marketplace.
HENRY KOTULA 