Compromise will compromise Medicare

Following House passage, the Senate passed a sweeping Medicare reform package Tuesday that has less to do with prescription drugs than with eventually ending public control of seniors’ health-care coverage.

This legislation is suspect for many reasons. It could have done a lot of good in the long-term by specifying that Medicare would continue to be a completely publicly funded operation with flexible access to general tax revenues, thus ensuring the program’s permanent fiscal stability. After all, we need a flexible system of financing entitlements to deal with the “big crunch” that will occur when baby boomers retire en masse in the coming decades.

Instead, in the name of cost containment and fiscal responsibility (something neither the Senate nor the White House has shown recently) we are getting a short-term solution that won’t add up in the long run. We will eventually have to determine a solution for Medicare’s funding, scheduled to go bankrupt by 2026, because of limitations placed on the program’s spending.

This isn’t a good deal for seniors or the American people in the short run either. While seniors will receive a prescription drug benefit, and a large amount in subsidies will be directed toward rural hospitals and doctors, there are many caveats to consider. One is that the bill has taken away the federal government’s power to negotiate lower drug prices, meaning that while seniors will have subsidized drug coverage, there is not much preventing drug companies from simply upping their prices in the meantime.

Another problem is the bill’s rampant giveaways to insurance companies and their ally, the AARP – a group that receives more than $150 million per year from insurance sales, mutual funds and prescription drugs.

Insurance companies and HMOs receive subsidies to the tune of $18 billion from this bill. These companies’ stocks are just soaring, but we all know whose money we are spending to subsidize them.

Most intolerable is the bill’s privatization thrust. Although it has been downplayed as merely an “experiment,” it is easy to see how Republicans can artificially create a case for privatization. Under the legislation, competition is introduced in some large cities to create a comparison with the Medicare system. Of course, the playing field will not be level – these companies receive large subsidies from the government (a different sort of “invisible hand”). Meanwhile they will choose only the healthiest seniors to cover, leaving the most expensive seniors in Medicare. Years after the “experiment,” when Republicans call for full privatization, Medicare will be broke, and insurance companies will look incredibly (and conveniently) efficient by comparison.

The privatization scheme will become a major policy initiative for Republicans in the future. And while I respect the desire of some conservatives to keep the government out of anything a private company can do, it would be short-sighted to imagine that these private firms, with their mammoth executive pay packages, subsidies and selective coverage, are any more efficient than Medicare. But who can blame them? Because no insurance company is big enough to spread the coverage risk as widely as Medicare does, they have to be picky in whom they cover. And they need subsidies, so they won’t drop seniors entirely, right?

This brings us back to the original purpose of Medicare. It was established in 1965 to cover seniors’ hospitalization insurance because private firms wouldn’t do it, because it was too risky and expensive. The current bill’s drafters seem to have forgotten that sometimes the government does things better than private firms – gasp! – and that some of the waste and inefficiency on Medicare’s part is tolerable, given that the alternative is profit-seeking HMOs.

Conservatives farther to the right than most Americans want entitlement programs like Medicare destroyed and the free market to reign. The trite “invisible hand” metaphor is a convenient way of forgetting the ugly side of the privatized sector. Senate and House conservatives have used a key moment in health-care reform history to push through their plans to make the United States a place remarkably similar to the 1920s, before there were any safety nets and when business interests were our leaders’ top priority.

Putting seniors’ health care in the hands of HMOs and insurance companies is not sound, and despite what some people have claimed, there were much better plans offered on the Senate floor. We could have ensured Medicare’s fiscal stability in the long term and provided most of the benefits of the bill without heading toward privatization and giving massive subsidies to special interests.

Mitch Mosvick is a guest columnist. He welcomes comments at [email protected]