Why not privatize Medicare?
By Consumers Union on Wednesday, May 25th, 2011
The Senate voted “No” on the Ryan plan to privatize Medicare last week. To find out how your Senators voted, visit Consumers Union’s vote center.
Medicare is a remarkably effective system for covering the healthcare needs of our most vulnerable. Costs could come down more, and it could be even more efficient, but is privatization the answer? We don’t think so.
Is there fraud? Yes. Mostly by providers who bill for care they didn’t give or care they didn’t need to give. But providers who do this also defraud the private insurance companies. Private insurance companies can just pass these costs on to consumers.
Whether you have employer-sponsored health insurance or you purchase your own insurance policy, healthcare fraud inevitably translates into higher premiums and out-of-pocket expenses for consumers, as well as reduced benefits or coverage.
Medicare keeps its administrative costs under 4%, which is absolutely amazing compared to private insurance companies. There are many reasons for this, but obviously it helps that Medicare doesn’t need advertising, nor does it have to return profits to its investors. And it doesn’t have the same massive infrastructure for denying legitimate claims–lawyers parsing contract langugage, claims administrators reducing the reimbursement or denying it altogether.
Further, Medicare reduces costs all down the chain. Providers must spend far less time and energy handling Medicare billing because it always works the same way for every patient. Private insurance billing is responsible for significant cost increases because doctors must spend so much time dealing with all the different standards, forms and claims processes.
Are there ways to further reduce costs? Sure! Like authorizing Medicare to negotiate lower drug prices with the big drug and device companies. But generally, Medicare has provided most of the healthcare for the costliest segment of the population, older people, efficiently and effectively.
We believe that Medicare costs can come down with additional, carefully thought out reforms, and that provider fraud can be curbed with continued aggressive action. We disagree that giving people vouchers to go buy private insurance will save money, although it might shift some taxpayer dollars to individual sick people, who will have to pay a far higher share of the cost of care. Medicare is a contract by America with America that we will all have adequate healthcare in our old age. Turning Medicare over to private insurance companies will cost individuals so much that it will effectively end that contract.