Misguided Plans for Medicare and Medicaid

Leadership in Washington recognizes the damage our soaring health care spending is doing to our entire economy. Unfortunately, although their rhetoric differs, recent budget proposals from both Republicans and Democrats mistakenly place the blame on Medicare and Medicaid. Their proposed cuts to and privatization of these important public insurances will place us on a dangerous path that will leave health care costs soaring and more patients unable to afford necessary care. Instead, Medicare and Medicaid should be left out of the discussion entirely until our elected leadership has the courage to address the real reasons why our health care costs are rising: the toxic environment created by investor-owned insurances and the profit-driven health care industry.


Health care spending in the United States is the highest in the world. In some cases, it is two times higher than spending in other industrialized nations, which achieve nearly universal coverage with better health outcomes than the U.S. Our soaring health care costs outpace our growth in GDP, inflation, and wages. By any measure it is an unsustainable situation.


If we look at the various health care models in the United States, we find that the rise in spending is lower for traditional (non-privatized) Medicare and Medicaid than it is for the private sector. Our public insurance is the most efficient, with administrative costs of around 3 percent, despite the fact that they cover our most vulnerable and least healthy populations. Administrative and marketing costs for private plans are higher by 15 percent or more. The many private plans further increase cost and complexity as patients and health professionals try to navigate their arbitrary and ever-changing rules.


Private health insurers are financial institutions designed to create profit, in part by obstructing, denying, and restricting access to health care. They add no value to our health and their business practices have polluted health care financing, causing all insurance to adopt their practices in order to "compete." They have also fragmented the health care market and, thus, the ability to negotiate for fair prices for goods and services, leading to the highest possible prices for pharmaceuticals and procedures.


The common sense solution is to eliminate wasteful and costly private health insurance and adopt a universal health care system modeled on the strengths of Medicare and given the power to negotiate for reasonable prices.


It is counterproductive to even discuss cuts to Medicare and Medicaid before addressing the fundamental reasons for rising costs. Yet, the Ryan budget proposal, the "Path to Prosperity," would fully privatize Medicare by moving to a voucher system in 2022, forcing all seniors to purchase private insurance. The vouchers are not designed to keep up with the rate at which health care costs are increasing. So, over time, seniors will either have to pay more out of pocket for health insurance premiums or will choose insurance plans that leave them unprotected when they have a serious illness or accident. Nearly half of Medicare enrollees have an income that is less than twice the federal poverty level and so have little room to absorb an increased share of health care costs.


Medicaid is significantly limited under the Ryan budget proposal which plans to cut overall Medicaid spending by $800 billion over 10 years and change to block grants for each state. Block grants will mean that individual states will continue to be under economic pressure to limit who and what services are covered. As fewer are covered by Medicaid, they will have to either purchase private insurance through the exchanges or seek a waiver from or be penalized for not purchasing insurance.


The Obama administration supports cuts to Medicare through the Independent Payment Advisory Board (IPAB), which is charged with keeping per capita Medicare spending below a target level lower than the current rate of health care cost inflation. Rather than blatantly privatizing Medicare as called for in the Ryan proposal, the president's plan will slowly strangle Medicare, leaving seniors struggling to find physicians able to care for them.


The IPAB was actually created in the Affordable Care Act (ACA), part of Obama's 2010 health care reform. The president's budget proposal would increase the power of the IPAB to cut Medicare costs. Medicaid spending would also be capped under the president's budget. Sadly, the Peoples Budget put forth by the Congressional Progressive Caucus rubberstamps the president's approach to cutting Medicare and Medicaid spending. The ACA puts more people into the private insurance market by mandating that all uninsured who do not qualify for public health insurance purchase private insurance through the exchanges, and starting in 2014. It subsidizes the purchase of private insurance using public dollars.


Half of the newly insured under the ACA are eventually supposed to come from an expansion of Medicaid eligibility. However, the Department of Health and Human Services has already allowed state expansions in Medicaid coverage to lapse. A recent White House Fact Sheet also supported allowing states to place their Medicaid population into private insurance through the health insurance exchanges.


The U.S. differs from other nations in allowing investor-owned corporations to profit at the expense of human suffering and lives. After decades of experience with this unique privatized model of financing health care, the results are clear and startling. Privatization of health care is a failed experiment.


The U.S. has the highest per capita health care costs, the highest prices for medical goods and services (with lower overall usage rates), and no control over health care spending. In addition, there have been no significant gains in important measures of health such as life expectancy and infant and maternal mortality rates.


Physicians for a National Health Program advocate for an improved Medicare for all health system, one that builds on the strengths of Medicare, such as its universality, administrative efficiency, and the patient's freedom to choose a health provider. It also corrects the weaknesses of Medicare, such as the lack of comprehensive benefits, out of pocket costs, and low reimbursement rates.


Both Democrats and Republicans are missing the point by putting the emphasis on controlling Medicare and Medicaid costs without effectively addressing the reasons for our rising health care costs. Rather than embracing the Republican rhetoric which blames our public insurance, Democrats would do well to call out the real reason for our health care spending crisis, our current fragmented and profit-driven model, and advocate for a national improved Medicare for all.


Margaret Flowers is a pediatrician who serves as Congressional Fellow for Physicians for a National Health Program (www.pnhp.org).