Privatizing raises Medicare costs

This editorial appeared in the St. Louis Post-Dispatch.

Republicans, on the campaign trail and during their convention, have touted private enterprise as the solution to America's health care crisis — despite evidence that within the government's Medicare program, private enterprise is causing more problems than it's solving.

Exhibit A is the $8.5 billion in extra payments that taxpayers will make this year to private insurance companies that cover some elderly Medicare patients.

The extra payments — over and above what it costs for traditional Medicare coverage — average nearly $1,000 for each person enrolled in a so-called Medicare Advantage plan that private insurance companies sell. Between 2004 and 2008, those extra payments added almost $33 billion to Medicare's costs, according to a recent review by the non-partisan Commonwealth Fund.

Exhibit B: The baffling and opaque marketing materials that private companies are using to sell stand-alone Medicare prescription drug plans. Eighty-five percent of the marketing materials fail to meet federal standards for fairness and clarity, according to a recent inspector general's report.

In 2003, the Republican-controlled Congress passed a Medicare prescription drug benefit that greatly expanded the role of private health insurance companies in the federal health program for the elderly. Only private insurance companies are allowed to offer drug coverage under that law. They do so through stand-alone plans or Medicare Advantage policies that combine drug benefits with traditional Medicare coverage.

Participation by private insurance companies was supposed to provide competition for traditional Medicare. In theory, that would be a fine idea. But reality is that this competition has come at a steep cost for taxpayers. That's because Congress added extra fees to entice private companies to compete.

About one of every five Medicare participants now is enrolled in a Medicare Advantage plan, which costs about 12 percent more per enrollee than traditional Medicare. The fastest-growing kind of Medicare Advantage plan, called a private fee-for-service plan, costs an average of 19 percent more than traditional Medicare.

Extra payments to private insurance companies have jumped from $3.9 billion in 2004 to $8.5 billion this year. With so much money at stake, insurance companies have cranked up the advertising pressure, often in misleading ways.

Congress twice tried to cut the overpayments last year and direct the money to expand health insurance for children. President Bush vetoed both bills. He threatened to veto another attempt to cut the overpayments this year.

The federal government is obliged to closely monitor private insurance companies that market to Medicare enrollees to ensure that they meet their legal obligations. But audit after audit has shown it has failed to do so.

Under Bush, Medicare has become a subsidy program for private insurance companies that pressure seniors to sign up for overpriced coverage.