Recently I argued that eliminating the private insurance industry would not suddenly make health care affordable. But this is no reason to gratuitously overpay private insurers to provide health care to Medicare patients—while simultaneously planning to slash the fees that Medicare pays physicians.
Begin with the insurers. When Congress created Medicare Advantage, the program that allows private insurers to offer Medicare to seniors, it agreed to pay for-profit insurers about 12 percent more per patient than traditional Medicare would spend if it were covering those patients directly. Add up those extra payments and they amount to a $16-billion-a-year subsidy for the health insurance industry.
Why the sweetener? Lobbyists argued that the government would have to pay more to persuade for-profit insurers to join the Advantage program. Moreover, they promised that the insurers would use the $16 billion to offer patients extra benefits like acupuncture and eye exams that they would not receive under traditional Medicare. And Congress agreed. Now, think about this for a minute: legislators agreed to use our tax dollars to help for-profit insurers draw customers away from a government program that most people liked—and that cost taxpayers less. This is not about saving money by transferring Medicare to the supposedly more efficient private sector. This is about the conservative agenda: some politicians are determined to try to outsource government to for-profit corporations.
Predictably, private insurers structured their plans to siphon off the healthiest seniors. In New York City, for example, Oxford included free memberships to some pretty posh gyms as part of the package. They called it the “Silver Sneakers” program. Unfortunately, a year after seniors signed up they discovered that the number of gyms involved in the program had suddenly shrunk. The options that remained weren’t nearly as tony, and most were no longer located in upper-middle-class residential neighborhoods. Is this “bait-and-switch”? You decide.