How to Reform Medicare and Lay the Basis for National Health Care

10-25-08, 9:45 am

At the first presidential debate, Jim Lehrer asked the two candidates where they would need to cut back their campaign promises, given the financial crisis. John McCain took the opportunity to say he would do what Republicans always do, feed the military and starve social programs. We must keep our national defenses funded, said McCain, but otherwise there must be a 'complete spending freeze.'

Barack Obama didn't fall for that trap. He said that we must not use a hammer in the budget process. Instead he said that he preferred to 'use a scalpel to cut away fat,' making sure that essential programs are maintained and improved. He also offered a way to pay for new spending.

We pick up the Q&A in midstream:

LEHRER: Not willing to give that [a comprehensive health care program] up?

OBAMA: I’m not willing to give up the need to do it, but there may be individual components that we can't do. But John is right – we have to make cuts. We right now give $15 billion every year as subsidies to private insurers under the Medicare system. [The system] doesn't work any better through the private insurers. They just skim off $15 billion. That was a giveaway, and part of the reason is because lobbyists are able to shape how Medicare works.

Let's compare and contrast what the future of Medicare might look like under the Republicans and under the Democrats.

More Privatization Under a McCain Presidency

Under a McCain presidency, even with a Democratic Congress, there would be increased privatization of Medicare. They don't call it that, of course. They give it a Madison Avenue label: “Medicare modernization”, i.e., turning larger and larger sections of Medicare over to the insurance carriers, with the taxpayer footing the subsidy bill.

This is done in the worn out name of better service and saving money, even though, rather than saving money, it will cost more, and service will deteriorate even more. This is always the case with privatization schemes. When the IMF and World Bank (yes, the healthcare crisis is an international one) force countries to whom they lend money to privatize their public services, they throw those countries into crisis. Privatization is their ugly quid pro quo. The bankers know very well that this costs taxpayers more and that services suffer, but their ideology (neoliberalism) must be served and the coffers of the corporations and banks must be filled. Therefore, both the current international financial crisis and the ongoing Republican attacks on Medicare and Social Security can be laid, in part, at the door of the IMF and the World Bank and their neoliberal ideologues.

Making Medicare a Fully Public Program

Medicare has never been a fully public program. A considerable portion of the medical bills has always been paid by the beneficiaries. In fact, on average, retirees over 65 years old are paying more out of their pockets today, with Medicare, than they did prior to the passage of Medicare in 1965. That is an astounding fact.

When the Medicare program was signed into law in 1964, Congress set a mandatory premium for Part B – physician care. They also required Medicare recipients to pay 20 percent of their medical bills. At the time the bill was up for a vote, Democrats stated that this condition was necessary in order for it to pass. The American Medical Association (those were the days when the AMA had decisive power), the insurance carriers, drug companies, and most of the rest of corporate America strongly opposed the passage of Medicare and Medicaid. Making these concessions got them to lower their opposition, but they kept the carriers and the drug monopolies in a position to do the dirty work they have been doing ever since.

One of the results of this compromise has been that Medicare Part B premium requirements have grown each year. The premium, now over $100 a month, is automatically taken out of monthly Social Security checks.

Even with Medicare, there is something like a 20 percent 'gap' in coverage for recipients and is a huge financial burden. To help cover the gap, insurance companies sell so-called Medi-gap insurance, which has become a major source of revenue for private insurance companies. The dollar figure of this 20 percent gap has steadily grown to an astronomical figure, in the hundreds of billions each year.

Following the failure to win a universal health care program in the early 1990s, the insurance companies thought up a new scheme and quickly obtained federal government approval for it. The Gingrich Republican Congress, assisted by the caving in of the Clinton administration, devised a new way to satisfy the greed of the insurance companies, through health maintenance organization, or HMOs. HMOs were originally group practices, like the Kaiser programs, set up by well-meaning preventive medicine professionals.

The new HMOs of the 1990s were a whole new animal. These latter-day HMOs were created by insurance companies themselves to 'offer retirees a deal.' The deal was simple. Sign up with us, we’ll pay the 20 percent gap, and we’ll give you better service.

Sounds like a good plan, but corruption was rampant. This was the heyday of corporations like Oxford Health Insurance company and other underhanded insurance carriers who, in the late 1990s, were caught raking in premium payments but refusing to provide advertised services, while doctors and hospitals went unpaid for months and even years. After the scheme was exposed, Oxford's CEO was given a golden parachute worth millions.

Despite such enormous corruption, Republicans like John McCain, with campaign coffers over-flowing with HMO contributions, continue to champion deregulation and privatization, holding up the HMO and the supposed superior health care it provides. Americans have long known the truth, however.

In 2003, when George W. Bush pushed through his misnamed Medicare Modernization Act, expanding these private plans, he used a new Madison Avenue gimmick and called them 'Medicare Advantage Plans.' Despite the fancy name, these plans have been a great disadvantage for many retirees, but have been a major new source of profits for insurance companies. Medicare recipients found themselves paying still more out-of-pocket expenses for fewer services. Some insurance carriers were allowed to exclude some Medicare recipients as bad insurance risks.

Amazingly, the Medicare Modernization Act (MMA) actually used taxpayer dollars to pay insurance carriers to set up these plans. And even with that money, the carriers demanded more, or they threatened to leave the program.

Finally, a showdown in the US Senate took place in July 2008. Senator Ted Kennedy dramatically returned from his sick bed to vote against the Bush administration’s attempt to lavish more money on the insurance companies. His was the 60th vote in the Senate to prevent a Republican Party filibuster. The mainstream media reported that Congress had voted to lower Medicare reimbursement for physicians fees, but the real deal was that Congress cut the money to the carriers. This was a major step toward Medicare reform that means something for all of us. Physician reimbursement from Medicare was frozen for 18 months.

Needed: Medicare Reforms

In the reform plan now being promoted by many activists, the federal government would cover the cost of both Part B and the 20 percent gap. By taking that step, the insurance carriers can almost be eliminate from the process. The savings from dumping the insurance carriers, could be as much as $15 billion annually, according to some sources, including the Obama campaign.

The 2003 Bush MMA legislation did more than just hand money over to the insurance carriers. It also set up a new drug plan to feed the profit addiction of the big pharmaceutical companies. The MMA was supposed to reduce the cost of drugs to seniors, an issue which had become a national disgrace. Although the Medicare Part D did reduce the cost of drugs to some recipients, the basic problem remained: some Medicare beneficiaries in middle-income brackets – the infamous 'donut hole' – were excluded from the plan.

The root of the problem is that Bush demanded that before he would sign the MMA, the legislation had to outlaw federal negotiation of the price of prescription drugs, as is the case with Medicaid and the Department of Veterans' Affairs. Eliminating that provision could result in billions more for the Medicare program, and since congressional Democrats supported that position during the MMA legislative fights in 2003, a solid win for the Democrats in this election could result in a renewed effort on their part to revise the MMA.

Another flaw in the present system is that when the original Medicare law was passed, Congress failed to put the program into the hands of a reliable administrator – the Social Security Administration – to run the program. Instead, they paid insurance carriers to do that. This also must change. The highly successful Social Security Administration should be expanded to include Medicare. That makes sound fiscal and managerial sense. It would also mean a reduction in the duplication of government administration and provide the efficiency and reduced bureaucracy Republicans are always clamoring for.

Lowering the Medicare eligibility age to 55 is another needed reform. Originally raised in the 1990s and pushed by former Sen. George Mitchell (D-ME) after the failure of the Clinton health care plan, such a move could benefit a large number of retirees not yet eligible for Medicare and would dramatically reduce the number of uninsured Americans.

A strong and expanded Medicare program would also reduce the financial pressure on negotiated labor contracts. Now, many unions negotiate with employers for health benefits for retirees. They negotiate to have Part B and the 20 percent gap covered by a labor/management contract.

Lowering the Medicare age to 55 also makes early retirement more feasible for workers who continue to work just to keep their benefits. In fact, some unions negotiate health benefits as an added early retirement feature. So lowering the eligibility age to 55 would reduce the cost of retirees for many industries struggling with costs related to retiree health care.

Taking these pro-worker, pro-labor steps should ease the worries that many union leaders have concerning congressional action for national health care. It could encourage them to be more solid advocates for a national health program.

Tom Brokaw's Question About 'Entitlements'

In the second presidential debate, Tom Brokaw asked this question: “With Social Security and Medicare being so much a part of the federal budget and future budgetary obligations, what would you do reign in those costs?”

Neither candidate really latched onto the question. That was a missed opportunity. We know that McCain and Republicans would dearly love to privatize Social Security and Medicare. So McCain confined his answer to platitudes.

Unfortunately, Senator Obama avoided a more direct answer as well. It was a perfect time to state the truth. “No Tom,” he should have said, “neither program is in financial trouble. Raising that charge is the standard way that those who dislike those programs try to push privatization schemes.'

From Medicare to National Health Care

So, with the changes proposed here we would have a new Medicare program. No more money would be taken out of retirees’ pockets. It would be a federally-managed program with complete oversight. Corruption and greed would be sharply curtailed. Health benefits for union members would be less costly for employers and workers alike. With such a program, the path to a universal national health care program could be easy to see.

Republicans hate Medicare because it is about people's health before corporate profits. They and their corporate backers know they cannot get rid of it completely, even though they would dearly love to. So the next best thing is to plunder Medicare for profits. The elimination of the insurance companies from Medicare, then, would be an important victory.

Additionally, rather than seeing the current economic crisis as a barrier to necessary action on health care reform, it should be emphasized that the government can actually save taxpayer dollars by enacting a federally-managed national health care program based on expanding Medicare.

Just the First Step

Congressional action to pass a national health plan with a new Medicare program at its core is the first step. HR 676, a bill currently introduced in the House of Representatives and authored by Rep. John Conyers (D-MI), is the closest approach to that.

All of the other G-7 countries provide excellent models for universal health care that cut out profits and rein in costs and are based on a system of medicine based on social solidarity. Canadians, for example, enjoy a publicly-managed health care system that could be a model for an expanded Medicare system.

Somewhat different from Canada is the National Health Service in the UK, which is a model system where the hospitals and health care facilities are owned by the British government. Physicians, nurses and health care workers, who are employed by the government-owned health service, have an active voice, as individuals and through their union, in how the system is run. People in the UK love the National Health Service, although it is reviled by the AMA and corporate America.

The people of France, Germany, Italy, Spain and all the other European countries are similarly totally supportive of their 'social solidarity' health systems. We should have no less.

A national health care system is being built one step at a time, but the steps are gaining momentum and are closer together than ever before. The goal is now within reach.

--Phil E. Benjamin is senior editor of Political Affairs.