Public versus Private: A Heathcare Debate with Serious Consequences

On December 8, 2003, President Bush signed into law the Medicare Prescription Drug, Improvement, and Modernization Act (MMA) of 2003. Not even a year later, the new law looks disaster-prone, with private insurance companies questioning the feasibility of the Bush administration’s plans for Medicare.

Scheduled to take effect in 2006, the new law will result in major changes to the federal insurance program, which is available to everyone over 65. In addition to some prescription drug coverage, the new Medicare will allow beneficiaries to purchase private health insurance plans.

From public to private

To encourage Medicare beneficiaries to transfer from traditional Medicare to private health plans, the government has offered to contribute a set amount of money towards the purchase of a private plan; this is called "premium support."

Beneficiaries would research the health plans available in their area, and choose the plan that would best serve them.

The Bush administration understands that Medicare beneficiaries must have good choices among private plans, or else they won’t want to switch from traditional Medicare. So the administration has proposed that the country be divided into ten insurance regions in which insurance providers would compete for Medicare beneficiaries’ premium support dollars.

The Bush administration and some economists say that these large regions would promote competition and therefore result in better care and lower costs.

But insurance providers don’t like the idea. They say that the proposal flies in the face of the way they’ve always done business - on a state by state basis.

Insurance state

Insurance companies like Blue Cross Blue Shield say that it’s not feasible for them to establish large insurance regions with broad networks of doctors and hospitals.

The larger the region, the greater the financial risk for insurance providers. They must come up with greater capital to cover the region, get insurance licenses in states where they are not established, and create contracts with doctors and hospitals with whom they have never worked.

This effort seems unworkable to private insurance companies, who are used to single state regions.

Many insurance companies would be willing to work with Medicare beneficiaries in their state only, but establishing 50 separate regions based on the 50 states would leave some beneficiaries (like those in Wyoming and Alaska) with very few choices.

In addition, Medicare officials say, a region needs at least 200,000 Medicare beneficiaries to support a private insurance agency, and small states or states with sparse populations are not likely to meet that requirement.

Private power

Since the new Medicare law relies heavily on private plans, private insurance companies will help shape healthcare for America’s seniors.

In this case, insurance companies have decided that the Bush administration’s plan to create large insurance regions is unprofitable and impractical, so the administration will have to compromise and find a solution that is more satisfactory to insurers.

This scenario illustrates Democrats’ arguments against the Medicare Prescription Drug, Improvement, and Modernization Act. During the congressional debates, many Democrats said that privatizing Medicare would leave seniors’ health in the hands of those who are concerned about one thing only: the bottom line. To make certain that health is the number-one priority, Democrats said, the program must remain public. With the government operating Medicare, there is some accountability, they argued. Elected officials have to answer to the public, while private insurance CEOs don’t.

Skyrocketing costs

State and federal healthcare budgets are squeezed by rising healthcare costs, and soon, any form of public health benefit may be a thing of the past.

On August 27, 2004, Federal Reserve Chairman Alan Greenspan encouraged Congress to deal with disappearing Medicare and Social Security budgets. He reminded legislators that the government has promised baby boomers more benefits than it can deliver. In the future, Greenspan suggested, Congress will be forced to slash benefits if it doesn’t deal with the dire funding situation of the present.

From philosophy to policy

Everyone agrees that Americans’ healthcare situation is plagued with quickly rising costs and severe budget deficits. But the parties have different philosophies about how to improve the system.

Republicans have faith in the market: if healthcare is run by the private sector, competition will keep prices down and quality up. Democrats have faith in the government: if the public runs its own healthcare plan, the public will be served.

And now, the consequences to this debate are becoming more and more critical. On August 27, 2004, the Census Bureau released statistics that show that 45 million Americans went without health insurance in 2003, 1.5 million more than in 2002. The number of uninsured Americans has increased for three years in a row.

For people who have jobs the situation is getting worse. Employers are reluctant to hire new employees because heath care benefits are so expensive and rising rapidly. And when you go to a health care provider today, you only get the treatment that your employer has agreed to provide in the contract they signed with the insurance company.

Consider further

Individual candidates propose solutions based on their party’s philosophies of healthcare. To review these philosophies and determine which one most closely resembles your own, click here.

To discuss this issue with other WomenMatter readers, click here.

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Posted on: 9/7/2004