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Privatized Medicare: No Cure for Seniors and People with Disabilities

Jan. 28, 2003

Privatized Medicare: No Cure for Seniors and People with Disabilities

Statement of Public Citizen President Joan Claybrook on White House Proposal for Medicare Privatization

Tonight during his State of the Union address, President Bush is expected to outline his proposal to partially privatize the Medicare program by tying a prescription drug benefit to changes in Medicare that will push America’s seniors and people with disabilities into private insurance plans.

America’s senior citizens need and deserve to have their prescription drugs covered by Medicare. But instead of the simplest, most efficient cure, President Bush is prescribing snake oil. The premise that private companies can deliver services more economically than Medicare is based more on ideology than reality. He is taking the path toward dismantling Medicare rather than strengthening it.

There is no evidence that for-profit insurance companies can provide the same level and quality of health care as the traditional Medicare program at a lower cost. To the contrary, private companies have significantly higher administrative costs than Medicare and often pay bloated salaries to executives and profits to shareholders. Medicare currently has private plans covering 5 million beneficiaries through the Medicare+Choice program. Government auditors have found that instead of producing savings this program is costing us more. From 1998 to 2000, federal payments to Medicare HMOs exceeded by 13.2 percent the costs the government would have incurred to pay providers directly to provide care.

A partially privatized Medicare system is also unlikely to provide dependable care to the elderly. Since 1999, 2.4 million beneficiaries have had to scramble to find new coverage when their plans simply dropped out of Medicare+Choice. And in much of the country, particularly rural areas, there are no viable HMOs for beneficiaries to use. What kind of choice is that? Also, any proposal that pushes beneficiaries into private plans will mean restrictions on their ability to see the doctor of their choice.

What beneficiaries need is to strengthen Medicare with a comprehensive prescription drug benefit within the traditional Medicare program. Providing health care to our elderly should be viewed as society’s obligation, not an opportunity for big insurance companies to reap big profits based on government subsidies. By exposing some of the most vulnerable members of society to the whims of the for-profit health care industry, President Bush is again demonstrating that there is no room for compassion in his brand of conservatism.