Written by Thom Hartmann
This week my new book, The Hidden History of American Healthcare: Why Sickness Bankrupts You and Makes Others Insanely Rich is officially available in bookstores nationwide and online. Here’s a chapter excerpt I think you’ll find interesting, particularly after all those awful TV ads with former football and sitcom stars we’ve had to endure the past few years…
The “Advantage” War against Medicare
Medicare Advantage is a massive, trillion-dollar rip-off, of the federal government and of taxpayers, and of many of the people buying the so-called Advantage plans.
It’s also one of the most effective ways that insurance companies could try to kill Medicare For All, since about a third of all people who think they’re on Medicare are actually on these privatized plans instead.
Nearly from its beginning, Medicare has allowed private companies to offer plans that essentially compete with it, but they were an obscure corner of the market and didn’t really take off until the Bush administration and Republicans in Congress rolled out the Medicare Modernization Act of 2003. This was the GOP’s (and a few corporatist Democrats’) big chance to finally privatize Medicare, albeit one bite at a time.
That law created a brand known as Medicare Advantage under the Medicare Part C provision, and a year later it phased in what are known as risk-adjusted large-batch payments to insurance companies offering Advantage plans.
Medicare Advantage plans are not Medicare. They’re private health insurance most often offered by the big for-profit insurance companies (although some nonprofits participate, particularly the larger HMOs), and the rules they must live by are considerably looser than those for Medicare.
Even more consequential, they don’t get reimbursed directly on a person-by-person, procedure-by-procedure basis. Instead, every year, Advantage providers submit a summary to the federal government of the aggregate risk score of all their customers and, practically speaking, are paid in a massive lump sum.
The higher their risk score, the larger the payment. A plan with mostly very ill people in it will get much larger reimbursements than a plan with mostly healthy people. After all, the former will be costly to keep alive and healthy, while the latter won’t cost much at all.
Profit-seeking insurance companies, being the predators that they are, have found a number of ways to raise their risk scores without raising their expenses. The classical strategies of tying people to in-network providers, denying procedures routinely during first-pass authorization attempts, and having very high out-of-pocket caps are carried over from regular health insurance systems to keep costs low and profits high.