Medicare Privatization—The Republican Strategy

Welcome to my first Follow the Money blog post where I will look at why Republicans are embarking on a quest for Medicare privatization.  The answer is not what you think or have been told to think is the reason–it is not failing or is old and needs an “overhaul”.  By following the money, we will discover that the real reason for Medicare privatization has to do with money and who stands to gain financially if the government’s Medicare program is converted to a fragmented, private collection of insurance plans rather than the largest single-payer healthcare plan in the nation. The Republican’s Medicare privatization plan is part of a multi-step process to reassert control over healthcare (largely Medicare) spending for influence peddling.  It is not a secret that all legislation out of Washington (“The Swamp”) can be traced back to “those who gained financially” from it.   The cost to these favored businesses comes in the form of contributions (“bribes”) to politicians and their party slush funds.  Direct healthcare industry contributions to candidates and committees in 2016 elections amounted to over $326 million.

Let’s follow the money and see how Medicare privatization fits into the Republican strategy to enrich themselves by maximizing Congressional influence on healthcare policy and the healthcare industry contributions that follow. I have outlined the strategy in the figure below.

Medicare privatization

Steps 1-4. Preparation for Medicare Privatization

The dismantling of Obamacare (PPACA) is the necessary first step toward Medicare privatization. Why? First and foremost, the law improves the solvency of Medicare through various Medicare cost reduction initiatives that are moving Medicare reimbursement from the volume-based fee-for-service payment model to value-based models. These cost reduction initiatives add up to a projected $500 billion Medicare (and Medicaid) savings from 2017 to 2026.  Cutting costs in the Medicare program makes it more solvent while taking away these cost savings would make it less solvent. The Republicans thus need to get rid of these Medicare cost reduction initiatives so that Medicare becomes less solvent and the call for Medicare privatization more than just the Republicans’ attempt to send more business over to the moneyed interests that contribute to Congressional campaign chests and party slush funds. (see Step 6)

The testing ground for complete Medicare privatization is the private, for-profit Medicare Advantage program and Obamacare (PPACA) is hindering its growth by moving to reduce the extra payments (above what Medicare pays for original Medicare beneficiaries) these plans currently receive for the Medicare beneficiaries they privately manage. These extra payments are projected to cost Medicare $400 billion over the next ten years—that’s $400 billion that Medicare could lose if these private Medicare Advantage plans continued to receive “extra” money.  While giving these private health insurance companies more money translates to higher campaign contributions, it also increases Medicare costs, and results in a less solvent Medicare program.  If you remember when private, managed care Medicare plans were first introduced (in 1997 and called Medicare +Choice), they were supposed to deliver LOWER costs than our “bloated” government was able to deliver.   This particular Obamacare (PPACA) reform again makes Medicare more solvent and  therefore is a threat to influence peddling and the contributions it brings to those who favor specific healthcare industry businesses.  Bringing Medicare Advantage plan payments in line with original Medicare payments will also uncover the inconvenient fact that private for-profit health insurance companies simply CANNOT deliver Medicare’s guaranteed benefits more cheaply than our government can.

Obamacare (PPACA) created the Independent Payment Advisory Board (IPAB) and the Center for Medicare and Medicaid Innovation (CMMI),  two reform bodies that are the bane of every influence peddling Congressman and private for-profit healthcare business that wants to tilt legislation in their favor. The IPAB is tasked with achieving Medicare cost reductions without affecting coverage or quality and has the authority to make the necessary changes to achieve its goals. Because the majority of the IPAB members must be composed of experts and stakeholders (including consumers) that do NOT have financial interests in the healthcare industry, conflicts of interest and pressure from lobbyists representing healthcare businesses is minimized. Congress can only override the IPAB decisions through a supermajority vote.

By creating and funding the Center for Medicare and Medicaid Innovation (CMMI), Obamacare (PPACA) made government healthcare policy more nimble and innovative and not more burdensome as Republicans want us to think. The only burdensome cog in government healthcare policy innovation was Congress itself as it tried to deliver favorable legislation to those who contributed to campaigns and party slush funds. The CMMI has the authority to undertake a wide variety of experiments for improving quality of care and cost reduction within both Medicare and Medicaid programs and upon certification by CMS’s Office of the Actuary, the Secretary of the Department of Health & Human Services (HHS) has the authority to implement a new idea without prior congressional approval. This is where putting Dr. Tom Price as Secretary of HHS becomes important in the overall Republican strategy for Medicare privatization. As a medical doctor and legislator, Dr. Price has always favored the financial interests of medical doctors over the interests of the American people for affordable health care. Together with the fact that many of the Medicare cost reductions initiatives within HHS are initiated at the discretion of the Secretary (the wordage used in Obamacare (PPACA) legislation),  Dr. Price could simply ignore CMMI recommendations and put a halt to most Medicare cost reductions already in place.  Nimble and innovative Medicare cost reduction and quality improvement organizations are a serious threat to the Republican strategy to enrich themselves and bring about Medicare privatization.

The affordability and quality measures within the Medicare program filter to the rest of the healthcare marketplace thus benefiting all Americans. The employer-sponsored health insurance plan premiums are lower simply because the single payer Medicare program exists.  Where Medicare goes, the rest of the healthcare marketplace follows. Medicare privatization and fragmentation into many smaller risk pools takes away much of Medicare’s power to keep healthcare costs down.  This is good for private for-profit healthcare businesses and politicians who seek the mutually beneficial arrangement that influence peddling provides.

Republicans are Poised for Medicare Privatization

The scenario described above could not have been set into motion without last November’s election results that gave the Republicans control of both houses of Congress and the Presidency. Having complete control of all legislative branches of government puts Republicans in the driver’s seat to enact all Republican agendas with little to no opposition. President Trump’s selection of Rep. Tom Price as Secretary of HHS sends a clear message to present and future Medicare beneficiaries—the financial interests of healthcare businesses are more important than the economic and social well-being of the individual American. As soon as he is in his new post, all Medicare cost reduction and quality improvement initiatives will be reversed and the resulting increase to Medicare costs will bring on the calls for Medicare privatization to “save the day”.

While the Republicans do not have a workable healthcare reform, Representative Paul Ryan’s A Better Way makes clear the path to increased political contributions–Medicare privatization and reasserting control of Medicare cost reduction and quality improvement decisions to Congress where influence peddling ($$$) can be again maximized. He specifically mentions the need to repeal both the Independent Payment Advisory Board (IPAB) and the Center for Medicare and Medicaid Innovation (CMMI), the two groups that are directly responsible for usurping Congressional power to maximize political contributions. He wants to “strengthen” (give them even more money?) Medicare Advantage. How does throwing more money at private for-profit health insurance companies and complete Medicare privatization “preserve Medicare for future generations”?  Perhaps the Republicans have some “alternate” reasoning to explain.

Medicare privatization

Medicare Privatization—Summary

The Republican healthcare agenda has the ultimate goal of increasing Congressional power over healthcare policy so that influence peddling will enrich members to new heights. They plan to accomplish this goal in several steps. They will first wrestle Congressional control of Medicare cost reduction and quality improvement initiatives under Obamacare (PPACA) from the experts in the Medicare program where influence peddling is minimized and the merits of improvements define success. These Medicare improvements have improved Medicare solvency by saving the Medicare program $500 billion over the next 10 years. Improved solvency is bad for a Republican agenda that wants to cram Medicare privatization down the throats of the American public. Medicare’s future is being mortgaged so that private for-profit healthcare businesses can make even more money than the current level that is DOUBLE that found in all other industrial nations.

It is important that individual Americans make clear to their elected officials and the Republican members of the Senate Committee on Finance that will be voting tomorrow to put into office Dr. Tom Price as the next Secretary of HHS that we will not stand for actions that will make Medicare less solvent and further a Republican agenda involving Medicare privatization. Unraveling Obamacare’s Medicare cost reduction and quality improvement initiatives is only the beginning to a road that enriches Congressional coffers and leaves Americans worse off.

Join  BB’s Healthcare Brigade and let’s combine our voices in bringing Affordable Health Care and Beyond for ALL Americans.


Cost Containment in the Affordable Care Act: An Overview of Policies and Savings Center for Healthcare Research &Transformation,  Centers for Medicare & Medicaid Services
Strengthening Medicare: Better Health, Better Care, Lower Costs Efforts Will Save Nearly $120 Billion for Medicare Over Five Years, Centers for Medicare & Medicaid Services
The Affordable Care Act: Lowering Medicare Costs by Improving Care Efforts Will Save Over $200 Billion for Taxpayers Through 2016, Nearly $60 Billion for Beneficiaries in Traditional Medicare, Centers for Medicare & Medicaid Services

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