Medicare Overpayments to Private Plans, 1985-2012: Shifting Seniors to Private Plans Has Already Cost Medicare US$282.6 Billion
ABSTRACT Previous research has documented Medicare overpayments to the private Medicare Advantage (MA) plans that compete with traditional fee-for-service Medicare. This research has assessed individual categories of overpayment for, at most, a few years. However, no study has calculated the total overpayments to private plans since the program's inception. Prior to 2004, selective enrollment of healthier seniors was the major source of excess payments. We estimate this has added US$41 billion to Medicare's costs since 1985. Medicare adopted a risk-adjustment scheme in 2004, but this has not curbed private plans' ability to game the payment system. This has added US$122.5 billion to Medicare's costs since 2004. Congress mandated increased payment to private plans in the 2003 Medicare Modernization Act, which was mitigated, to a degree, by the subsequent Affordable Care Act. In total, we find that Medicare has overpaid private insurers by US$282.6 billion since 1985. Risk adjustment does not work in for-profit MA plans, which have a financial incentive, the data, and the ingenuity to game whatever system Medicare devises. It is time to end Medicare's costly experiment with privatization. The U.S. needs to adopt a single-payer national health insurance program with effective methods for controlling costs.
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ABSTRACT: Governments world-wide have attempted to use market mechanisms and privatisation to increase the quality and/or reduce the cost of healthcare. England's Health and Social Care Act 2012 is an attempt to promote privatisation through marketisation in the National Health Service (NHS). While the health policy literature tends to assume that privatisation follows from private-sector entry points, we argue that this is more likely if firms expect to make a profit. This paper examines the link between privatisation and marketisation in England drawing on 32 semi-structured interviews with private-sector and public-sector respondents, campaigners, and other experts conducted 6–10 months after the implementation of the 2012 Act. By generating a theoretical framework on the conditions of profitability we seek a better understanding of the conditions under which marketisation leads to privatisation. We find that significant barriers to profit-making remain after the reforms, including a top-down squeeze on prices, uncertainty in market rules, state dominance of funding and provision, and failures to depoliticise the market. These factors restrict private-sector involvement by frustrating profit-making. Where profits are made they are through reduced unit costs and high volumes by a longstanding incumbent in a particular market segment. This, however, restricts marketisation by reinforcing entry barriers.Social Science & Medicine 01/2015; 124:215-223. DOI:10.1016/j.socscimed.2014.11.045 · 2.56 Impact Factor