11-24-08, 9:11 am

During the presidential campaign, Barack Obama argued against using a hatchet to cut the federal budget. Despite enormous pressure from the right-wing and so-called fiscal conservatives to cut existing programs and scale back his proposed social agenda, Obama said that he preferred to 'use a scalpel to cut away fat,' making sure that essential programs are maintained and improved. He also promised to find ways to pay for new spending. With this philosophy in mind, a more efficient and people-friendly Medicare system could provide the first steps toward a national health care program.

Specifically on Medicare, Obama talked about one way to save money. “We right now give $15 billion every year as subsidies to private insurers under the Medicare system,” he said during the first presidential debate. “[The system] doesn't work any better through the private insurers. They just skim off $15 billion. That was a giveaway, and part of the reason is because lobbyists are able to shape how Medicare works.”

Obama’s view suggested a big ideological and political departure from the past eight years. Republican Party policy under George W. Bush pushed strictly for privatization. He didn't call it that, of course. He gave it a Madison Avenue label: “Medicare modernization,” i.e., turning larger and larger sections of Medicare over to the insurance carriers, with the taxpayer footing the subsidy bill.

Modernization, Bush and his allies claimed, would mean better service and more savings. Modernization really meant higher costs and poorer service. This is always the case with privatization schemes. When the IMF and World Bank force countries to whom they lend money to privatize their public services, they throw those countries into crisis. Privatization is their ugly quid pro quo. The bankers know very well that this costs taxpayers more and that services suffer, but their ideology (neoliberalism) must be served and the coffers of the corporations and banks must be filled. Therefore, both the current international financial crisis and the ongoing Republican attacks on Medicare and Social Security can be laid, in part, at the door of the IMF and the World Bank and their neoliberal ideologues.

Making Medicare a Fully Public Program

Medicare has never been a fully public program. A considerable portion of the medical bills has always been paid by the beneficiaries. In fact, on average, retirees over 65 years old are paying more out of their pockets today than they did prior to the passage of Medicare in 1965.

When the Medicare program was signed into law in 1964, Congress set a mandatory premium for physician care called Part B. They also required Medicare recipients to pay an ever growing portion of the overall cost of the hospitalization invoice. This can amount to 20 percent of their medical bills. At the time the bill was up for a vote, Democrats stated that this condition was necessary in order for it to pass. Lobbyists for the American Medical Association (AMA), the insurance carriers, drug companies and most of the rest of corporate America fought the passage of Medicare and Medicaid. The Republican Party was the voice off those interests. These concessions reduced this opposition, but the final product kept the carriers and the drug monopolies in a position to do the dirty work they have been doing ever since.

One of the results of this compromise has been that Medicare Part B premium requirements have grown each year. The premium, now over $100 a month, is automatically taken out of monthly Social Security checks.

Even with Medicare, there is something like a 20 percent or more 'gap' in coverage for recipients. To help cover the “gap,” insurance companies sell so-called Medigap insurance, which has become a major source of revenue for private insurance companies. The dollar value for insurance companies of this gap has steadily grown to an astronomical figure, in the billions each year.

Following the failure to win a universal health care program in the early 1990s, the insurance companies created a new scheme and quickly obtained federal approval for it. Congressional Republicans, assisted by the Clinton administration, devised a new way to satisfy the greed of the insurance companies through health maintenance organizations, or HMOs. HMOs were originally group practices, like the Kaiser programs, set up by well-meaning preventive medicine professionals.

The HMOs of the 1990s were a whole new animal created by insurance companies to 'offer retirees a deal.' The deal was simple. Sign up with us, we’ll pay for the gap, and we’ll give you better service.

It sounded like a good plan, but corruption was rampant. This was the heyday of corporations like Oxford Health Insurance Company and other underhanded insurance carriers who, in the late 1990s, were caught raking in premium payments but refusing to provide advertised services, while doctors and hospitals went unpaid for months and even years. After the scheme was exposed, Oxford's CEO was given a golden parachute worth millions.

Despite such enormous corruption, Republicans with campaign coffers over-flowing with HMO contributions, continued to champion deregulation and privatization, holding up the HMOs and the supposed superior health care they provide.

In 2003, when George W. Bush pushed through the misnamed Medicare Modernization Act (MMA), expanding these private plans, he used a new Madison Avenue gimmick and called them 'Medicare Advantage Plans.' Despite the fancy name, these plans have been a great disadvantage for many retirees, but have been a major new source of profits for insurance companies. Medicare recipients found themselves paying still more out-of-pocket expenses for fewer services. Some insurance carriers were allowed to exclude some Medicare recipients as bad insurance risks.

Amazingly, MMA actually used taxpayer dollars to pay insurance carriers to set up these plans. And even with that money, the carriers demanded more or threatened to leave the program.

Finally, a showdown in the Senate took place in July 2008. Senator Ted Kennedy (D-MA) dramatically returned from his sick bed to vote against the Bush administration’s attempt to lavish more money on the insurance companies. His was the 60th vote in the Senate to prevent a Republican Party filibuster. The mainstream media reported that Congress had voted to lower Medicare reimbursement for physicians’ fees, but the real deal was that Congress cut the money to the carriers. This was a major step toward Medicare reform that means something for all of us. Physician reimbursement from Medicare was frozen for 18 months.

Needed: Medicare Reforms

In the reform plan now being promoted by many activists, the federal government would cover the cost of both Part B and the 'gap.' By taking that step, the insurance carriers can almost be eliminated from the process. The savings from dumping the insurance carriers could be as much as $15 billion annually, according to some sources, including the Obama campaign.

The 2003 Bush MMA legislation did more than just hand money over to the insurance carriers. It also set up a new drug plan to feed the profit addiction of the big pharmaceutical companies. The MMA was supposed to reduce the cost of drugs to seniors, an issue which had become a national disgrace. Although the Medicare Part D did reduce the cost of drugs to some recipients, the basic problem remained: some Medicare beneficiaries in middle-income brackets – the infamous 'donut hole' – were excluded from the plan.

The root of this problem lay in Bush's demand that the bill forbid federal negotiation of the price of prescription drugs, as is the case with Medicaid and the Department of Veterans' Affairs. Eliminating that provision could result in billions more for the Medicare program, and since congressional Democrats supported that position during the MMA legislative fights in 2003, a solid win for the Democrats in this election could result in a renewed effort on their part to revise the MMA.

Another flaw in the present system is that when the original Medicare law was passed, Congress failed to put the program into the hands of a reliable administrator – the Social Security Administration – to run the program. Instead, they paid insurance carriers to do that. This also must change. The highly successful Social Security Administration should be expanded to include Medicare. That makes sound fiscal and managerial sense. It would also mean a reduction in the duplication of government administration and provide the efficiency and reduced bureaucracy Republicans are always clamoring for.

Lowering the Medicare eligibility age to 55 is another needed reform. Originally raised in the 1990s and pushed by former Sen. George Mitchell (D-ME) after the failure of the Clinton health care plan, such a move could benefit a large number of retirees not yet eligible for Medicare and would dramatically reduce the number of uninsured Americans.

A strong and expanded Medicare program would also reduce the financial pressure on negotiated labor contracts. Now, many unions negotiate with employers for health benefits for retirees. They negotiate to have Part B and the gap covered by a union contract.

Lowering the Medicare age to 55 also would ease early retirement for workers who now continue to work just to keep their health benefits. In fact, some unions negotiate health benefits as an added early retirement feature. So lowering the eligibility age to 55 would reduce the cost of retirees for many industries struggling with costs related to retiree health care.

Taking these pro-worker, pro-labor steps should ease the worries that many union leaders have concerning congressional action for national health care. It could encourage them to be more solid advocates for a national health program.

From Medicare to National Health Care


With the changes proposed here we could see a new Medicare program. No more money would be taken out of retirees’ pockets. It would be a federally-managed program with complete oversight. Corruption and greed would be sharply curtailed. Health benefits for union members would be less costly for employers and workers alike. With such a program, the path to a universal national health care program could be easy to see.

Republicans hate Medicare because it is about people's health before corporate profits. They and their corporate backers know they cannot get rid of it completely, even though they would dearly love to. So the next best thing is to plunder Medicare for profits. The elimination of the insurance companies from Medicare, then, would be an important victory.

Additionally, rather than seeing the current economic crisis as a barrier to necessary action on health care reform, it should be emphasized that the government can actually save taxpayer dollars by enacting a federally-managed national health care program based on expanding Medicare.

Just the First Step

Other immediate steps could be taken to reduce the number of uninsured Americans to close to zero. Congress should increase access to Medicaid. Eligibility requirements should be expanded to cover families and individuals making up to four times the federal poverty level. If this is done millions of the uninsured would have affordable access to health care.

Also, if states were given the resources to completely fund Medicaid, this could prove to be a strong stimulus package for states. Sate governments would be relieved of the nonsensical 50/50 funding requirement, and they would not have to cut other necessary programs to cover health care bills.

Federal insurance benefits, the same benefits members of Congress get, could be made available for all of those people in between, i.e., those who are below 55 and wouldn't yet have access to Medicare and are over 400 percent of the federal poverty level and would not be eligible for Medicaid.

This combination of plans would set the stage for their integration. Congressional action to pass a national health plan with a reformed Medicare, Medicaid, and the federal insurance programs at its core is the first step. HR 676, a bill currently introduced in the House of Representatives and authored by Rep. John Conyers (D-MI), is the closest approach to that.

Other Reforms Under the Radar

New reforms should look to expand the number of primary care physicians and nurses. To do this, there has to be a dramatic increase in funding for medical and nursing education. Expansion of the national health service corps, which supports medical education, would be a start. Using the power of federal funding for academic medical centers could help increase the availability of slots in which new doctors and nurses could be trained.

In addition, new federal investments are needed to create or expand qualified community health centers in order to service the millions of newly insured people.

All public, not-for-profit hospitals need attention. New federal investments are necessary, but these should come with strings attached, for example, limits on administrative costs, executive salaries and other wasteful spending.

Finally, to help reverse eight years of neglect, the federal government must significantly increase support for the public health infrastructure, that is, local, regional and state health departments. These departments must take on public health immunization programs and the like that have been allowed to fall short for so long.

Catching Up With the World

All of the other G-7 countries provide excellent models for universal health care that cut out profits and rein in costs and are based on a system of medicine based on social solidarity. Canadians, for example, enjoy a publicly-managed health care system that could be a model for an expanded Medicare system.

Somewhat different from Canada is the National Health Service in the UK, which is a model system where the hospitals and health care facilities are owned by the British government. Physicians, nurses and health care workers, who are employed by the government-owned health service, have an active voice, as individuals and through their union, in how the system is run. People in the UK love the National Health Service, although it is reviled by the AMA and corporate America.

The people of France, Germany, Italy, Spain and all the other European countries are similarly totally supportive of their 'social solidarity' health systems. We should have no less.

A national health care system is being built one step at a time, but the steps are gaining momentum and are closer together than ever before. The goal is now within reach.

--Phil E. Benjamin is senior editor of Political Affairs.