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Traditional Medicare - The Promise Is In Peril

Excellent and succinct overview of Traditional Medicare, now under a very real threat. People are now waking up!

Excellent and succinct overview of Traditional Medicare, now under a very real threat. People are now waking up!

[Guest Writer, Lisa Dekker, is a co-Outreach VP of the Puget Sound Advocates for Retirement Action (PSARA). She resides in Clallam County and is one of PSARA’s lead organizers on the Clallam County PSARA Committee. This article originally appeared in the February 2023 issue of The Retiree Advocate, a monthly publication of the PSARA Education Fund and is reprinted here in its entirety with the permission of the publisher.]

At its beginning, Traditional Medicare was a promise made to the American people that when they turned 65 they would get health care when they most needed it. With almost 60 million enrollees, and administered by the Centers for Medicare and Medicaid Services (CMS), it is financed through our  payroll taxes, general tax revenue, and the premiums paid. Medicare is widely regarded as an essential public good, and one of this country’s best government programs.

Fifty-seven years ago, only 60 percent of Americans over age 65 had health insurance. Coverage was often unavailable or unaffordable. As a result, as thousands suffered the onset of health conditions often brought on by aging, many had their finances and their very survival severely threatened by medical expenses.

In 1965, under the leadership of Lyndon Johnson, and after months of strenuous negotiations, Congress passed the Medicare Act under Title XVIII of the Social Security Act. It was a hard-fought victory, with powerful forces aligned against it, most notably the American Medical Association, which launched an all-out lobbying campaign, including anti-Medicare recordings by an actor named Ronald Reagan.

The Medicare Act was one of the most important achievements for civil rights in American history. It quietly and quickly integrated both hospitals and physicians’ practices by making Medicare payments to providers conditional on desegregation. After decades of a strictly segregated system, hospitals in both the North and South quickly integrated – at least a thousand in less than four months.

Traditional Medicare covered Part A (hospitalization) and 80 percent of Part B (including doctor visits, exams, and specialists). In 1973, Medicare was expanded to cover people under age 65 who receive Social Security Disability Insurance (SSDI) benefits. But in 1997, Medicare’s door was opened to private insurance companies via HMO’s. And 2003 marked the beginning of Medicare Advantage plans – private insurance masquerading as Medicare. It is crucial to recognize that what is broadly labeled “Medicare” today encompasses both traditional Medicare and what is actually private health insurance, hiding under the name Medicare Advantage.

The fact that Medicare Part B leaves it up to the beneficiary to pay 20 percent of costs is likely due to the “moral hazard” myth that pervades much of health insurance – that people will over-use their healthcare if everything is covered. In 1980, the Baucus Amendment implemented Medigap supplements. A traditional Medicare enrollee had to choose whether to purchase a Medigap supplemental plan as a “solution” to that 20 percent gap. Purchasing or not purchasing Medigap insurance can lead to additional Medicare being more expensive on an annual basis than Medicare Advantage. The 20 percent gap is a historical shortcoming of the program. This has become a huge problem for seniors, along with the fact that prescription drugs were originally not covered, and then CMS was prohibited from negotiating for lower prescription drug prices. 

Despite these shortcomings, Traditional Medicare has many benefits, including the following:

- Patients can go to any doctor or provider that accepts Medicare, in any state.

- There are no restrictive networks, and no prior authorizations are needed.

- If you choose Traditional Medicare when you first enroll at age 65, you have a guaranteed right to buy a Medigap plan to cover expenses not covered by Part B. (Note that current rules say that if you want to add a Medigap plan later, you may be denied.)

- If you choose Traditional Medicare and a Medigap plan during your initial enrollment window, there are no health questionnaires. Many Traditional Medicare enrollees choose to purchase a Medigap plan.

- Those on traditional Medicare experience fewer delays or denials of care than those on Medicare Advantage

- The administrative costs of traditional Medicare are only 2–3 percent vs. 12–18 percent for Medicare Advantage (private health insurance.)

Traditional Medicare has been one our country's most treasured public goods, providing universal health care for those 65 years of age and older, as well as those who are disabled. Despite some built-in flaws, traditional Medicare maximizes patient choice, access, and quality of care. But as private, for-profit entities have relentlessly and successfully lobbied for a bigger piece of the what will soon be the $1.6 trillion Medicare pie – through both Medicare Advantage and a new pilot program called ACO REACH – massive profiteering and corruption now threaten the quality of care and the stability of the Medicare Trust Fund. This once again puts many seniors and, because of health equity issues, communities of color in peril. 

The privatization of Medicare has inevitably led to the maximization of profits, often through fraudulent practices, and has placed the entire Medicare program in jeopardy. We need to take the profit incentive and privatization out of Medicare and replace it with an expanded public, non-profit traditional Medicare system with expanded benefits and lower individual costs. 

For more information on protecting and strengthening traditional Medicare, see the goals section in the January issue of the Retiree Advocate. For more information on Medicare Advantage, see the forthcoming March issue of the Retiree Advocate.

Comments by Readers

Ray Kamada

Feb 03, 2023

There’s the immoral conundrum of investing your health and retirement in companies whose profits depend on denying you the care that you’ve paid for. Private firms aren’t in business to help you. Though some may deny it, deep down, we all know this. 

Then there’s making your own, personal, best choices. 

For example, I’ve been reasonably healthy during my first ten senior years. Ergo, I chose Advantage because a) it was cheaper (MediGap is an extra ~$71/month), b) free gym membership, c) some duration limit on long term care whose details I forget but will look up again. 

Now that I’m older, my health is more at risk. Covid turned gyms into disease vectors. And I know full well that denial of charges and services is how private insurance like Advantage bridges the 9 to 15% overhead gap, plus the more that’s needed to make a profit.

So, I may switch to Medicare + MediGap this year, if I still can. For me, it’s now probably the better bet. For you, these factors may weigh differently. 

Read More...

Dick Conoboy

Feb 04, 2023

 Ray,

Good comment.  For those who want to know about buying Medigap coverage vs. Medicare (Dis)Advantage polices, you can read the rules at this link: 

When can I buy Medigap?

Read More...

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