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Medicare Privatization Act

A piece of legislation known as the Medicare Prescription Drug, Improvement and Modernization Act of 2003 marked one of many turning points within the Medicare health insurance system. The Modernization Act further reinforces a trend towards privatization that enables private insurance companies to administer Medicare benefits. In effect, the privatization of Medicare alters its intended role as a social health care system.

  1. Medicare Modernization Act of 2003

    • The Medicare Prescription Drug, Improvement and Modernization Act is best known for the addition of a prescription drug plan known as Medicare Part D. According to the Alliance for Health Reform, the Part D option represents the first Medicare benefit offered exclusively through private insurance companies. In addition to the Part D option, the Modernization Act renamed the existing Medicare + Choice program, designed to provide supplemental coverage, to Medicare Advantage. In effect, these changes gave private insurance companies a larger administrative role within the Medicare health care program.

    Medicare Privatization

    • The privatization of Medicare began in the 1980s as health insurance plans began to operate through managed care organizations, or networks, according to the Center for Medicare Advocacy. Managed care plans require participants to stay within an assigned network of service providers in terms of doctors, hospitals and medical suppliers. The original managed care network eventually gave way to the Medicare Part C option (Medicare + Choice) of 1997, which provides supplemental insurance benefits through plans issued by private insurance companies. Over time, many private insurers were forced to discontinue plan coverages due to loss of revenue and reduced government subsidies.

    Private Plan Participation

    • The addition of the Medicare Part D, prescription option created reduced prescription costs for Medicare beneficiaries, which provided a genuine incentive for Medicare beneficiaries to participate in, or convert to private health plans, according to the Alliance for Health Reform. As traditional Medicare works on a fee-for-service basis with minimal prescription coverage, the reduced cost and convenience of Medicare Advantage plans ultimately worked to increase private plan participation between 2003 and 2006. Statistics from the U. S. Department of Health & Human Services show plan participation rates more than doubled between the years 2003 and 2006.

    Government Subsidies

    • Government subsidies for Medicare Advantage Plans, Prescription Drug Plans (PDPs) and traditional Medicare coverage show a considerable difference in terms of funding allotments made to each program. According to the Center for Medicare Advocacy, government subsidies for Medicare Advantage drug plans made in 2006 amounted to $4.6 billion more than monies allotted for stand-alone PDPs. In terms of Medicare Advantage coverage for comprehensive health coverage, government subsidies showed an 11 percent increase compared to monies paid towards maintaining traditional Medicare coverage in 2007. In effect, these increases targeted privatized plans, which ultimately service the same group of Medicare beneficiaries as PDPs and traditional Medicare plans.

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