September, 1995

"The House Republican proposal on Medicare released today sets in motion a death spiral for Medicare. The proposal is a blueprint for funneling $84 to $189 billion over the next seven years to private insurance companies and for-profit HMOs for their exorbitant overhead costs, profits, and executive salaries. Medicare's administrative costs are just 1.9 percent, compared with 15 to 30 percent at HMOs such as U.S. Healthcare."

"The proposal will unleash a frenzy of risk selection by insurers/HMOs, who will pick out the healthiest seniors to market to and enroll, leaving sicker patients who are less willing to change physicians concentrated in the traditional Medicare program. Medical savings accounts will further shrink the funds available to care for frail elderly, as they will attract only the healthiest seniors, and end up costing Medicare funds that otherwise would not have been spent. As provider reimbursement is ratcheted down by the Republicans to meet their budgetary "fail-safe", traditional Medicare will be left looking a lot like Medicaid, where measures of access to care are no better than for the uninsured."

"Quality, access, and choice of physician are on the chopping block for seniors. Studies by the Rand Corporation, the Robert Wood Johnson Foundation, and by the HHS' inspector general's office show that sick and disabled patients do poorly under managed care. The previous incentives to overtreat in the Medicare program are being replaced by incentives to undertreat in the HMOs and the newly emerging for-profit physicians' groups."

"In addition, the proposal will subject seniors to the same kinds of massive fraud and abuse going on in Medicaid HMOs, in the Medigap sector, and in managed mental health care. In Florida, Medicaid patients were told by insurers that they would lose their coverage if they failed to sign up with an HMO, and administrative costs and profits ate up 50 to 77 percent of program costs at some plans."

"Managed care won't save Medicare, and contrary to earlier reports, managed care has not saved money for the non-elderly either. The consulting firm Foster Higgins, which reported a 1.1% decline in employers' health benefit costs, reexamined its data and found an increase of per-employee HMO costs of 10% in 1994. Costs fell in PPOs, but only because this form of managed care shifted more costs onto employees directly."

"The bottom line is that this is a proposal to augment corporate welfare, not Medicare. Seniors should beware. The only way to control costs while improving access, quality, and preserving choice of doctor is a single-payer system covering all Americans."