Brett Arends’s ROI: Medicare is quietly being privatized. Does anyone care?

by | Aug 11, 2023 | Stock Market

The campaign to privatize Medicare has just passed a landmark. This year, for the first time ever, more than half of all Medicare beneficiaries are enrolled through private insurers, in a system known as Medicare Advantage. “In 2023, 30.8 million people are enrolled in a Medicare Advantage plan, accounting for more than half, or 51 percent, of the eligible Medicare population, and $454 billion (or 54%) of total federal Medicare spending (net of premiums),” reports the healthcare nonprofit and think tank the Kaiser Family Foundation.

As recently as 2005, privatized Medicare plans accounted for just 13% of beneficiaries. By 2033, they are expected to be above 60%. This is a remarkable evolution. Medicare was created as a government program. But today more than half of its beneficiaries are in the hands of private insurers, rather than the government. Private Medicare plans have existed since the 1970s but only really took off in recent decades. A big change came under President Obama. His Affordable Care Act, which became known as “Obamacare,” improved the system, drove down costs and introduced incentives for insurers to make their plans better — including a star rating and annual bonuses for hitting quality targets. Kaiser reports that those bonuses are on track to jump 30% this year to $12.8 billion, more than four times the amount paid out by Uncle Sam in 2015. This is just over 1% of the annual Medicare budget, which will top $1 trillion this year. The process of privatizing Medicare has been surprisingly uncontroversial so far. For one thing it doesn’t fit easily into a TikTok video. Is it a good thing? Maybe. Consumers are certainly voting with their feet. Medicare Advantage plans typically operate through HMO or PPO networks, which give them greater control over costs. Most Adva …

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