Traditional Medicare versus Medicare Advantage

Medicare has both a public and private proponent. Traditional Medicare which has just one plan and covers about 81% of seniors. But about 19% of seniors have opted for private Medicare Advantage services. The latter was Congress' attempt to privatize the system but so far it has failed to capture the market (because it isn't a very good option).

Traditional Medicare

• Public-private

• Each state has one Medicare administrator (a non-profit corporation that bids on the contract)

• Are often non-profits run by for-profit management companies (see note below)

• In Wisconsin that is WPS (Wisconsin Physician Service), but could be any lower bidder

• WPS pays physicians on a fee-for-service basis and is then reimbursed by CMS for expenses

• Physicians must be private contractors and not employed by WPS (they can be employed by a non-profit hospital or HMO, or be in private practice)

• WPS has no marketing costs. They are the default Medicare provider and cover 81% of seniors

• WPS must accept all seniors applying (no denials), but physicians may opt out of Medicare program (which some do because they have built their practice and prefer private payers that carelessly reimburse up to quadruple Medicare rates.) For-profit hospitals can also opt out, but few do.

Medicare Advantage Plans

• Public-private (but in a different way, and sometimes to the disadvantage of the patient).

• They in effect are HMOs or managed care organizations that negotiate an Advantage contract. There is only one "traditional" provider but there can be multiple Advantage contractors, thus marketing costs are usually necessary.

• Advantage providers can be staff-model HMOs (physicians are on staff), or simply serve as an insurer.

• Are usually non-profits run by for-profit management companies (see note below)

• Are reimbursed on a "per patient" basis (x dollars per year per patient, i.e., "capitation"), though some private-fee-for-service (PFFS) companies are emerging.

• Whatever care the capitation companies do not provide reduces their costs and increases their surpluses, thus they have an incentive to avoid costs and deny care or tests

• They can cherry-pick only the youngest and healthiest, can deny entry but cannot drop an expensive patient (though they can increase fees to drive them out).

• They have marketing costs (and have attracted 19% of seniors who can opt in, but many want out after learning of their limitations). They have become known for their unethical marketing techniques and have even scammed patients into joining. They've also increased their enrollment by convincing patients they are their only option.

• Their per-patient costs are 15-19% more than traditional Medicare spends today (so much for private industry being more efficient than the government)

Notably, non-profits cannot pay outlandish salaries under the law, but they CAN pay outlandish management fees to a for-profit corporation that pays outlandish salaries. But they must competitively bid, thus outlandish management fees would be minimized.

US Rep. John Conyers, sponsor of HR676 Medicare-for-all bill, should block this legality when it involves health care nonprofits. Non-profits cannot make profits but they can accumulate "surplus" that must ultimately be spent (and sometimes they spend it on higher administrative contracts). For example, Blue Cross (a for-profit) can set up a non-profit for the purposes of bidding on the Medicare Advantage contract and then siphon ill-gotten "surpluses" in the form of higher management fees.

Traditional Medicare is reasonably controllable, but we must get the system out of the hands of the conflicted politicians and establish a non-partisan and non-conflicted Health Commission made up of retired medical professors and health care administrators, each serving 14 year staggered terms and appointed by a non-partisan ethics commission. This commission would establish all rules, reimbursement fees and regulations, but the payments and administration would still be contracted to a private non-profit corporation under competitive bid much like Medicare has contracted with WPS in Wisconsin.