Privatization Always Fails: Medicare Edition

Privatization: Always Higher Prices, Always Worse Service. Always.

Kevin Drum:

The chart below shows what happened. When Medicare was run traditionally, overhead was fairly low and getting lower (dashed blue line). Then private plans were introduced and total overhead costs started to flatten (black line). By 1997, total overhead was about 1.4 percentage points higher than traditional Medicare alone. In that year, Medicare Advantage was introduced, and by 2005 the gap had widened to 2.1 percentage points. Then privately run prescription drug plans were introduced, and now the gap is 4.5 percentage points.

In the case of prescription drugs, it's possible that higher overhead is justified by the lower overall program costs we get from having a lot of competing plans. In the case of Medicare Advantage, it's just pure waste. We have higher overhead and higher overall costs, with very little benefit to show for it. As Sullivan says, this should "long ago have triggered inquiries within Congress and the US health policy community as to whether the higher administrative costs associated with the growing privatization of Medicare are justified."