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Analysis — Are seniors paying attention to Paul Ryan's plan for Medicare?

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 Updated:

Columnist Wendell Potter

Center for American Progress

Tea Party members who railed against health care reform because of the spin they were sold about how “Obamacare” would affect Medicare played a big role in returning the House of Representatives to Republican control.

I’m betting that many of them, if they're paying attention to what Rep. Paul Ryan, R-Wis., wants to do to the Medicare program, are having some serious buyer’s remorse. If Democrats are wise, they’re already drafting a strategy to remind Medicare beneficiaries, including card-carrying Tea Party members, just how fooled they were into thinking that Republicans were the protectors of the government-run program they hold so dear.

As a speaker at an especially contentious town hall meeting during the summer of 2009, I saw firsthand just how many senior citizens were snookered about how reform legislation would alter Medicare. Shortly after I testified before Congress about how the insurance industry was conducting a behind-the-scenes campaign to influence public opinion about reform, Rep. Bill Pascrell, D-N.J., invited me to share my perspective as a former insurance industry insider at his Sept. 3, 2009, town hall meeting at Montclair State University.

More than 1,000 people had crammed into the school’s auditorium, not so much to hear the speakers as to express their opinions. Reform opponents were on one side of the auditorium, and reform advocates were on the other side. I had to shout just to be heard above the insults the groups were hurling at each other. Many of the reform opponents were carrying signs that read, “Hands Off My Medicare!” They clearly had bought the lie that the Democrats planned to dismantle the program.

There was no doubt in my mind that the insurance industry was the original source of that lie. While insurers liked the part of reform that would require all Americans not eligible for Medicare or Medicaid to buy coverage from them, they did not like the provision that would eliminate the overpayments the federal government has been paying private insurers for years to participate in the Medicare Advantage program, which was created when Republicans controlled both chambers of Congress in the late 1990s.

A little history: A provision of the Balanced Budget Act of 1997, written primarily by the insurance industry and backed by House Speaker Newt Gingrich and Senate Majority Leader Trent Lott, gave Medicare beneficiaries the option of getting their benefits through private insurers. Republicans envisioned this as the first step toward the total privatization of Medicare.

The problem was that insurers were reluctant to jump in unless they could be assured of a substantial profit. To get them to market Medicare Advantage plans, the government agreed to give them a big bonus. As a result, we the taxpayers now pay private insurers 14 percent more than the per-patient cost of the traditional Medicare program. These overpayments have contributed significantly to the record profits insurance companies have been posting in recent years, even though only 22 percent of people eligible for Medicare have bought what they’re selling.

The insurers were not able to keep the Democrat-controlled Congress of 2010 from eliminating those bonuses when they passed the Affordable Care Act. The law will indeed reduce future Medicare spending—not benefits—by an estimated $500 million over the next 10 years in a variety of ways, one of which is to stop overpaying insurers. This means that they will not get an extra $136 billion that they—and their shareholders—had been counting on, and they’re really bummed about that.

Knowing they fare much better when the GOP is running things on Capitol Hill, they devoted millions of the premium dollars we paid them to help elect more Republicans to Congress.

The insurers funneled millions of dollars to their business allies and front groups in an effort to convince the American public that the Democrats wanted to cut Medicare benefits. Not only is that not true, the new law actually adds an important new benefit and greatly improves another. For the first time, Medicare now pays for preventive care. And the law closes the hated “doughnut hole” in the Medicare prescription drug program.

But thanks to the success of the insurer-funded misinformation campaign, many seniors went to the polls last November convinced that the Democrats not only had created death panels in the Medicare program, they had also slashed their benefits.

The insurance industry funneled $86 million to the U.S. Chamber of Commerce to pay for TV ads that charged that the new law would “cut Medicare.” Also joining in on the campaign of lies was the 60 Plus Association, a group that, according to the Washington Post, AARP and other sources, has received the lion’s share of its funding over the years from the pharmaceutical industry and other special interests.

The 60 Plus Association ran TV ads in numerous congressional districts last fall against Democrats who had voted for the reform law. The ads were amazingly effective. Most of the Democrats they targeted lost.

The irony, of course, is that the GOP had no intention of preserving Medicare as seniors have known it since it was created more than 45 years ago. Ryan’s plan to reduce the deficit—which was approved by the House last week—would complete the privatization of Medicare that insurers and their Republican allies have been plotting for years.

Ryan wants to give Medicare beneficiaries a voucher they can use to get coverage from a private insurance company. Initially, the vouchers would enable beneficiaries to get coverage comparable to what they have today. But the value of the vouchers would diminish over time. The Congressional Budget Office predicts that 65-year-olds would be paying 68 percent of their Medicare coverage costs by 2030, compared with 25 percent today.

What this means is that almost all Medicare beneficiaries would eventually be woefully underinsured, just as an estimated 25 million younger Americans already are and just as most of the nation’s elderly—the ones who could afford coverage at all—were before Medicare was enacted in 1965. (Most senior citizens had no health coverage before Medicare because insurance companies refused to sell it to them. That’s why it was so urgently needed.)

Ryan’s plan is a losing proposition for just about every American who lives long enough to qualify for Medicare benefits, but it is the business model that insurance firms have been dreaming of for years. It would enable them to reap profits that would make their earnings today pale by comparison.

If Democrats have any hope of keeping control of the Senate and regaining the House, they better be able to explain what’s really going on in ways that even the Tea Party seniors will understand. If I were a Democratic strategist, I would be ordering enough “Hands Off My Medicare” signs to blanket the country.

News analyst  Wendell Potter , a former insurance company executive, is the author of  Deadly Spin: An Insurance Company Insider Speaks Out on How Corporate PR Is Killing Health Care and Deceiving Americans.