Advocates protest Medicare Advantage

Advocates hold signs during a news conference on Medicare Advantage plans in front of the U.S. Capitol on July 25, 2023 in Washington, D.C.

(Photo: Alex Wong/Getty Images)

Washington Complicity in Half-Century Privatization of Medicare

Since passage of the 1965 Medicare law, special interests inside and outside of government have continually bent the intent of Medicare in order to maximize corporate profits at the expense of taxpayers, seniors, and the disabled.

The authors of "The Privatization of Everything: How the Plunder of Public Goods Transformed America..." describe the corporate campaign to turn public goods and services into private profit-centers, paralleling the U.S. half-century $50 trillion wealth transfer upward. Promoting increasing commodification of healthcare, the U.S. is the only developed nation to place profiteering middlemen between patients and providers. Corporate/Wall St. exploitation of U.S. healthcare as a cash cow since 1980 has contributed to higher health costs and worse outcomes than other advanced nations.

A 1971 Oval Office conversation between President Nixon and John Ehrlichman augured misplaced healthcare priorities. Extolling the Kaiser CEO's profit-seeking, Ehrlichman enthused: "All the incentives are toward less medical care, because the less care they give them, the more money they make."

Nixon's 1973 HMO Act ushered in "Managed Care" health models, including Health Maintenance Organizations, Accountable Care Organizations and Medicare Advantage, many morphing into "Managed Profit," because neoliberalism yields wealthcare not healthcare.

Washington Accelerates Medicare Privatization

Since passage of the 1965 Medicare law, special interests inside and outside of government have continually bent the intent of Medicare in order to maximize corporate profits at the expense of taxpayers, seniors, and the disabled. With plutocratic intent Newt Gingrich in 1996 blithely forecast that privatization would cause Medicare to “wither on the vine.”

The 2003 Medicare Modernization Act was G.W. Bush's giveaway to the PhRMA and insurance industries. Even as it prohibited negotiation of bulk medicine rates, the MMA subsidized Medicare Advantage plans with extra billions of dollars annually siphoned from the Medicare Trust Fund, overcharging taxpayers up to $140 billion annually by 2023.

An obscure provision of MMA, the Employer Group Waiver Plans (EGWP), furthers Medicare privatization by permitting employers to move retirees, without their consent, into for-profit Medicare Advantage plans. Retiree organizations in Vermont, New York, and Delaware have waged David vs. Goliath-style battles to preserve their Traditional Medicare coverage against the subterfuge of Medicare Advantage "modernization" of benefits, which actually represent benefits "reduction."

CMS Betrayal: Promotion of Medicare Advantage

A 2023 report by the Center for Economic and Policy Research (CEPR) relates that privatized Medicare Advantage plans drain the Medicare Trust Fund, while increasing insurers' profits and reducing quality of patient care. Failing to protect Medicare's Trust Fund, the Centers for Medicare and Medicaid Services (CMS) has failed to halt overpayments to private Medicare Advantage plans. The Center for Medicare Advocacy (CMA) cites CMS outreach and enrollment materials since 2017 that encourage beneficiaries to choose private Medicare Advantage plans over Traditional Medicare.

Excess Medicare Advantage payments fund supplemental benefits and heavy marketing to lure enrollees, while brokers are paid commissions twice as high to sell Medicare Advantage plans than to sell Medicare Medigap plans. Moneymaking schemes of both Medicare Advantage and the Affordable Care Act have employed deceptive marketing, sometimes switching people's insurance without their consent. Some seniors intending to enroll in Traditional Medicare have been enrolled in a private Medicare Advantage plan. Too many seniors discover too late that MA's frequently-changing, narrow doctor networks expose them to substantial out-of-network costs, and that they are denied access to necessary care.

Medicare Advantage payments are inflated by "upcoding," which exaggerate patient health conditions; capitated payments incentivizing healthcare denial; and prior authorization requirements that delay and deny healthcare. Medicare Advantage "cherry-picking" selects the healthiest for coverage, and "lemon-dropping" rejects sicker patients.

ACA Fast-Tracking of Medicare Privatization

The Affordable Care Act created the Center for Medicare and Medicaid Innovation (CMMI) to conduct Medicare "innovative payment" experiments, modeled on "Managed Care" ACOs. Since first testing ACOs in 2005, CMS has authorized hundreds of private Managed Medicare ACO insurance models that amplify administrative costs. In 2023 the Congressional Budget Office reported that CMS experiments with "value-based" ACO payments failed to control costs, improve quality or increase equity, costing Medicare $5.4 billion more than it saved during its first decade.

An official CMS webpage titled "Fraud and Abuse Waivers” lists Innovation Center models that have been granted waivers to bypass fraud and abuse laws, to permit testing "innovative payment and delivery models" of healthcare—the better to milk the Medicare Trust Fund. CMS has invited the same investor-controlled insurance and Wall St. actors that drive Medicare Advantage overpayments to act as fiscal intermediaries between providers and patients within successive Trump DCE and Biden ACO REACH Alternative Payment Models.

Every administration since 2000 has welcomed some CMS administrators through Washington's Revolving Door. Prior to, or following government service, some have headed investor-backed health startups. Tom Scully, G.W. Bush's CMS head, oversaw privatized prescription drug benefits and Medicare Advantage before joining a private equity firm to capitalize on public dollars. Liz Fowler has rotated through the Revolving Door, between executive positions with insurance and pharmaceutical industries, alternately helping to draft both the Medicare Modernization and Affordable Care Acts, and subsequently returning to the Biden administration to oversee CMMI that she helped write into the ACA.

Even as CMS promotes experimentation with costlier multiple private payer models, they disregard single-risk-pool Medicare that alone has the economy of scale to provide sustainable universal health coverage, while permitting global budgeting and bulk medicine rate negotiations. Twenty-two studies report annual $600 billion Medicare-for-All administrative savings alone, enough to extend comprehensive health coverage to all ages.

Rather than improve and expand the promise of direct-payment Single-Payer Fee-For-Service—a model utilized by many advanced nations—CMS has promoted privatization of most public healthcare programs. Describing the goal of placing "100% of Traditional Medicare beneficiaries and the majority of Medicaid enrollees in accountable care relationships by 2030," CMS transfers Medicare recipients without their consent into private ACO REACH plans, "auto-aligning" Medicare enrollees with ACO-affiliated providers.

"Don't Bust Up Medicare and Turn It Over to the States," writes Kay Tillow of the latest misguided attempt to drain the Medicare Trust Fund, purportedly to achieve health care state by state.

If Health and Human Services, CMS and legislators fulfilled their responsibility to protect Medicare for the People, the plan would have been streamlined long ago. There would be no need for complicating costly supplemental insurance plans such as Parts A, B, C, D, and Medigap.

The non-profit law organization, the Center for Medicare Advocacy, defender of Traditional Medicare, affirms that "Few programs in the history of the United States have brought as much benefit to society as Medicare... Reforms to Medicare should honor and maintain its core values to ensure its continued success for future generations."

We must eliminate the greed of the market ethos, prioritize health as a human value, and support the aspiration of the Poor People's Campaign—i.e., an economy and healthcare for the people, eliminating continuous wealth transfer upward.


A traditional Medicare enrollee for over a decade, CMS recently notified me that my health provider has been moved to a MSSP ACO, where 11 million beneficiaries were reportedly transferred by 2023. To retain Traditional Medicare, recipients are forced to find independent providers not captured by ACO payment plans, and to do so before CMS drains the Medicare Trust Fund and totally destroys Medicare.

Our work is licensed under Creative Commons (CC BY-NC-ND 3.0). Feel free to republish and share widely.