The Parallels Between Privatization of Medicare and Public Schools
When you examine different government privatization efforts, there are some disturbing parallels between what is happening in Medicare and similar efforts in public education.
The Rise of Medicare Privatization
With respect to Medicare, in 1982, Congress created what is called Medicare Part C or so-called “Medicare Advantage” (MA) plans to allow private sector managed care alternatives to “traditional Medicare” (TM). The idea was that these risk-based private health plans would: (1) expand choice options; (2) create innovation and improve the coordination of health care for senior citizens and people with disabilities enrolled in Medicare; and, (3) provide care more efficiently and save Medicare money (i.e., payments were originally supposed to be set to 95% of the Medicare average).
The acknowledged trade-off was that the private managed care plans would restrict and limit provider networks available to senior citizens and people with disabilities. Over time, there have been growing concerns with respect to how plans restrict care to people with higher levels of health care needs through the use of narrow networks and prior authorization restrictions and payment denials. After all, private health plans are in business to, first and foremost, make money.
In addition to the Health and Human Services (HHS) Office of the Inspector General (OIG) cited above by Larry Levitt, Vice President at Kaiser Family Foundation (KFF), a previous 2018 report by the OIG found:
When beneficiaries and providers appealed preauthorization and payment denials, Medicare Advantage Organizations (MAOs) overturned 75 percent of their own denials during 2014–16, overturning approximately 216,000 denials each year. During the same period, independent reviewers at higher levels of the appeals process overturned additional denials in favor of beneficiaries and providers. The high number of overturned denials raises concerns that some Medicare Advantage beneficiaries and providers were initially denied services and payments that should have been provided. This is especially concerning because beneficiaries and providers rarely used the appeals process, which is designed to ensure access to care and payment. During 2014–16, beneficiaries and providers appealed only 1 percent of denials to the first level of appeal.
In addition, a 2019 study published in JAMA Internal Medicine cited other studies highlighting substantial MA disenrollment and switching back to Medicare fee-for-service or TM after “significant health events and kidney failure.” The study also found evidence that “substantially higher disenrollment from MA plans occurs among high-need and Medicare-Medicaid eligible enrollees” which suggests that “MA plans may not currently meet the preferences of high-need enrollees.”
MA plans have also utilized risk selection through benefit design, marketing to health beneficiaries (“cream skimming”), and pushing out or dropping those with higher health care needs (“lemon dropping”). Through other mechanisms like upcoding or inflating the expected costs of Medicare enrollees, managed care plans have gamed the system and have cost the Medicare program billions of dollars.
As a result, according to analysis by Richard Kronick, professor at the University of California-San Diego, Medicare overpaid Medicare Advantage plans by more than $106 billion between 2010 and 2019 and payments to these plans will increase Medicare spending by more than $200 billion over the next decade.
These overpayments led to record profits by Medicare Advantage while simultaneously increasing Medicare premiums for all Medicare beneficiaries (including TM enrollees), contributing to the risk of insolvency of the Medicare Trust Fund, and increasing costs to taxpayers.
Citing much of this evidence, an April 20 letter by Reps. Katie Porter, Rosa DeLauro, and Jan Schkowsky and Sen. Elizabeth Warren along with 15 other senators and representatives urging Centers for Medicare and Medicaid Services (CMS) Administrator Chaquita Brooks-LaSure to reduce these overpayments by noting:
Taxpayers and Traditional Medicare beneficiaries are subsidizing the surplus profits of Medicare Advantage plans.
It is why some call this system Medicare “disAdvantage”.
Despite these shortcomings, the KFF reports that there are now 3,834 Medicare Advantage plans serving more than 26 million people or 42% of the total Medicare population.
However, in addition to many plans failing to serve everyone who may be eligible for them, “Medicare Advantage” plans are not everywhere. KFF reports that over half of all Medicare beneficiaries are enrolled in MA plans in Minnesota, Florida, and Puerto Rico, but less than 20% is Maryland, Vermont, Alaska, and Wyoming. There are great disparities within states as well. For example, KFF notes that just 16% of Monroe County (Key West, Florida) and 73% of Miami-Dade County residents are enrolled in MA plans.
As this chart from KFF shows, there are a few select counties where over half of all Medicare enrollees are in MA plans. They are the places and and the populations in which MA plans can maximize profits.
In a journal article entitled Explaining Privatization Failure: The Vice of Sweet Carrots and Hard Sticks, Roland Zullo explains this situation:
Public services are shaped by political processes that, when democratic, pressure providers to accommodate social diversity in ways that ultimately manifest as a mandate toward inclusion. Private goods and services originate from exchanges that are divorced from political requisites for inclusivity, which liberates producers to thrive through strategic exclusion.
Contract terms, regardless of design, risk the subordination of social mission to financial self-interest.
Such self-interest results in participation in political campaigns and distorts the focus and goals of the Medicare program, which is to provide health care services to senior citizens and people with disabilities. With large amounts of public funding involved and at risk, private entities provide huge amounts of campaign contributions that distort the delivery of such health services, as the focus becomes the interests of health plans.
As a former health care staffer on Capitol Hill, I saw firsthand how MA health plans threatened Medicare enrollees with reduced benefits or higher cost sharing if they didn’t get what they want from the government. Their political goal is for higher payments rather than ensuring the delivery of benefits and services.
In January 2022, despite years of documented overpayments to MA plans, health plans successfully lobbied 346 Members of Congress to write the Administrator of the CMS to provide a “stable rate and policy environment for Medicare Advantage” (i.e., higher payment rates and fewer demands on ensuring service delivery). As Barbara Caress reports in her article The Dark History of Medicare Privatization:
It’s now become a costly, unaccountable cash cow for private insurance companies that is swallowing traditional Medicare.
The Parallels to Charter Schools and Voucher Privatization Systems
This likely sounds all too familiar to my public school friends. In public education, many states that use tools such as standardized testing to push the privatization of public schools, particularly in urban areas and communities of color. This leaves kids, parents, and neighborhoods trying to manage a privatized system whose incentives are often not geared toward inclusivity and community or the needs of their kids.
These attempts to privatize public schools have reprehensible roots, as they begin in an effort to maintain school segregation in the 1950s in the wake of the Brown v. Board of Education Supreme Court decision to desegregate public schools. As Nancy MacLean writes:
…as soon as the U.S. Supreme Court handed down its landmark Brown v. Board of Education decision in 1954 outlawing segregation in public education, southern political leaders began scheming to evade it and maintain racist education systems.
As just one of many documented examples, MacLean points to the 1955 A Plan for Virginia by the Defenders of State Sovereignty and Individual Liberties that pushed the Virginia legislature to adopt school privatization voucher programs so that white parents could send their kids to “private segregation academies, and to cut off state funds to any school that integrated.”
Those efforts failed, but neoliberalism has not.
Twelve years after private plans were introduced to Medicare, the federal “Charter School Program” (CSP) was created in 1994. The original intent was for these schools to be non-profit, but there were numerous ways to “game the system” and maximize profits, including contracting with a for-profit charter management company.
In the past few decades, there have been growing efforts to privatize and close public schools and move funding toward privatized charter schools and voucher programs. There have also been growing incidents of fraud and abuse through these for-profit charters. In fact, the Network for Public Education has identified hundreds of millions of taxpayer dollars that have been funneled to charter school that shut down or never even opened.
Again, privatized systems are adept at risk selection to ensure financial success based on measures of standardized testing rather than universal education, care, and services. As Zullo explains:
….tests for performance on productivity or cost effectiveness are rigged to favor organizations dedicated to standardized, linearized production, that is, those engaged in marketism. Organizations dedicated toward universalism will be judged less effective because nonstandard contributions go unmeasured.
Privatized schools can recruit students who have fewer individualized needs and students more inclined to do well on standardized tests (i.e., wealthier students) and push-out those who are higher cost or test poorly. As an example of a push-out strategy, Roxbury Prep in Massachusetts suspended 21% of its students, which was far higher than the state average of 2.9%.
An article by Peter Greene highlights how the charter chain Success Academy screens out and pushes out certain students and families. Again, “strategic exclusion” is the operating model.
This is quite purposeful, as privatized systems have successfully sought to exclude themselves from fundamental requirements, including even compliance with fundamental student rights. As Greene explains:
While it’s unfortunate that parents of students with special needs must take public schools to court to have the legal requirements met, those some parents in private schools may have no recourse at all, having waived their child’s rights in order to enroll them…. Instead of empowering parents, the unregulated market gives parents no leverage and no legal protections.
In sharp contrast, public schools are required to serve all children, include students with disabilities, those for whom English as a second language, those with mental and behavioral health needs, and kids who live in poverty. These students typically need more intensive services.
Again, there are important lessons here from Medicare. As Caress documents, the Clinton and Obama administrations tried to address risk selection by Medicare plans and billions of dollars in overpayments, but the efforts were all eventually overcome by new forms of “gaming the system” and/or by politics. Unfortunately, the bigger the system grows, the tougher it will be to overcome the problems of risk selection, claim denying, prior authorization, and rigging the risk pool by upcoding. As Caress writes:
The larger and richer the plans have become, the less leverage the feds have to regulate the industry. While the funding still comes from the U.S. Treasury, dispersed under the aegis of Congress, most of the power has passed to the companies.
The Biden Administration is trying to address such problems in education. They recently proposed regulations to address fraud and abuse in the charter sector, including self-dealing through facility leasing and land purchases, provisions requiring community assessments of need to prevent increased segregation (and yes, “white flight” charter or private schools are happening again), etc.
There is also this.
In response, the charter school industry has mounted a heavily funded campaign that includes fly-ins, television advertisements, and lobbying efforts demanding that the federal government “back off” from closing these loopholes. This campaign has already resulted in a softening of proposed regulations, when anti-discrimination and due process provisions for students, as detailed by Preston Green and Chelsea Connery, should actually be strengthened.
When fully and equitably funded, our nation’s public schools have vaulted our country into a leadership role around the world in innovation, technology, business, and the arts. Our public schools are also the cornerstone of a strong and functional democracy. We must fully invest in our nation’s public schools, teachers, and students and not back down from challenging the abuses in privatized systems.