Medicare Privatization Is Breaking the Bank

I’m out of analogies to capture the disaster that is federal spending on the Medicare Advantage (MA) program. So, I’m going in a different rhetorical direction this year. I’m going to start referring to MA as Medicare privatization because that’s what it really is — the privatization of a government program.

We know what happens when the government privatizes something. Quality and service go down, and costs go up as private contractors shake money out of the pockets of duped taxpayers while lawmakers in on the scam look the other way. The MA program has not failed to disappoint on that issue.

I’ll also be referring to MA plans as private Medicare plans as there is no advantage for taxpayers in Medicare Advantage.

On Dec. 18, 2024, CMS released its annual figures on national health expenditures (NHE). As headlines across the country noted, NHE rose 7.5% in 2023 to nearly $4.9 trillion. The increase is up substantially from the 4.6% increase in 2022 and the highest since 2020, when NHE rose 10.4% driven by the COVID-19 pandemic.

NHE on Medicare, meanwhile, rose 8.1% in 2023 to a little more than $1 trillion. That increase is up from a 6.4% increase in 2022 and the highest since 2006, when spending on Medicare jumped 18.8%. I can’t remember what happened in 2006 to explain that explosion in Medicare spending.

What CMS doesn’t include in its ZIP file of NHE charts that accompany the annual release is the chart on how Medicare is spending its money, or how it spent that nearly $1 trillion in 2023. You have to request it, and then CMS sends it to you because it’s public information. I did. It did. Here’s what it said.

Of the $1,029.8 billion in Medicare spending:

• 52%, or about $540.3 billion, was spent on Medicare privatization.
• 48%, or about $489.5 billion, was spent on traditional, or fee-for-service, Medicare.

Of the 65.1 million people enrolled in Medicare in 2023:

• 4%, or about 31.5 million, were enrolled in private Medicare plans.
• 6%, or about 33.6 million, were enrolled in traditional Medicare.

In other words, we spent more to cover fewer people in private Medicare plans, and we spent less to cover more people in traditional Medicare. We also spent 17.9% more per person to cover people in private Medicare plans than we did on people with traditional Medicare coverage:

• $17,152 per person in private Medicare plans.
• $14,550 per person in traditional Medicare.

All of that adds up to a big fat increase in spending on Medicare privatization in 2023. NHE on private Medicare plans jumped 14.7% in 2023 to the aforementioned $540.3 trillion. That follows a 15.7% jump in 2022.

Here’s what the previous 10 years of annual increases in Medicare privatization look like in a chart, according to the data in CMS’ latest NHE release:

If only those were my annual returns in my retirement funds. They’re not. You and I are paying for them as taxpayers to enrich commercial health insurers that sell private Medicare plans to beneficiaries. The companies’ business model is ingenious: exaggerate how sick enrollees are to get higher payment rates from Medicare and downplay how sick enrollees are to deny and delay claims for medical care. And then supercharge that business model with artificial intelligence.

Medicare privatization is breaking the bank. In two short weeks, the White House will be occupied by a convicted felon who wants to appoint, according to media reports, a proponent of and investor in private Medicare plans to run CMS. What could go wrong?

Thanks for reading.

To learn more about this topic, please read:

• “Medicare Advantage Is a Burst Pipe”
• “Keep Moving. Nothing to See Here. Just Another Double-Digit Increase in Medicare Advantage Spending.”

• “Unfazed by Unbridled Medicare Advantage Spending”
• “Medicare Advantage Keeps Biting the Hand that Feeds It”
• “Medicare Advantage Bends Cost Curve the Wrong Way”
• “Growing Pains or Warning Signs for Medicare Advantage?”