So it's basically what I originally said . . .

Your opinion is based on your anecdotal observations of other systems in other countries totally unrelated to the system of Medicare here in the good ol' U.S..

Well ... As you no doubt already know, the push for private involvement to compete and help contain costs with an already strong public component (Medicare Parts A and B) began with the passage of the Balanced Budget Act of 1997 which brought us Medicare Part C: Medicare Advantage plans. Then in 2003 the Medicare+Choice plan was rammed through.

According to a look-back at the 2006 GAO Report found under "Results in Brief" pg3 of GAO-09-132R Medicare Advantage Expenses  (pdf) those particular plans had profits of 6.6%, overhead of (sales, marketing etc) of 10.1%, with 83.3% of revenue dollars providing medical benefits to the consumer, above that of the traditional fee-for-service Medicare, and 1.3% above that projected which translated the difference between actual and projected profits increase from $1.1 billion in 2005 to $1.3 billion in 2006. So much for cost containment with the involvement of the private sector.

Now, since four years have passed, here from the Executive Summary. June 2009 from Health & Human Services is a general synopsis and overview  of the competing private entities (Part C) versus the public (Parts A and B).

Evaluating MA Payment and Participation: Overarching Policy Issues

The current MA program has grown rapidly in recent years, but at a significant cost to the overall Medicare program.  Thus, evaluating MA and considering payment changes has become an important and controversial policy issue.  Views on the specific issues related to the current MA structure for paying plans, and options for modifying it, are often consistent with competing visions for the Medicare program.  Indeed, the current debate over MA payment takes place and is perhaps best understood within the context of a larger historical debate over the role of private plans in the Medicare program.  In the following sections we describe these issues.

Medicare is one of the largest and most popular social programs in the United States. It has provided a stable source of health insurance coverage for aged and disabled individuals for over forty years, and now covers 45 million beneficiaries (as of November 2008).  Along with Social Security, Medicare's coverage assures some financial security for the elderly and disabled.  In addition, Medicare has also provided public health benefits by arguably supporting health care infrastructure and innovation through its timely and consistent payments to health care providers; and helping to assure an adequate supply of physicians through its support of medical education programs.

Nonetheless, the fiscal challenges Medicare faces in the 21st century are formidable.  The rapidly rising costs of providing health care to the Medicare population will result in difficult choices for policymakers in terms of assuring the program's long run sustainability.  Under current law projections, outlays from the Part A trust fund began to exceed income in 2008 and the fund will be exhausted in 2019.  Moreover, under a provision of the MMA, prescribed policy responses are "triggered" when general tax revenue funding is projected to exceed 45 percent of Medicare's total spending.  According to the latest projections, the 45 percent threshold will be breached in 2014 and the percent of spending accounted for by general revenues will grow steadily afterwards - meaning that the size of the spending reductions needed to address the "trigger" will grow rapidly.  Moreover, the program's future impact on the Federal budget and the aggregate economy is significant.  Medicare overall is projected to grow to nearly 6 percent of the gross Domestic Product (GDP) by 2030 (2008 Medicare Trustees Report).

In addition to the fiscal issues, the quality of care for Medicare beneficiaries, as in the health system as a whole is considered disappointing (Gold, 2008).  Thus, the value of health care provided to beneficiaries - the outcomes per dollar spent - is considered to be suboptimal.  Another indicator of these problems is the considerable variation in Medicare spending per beneficiary among geographic areas.  These variations cannot be explained by local price differences or beneficiary characteristics, and higher spending areas are not associated with better quality of care (CBO, 2007a).

Competing Views on the Role of Private Plans in Medicare

These significant policy challenges set the stage for new rounds of the longstanding debate over the appropriate approach to the future of Medicare.  On one hand, there is support among many policy makers for the view that the best option for improving the value of care and financial sustainability of Medicare is a dynamic marketplace of competing private health plans.  These analysts see the problems described above as a direct result of the incentives inherent in Medicare's fee for service payment systems and rules.  They believe that Medicare's size, decision making / policy implementation structure, and politics render the traditional program incapable of meeting the challenges of a rapidly changing health care system on behalf of beneficiaries and taxpayers.

The opposing view is that while private plans have a potentially important role in Medicare for some beneficiaries, a thriving traditional program will remain the core option for assuring access to health care for beneficiaries.  Proponents of this view believe that because business practices among private plans vary in response to market conditions, and these plans potentially move in and out of markets rapidly, they cannot provide a steady and secure source of coverage for most beneficiaries.  They also believe that the multiple and frequent choices that would be consistent with a dynamic marketplace can be problematic for many beneficiaries.  Moreover, they believe that the traditional program can best address cost and quality challenges by using use its market power and administrative structure to implement successful value based purchasing policies in the near future.

These competing visions of Medicare are based on differing ideologies concerning social and economic policies.  Those more favorable in general to policies that emphasize private sector approaches over government interventions are more likely to support a Medicare program in which a significant share of beneficiaries are enrolled in private health plans.  They would tend to put more weight on arguments supporting higher payments for these plans.  Others believe that private markets have certain limitations for achieving social objectives and that government should assume a more active and significant role in policy implementation.  They would tend to see traditional Medicare as the core program for providing coverage to a majority of beneficiaries, and see higher payments to MA plans as wasteful and a potential threat to the solvency and viability of the program.  For example, they might argue that as more beneficiaries are encouraged to leave the traditional Medicare program in order to obtain the additional benefits that are available through MA plans, this would result in a de facto privatization of the current Medicare program without Congressional action having been taken.