Book Review

Shredding the Social Contract: The Privatization of Medicare

N Engl J Med 2006; 355:217-218July 13, 2006

Article

Shredding the Social Contract: The Privatization of Medicare
By John Geyman. 322 pp., illustrated. Monroe, Me., Common Courage Press, 2006. $16.95. ISBN: 1-56751-376-X

John Geyman deeply distrusts the private sector. In his view, ever since the election of President Rutherford B. Hayes in 1876, corporate giants have bought legislation, engaged in secret negotiations, and effectively rewritten the U.S. Constitution at the expense of the public interest. The California energy crisis that made national headlines in the 1990s, the Enron debacle, and other corporate scandals all demonstrate that the machinations of modern corporations are incompatible with democracy.

Given this worldview, it is not hard to guess what Geyman thinks of the role that private companies should play in the future of Medicare. He reserves particular distaste for Medicare's managed care program — now called Medicare Advantage — which allows beneficiaries to enroll in health maintenance organizations (HMOs) and other health care plans rather than in the traditional Medicare program.

Geyman presents ample case studies of miscues by Medicare HMOs in Shredding the Social Contract. For example, “Ms. G” is lucky to be alive. After receiving a diagnosis of colon cancer, she underwent surgery and radiation therapy. Several years later, her bowels stopped functioning properly, but her Medicare HMO refused to authorize a colonoscopy. Three months afterward, she was hospitalized with a ruptured colon, and peritonitis and septicemia developed. “Mr. M” feels duped. He dropped his Medigap plan in order to enroll in a Medicare HMO, only to find out three months later that this plan had dropped its coverage of prescription drugs, eyeglasses, and vision care and added a $65 monthly premium. Such stories percolate throughout the book.

In his zeal, Geyman occasionally succumbs to hyperbole. He writes about HMOs' holding marketing seminars on the second floors of buildings with no elevators, in an attempt to screen out beneficiaries at high risk. This is a well worn anecdote, but I know of no credible evidence to support it. The study he cites was performed by a public-relations firm that went to three marketing seminars at a “nonaccessible restaurant” in southern California. In fact, most Medicare HMOs market their plans on television and over the radio, and the advertisements emphasize features that appeal to lower-income beneficiaries — namely, greater benefits coverage at a lower price than those of standard Medigap plans.

These stories make for provocative reading, and Geyman does diagnose Medicare's problems correctly. There is a lot of churning in this program; enrollment remains low, at approximately 15 percent; benefits have been cut in recent years; and the HMOs compete for enrollees at low risk for needing health care services. Much of Medicare spending is wasted on services that have little social value, and the high cost of services that are truly necessary limits enrollees' access to them. Beneficiaries face high costs for care, and problems of access and quality of care abound.

But Geyman's solutions are a bit disappointing. Who can argue with improving quality, reducing health disparities, expanding coverage, increasing access, and lowering costs? These issues deserve more depth than he provides. Central to Geyman's argument is that eliminating private insurers will save vast sums of money. He notes repeatedly that Medicare has lower administrative expenses than do private insurers. This argument has often been used by proponents of national health insurance — which Geyman also advocates — to justify great savings.

There are two problems with the administrative-costs argument that are not suitably addressed. First, Medicare is ripe with abuse — especially in the overuse of unneeded services — and there is little incentive for politicians to weed it out. This is a hidden cost that is often ignored in administrative-cost calculations. Furthermore, there are economic costs associated with financing Medicare through taxes, especially payroll taxes borne by a proportionately shrinking base of young workers.

Second, and perhaps more important, even if we could wring some savings by eliminating private health insurance, this effort would be a single reduction in the level of spending. The real problem for Medicare is the growth in spending. For this reason, many industrialized countries with nationalized health care have increases in spending (and rates of increase) that are similar to those in the United States. A one-time decrease in health care spending — even if it could be claimed — would be nice, but it would only postpone the really painful choices. Geyman would argue that Medicare does a better job controlling health care spending than do private insurers, but here the evidence (through no fault of his) is decidedly mixed.

Geyman's take on means testing of Medicare — charging more affluent patients more for participation in the program — leaves the reader wanting more explanation. Readers may have a hard time accepting his thesis that means testing is a Republican plot to dismantle the program eventually. Faced with painful policy choices, such as raising the eligibility age or increasing taxes to avoid fiscal insolvency, such a reform probably deserves more consideration than is offered in this book. In countries such as Canada, national health insurance is financed through a progressive tax structure; why not use such a mechanism in the United States?

Ultimately, Geyman's personal diagnosis of the Medicare program makes for entertaining reading. Readers looking for innovative policy prescriptions, however, will need to go elsewhere.

Dana P. Goldman, Ph.D.
RAND, Santa Monica, CA 90403