The unspoken link between the Republican war on Medicare and the privatization of Medicaid

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There is a strong link between the Republican war on Medicare, and the progressive privatization of Medicaid, and that is the primary beneficiaries of each: the Wall Street darlings of the health insurance industry.

Paul Krugman's piece yesterday in The New York Times describes the Republican vision of Medicare as Vouchercare, where private health insurers are paid a set fee every month per person. It would function similarly to the capitation contracts for Medicaid that these same private health insurers are gobbling up quietly across the country.

About $30 billion in Medicare and Medicaid funding was paid to nine corporate insurance companies in the first quarter of 2011, already well on the way to topping the 2010 total of $113 billion. According to published Medical Loss Ratios, more than $5 billion of that was skimmed off the top as operating profit: the difference between what the company is paid per person per month and what they actually spend on that person. With seven of the nine reporting lowered MLRs for 2010, that quarterly figure is also on the way to besting the 2010 published total of about $19.5 billion.

Unitedhealth is the leader of the pack financially. A five percent increase in Medicaid membership generated a twenty-three percent increase in Medicaid revenues just in the past six months.

Meanwhile, criminal fraud investigations have found several of these companies - Amerigroup, Humana, Wellcare and Unitedhealth in particular - artificially inflating MLRs. Florida is asking for millions of dollars to be returned, just from investigations that are already four or five years old. Wellcare, whose Medicaid/Medicare income grew nine percent in 1Q 2011 over the previous year, submitted a settlement agreement with nine states over Medicaid fraud in late April. A few days later they scooped up a new contract with one of the nine, Georgia.

The selling of Medicaid and Medicare to the private sector becomes particularly frightening in light of a recent amicus brief the Administration has submitted to the Supreme Court. Barring Medicaid beneficiaries access to the protections of federal civil rights laws can only produce an exponential growth in criminal Medicaid and Medicare fraud.