Labor Leaders Provide Cover for Privatization of Medicare
Portside Date:
Author: Ed Grystar
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“Medicare is a pillar of the healthcare system”

– AFL-CIO June 13, 2022

Such a statement from the AFL-CIO would suggest that labor is determined to protect Medicare and even support improving and expanding it to all Americans. Additionally, President Biden and Democrats regularly criticize Republican threats to reauthorize and voucherize Medicare. Meanwhile, what’s left out of both the Democrat talking points and the AFL-CIO’s 2022 national resolution on healthcare is any acknowledgment that the real threat to Medicare and healthcare today is the decades-long tax-subsidized privatization supported by both major parties.

With major support from organized labor, including AFL-CIO President George Meany at the signing, Medicare was signed into law in 1965. Before Medicare, only 60% of those over 65 had insurance since it was unavailable or unaffordable via private insurance (seniors were charged 3x the rate of younger people). Not only economically beneficial to the working class, the passage of Medicare was a huge civil rights victory as payments to physicians, hospitals, and health care providers were conditional on desegregation.

While a big victory, Medicare did not provide full coverage for all services, and from its inception, there has been a drive to privatize and hand it over to profiteers. In fact, 2022 marks the 50th anniversary (1972) of Medicare permitting private insurance companies (HMOs) to participate in Medicare.

President Clinton finalized HMO participation with Congress in 1997, and in 2003, the Medicare Modernization Act, under President Bush, further boosted privatization. The year 2003 marks the beginning of Medicare Advantage plans: insurance companies essentially masquerading as Medicare.

HMOs and all the other private insurance companies introduced into Medicare after 1997 have not saved the government money, but instead, raised the cost to taxpayers much more than traditional Medicare beneficiaries. In 2005 the Government Accounting Office reported that “It is largely . . . excess payments, not managed care efficiencies, that enable plans to attract beneficiaries by offering a benefits package that is more comprehensive than the one available to FFS beneficiaries, while charging modest or no premiums. Nearly all of the 210 plans in our study received payments in 1998 that exceeded expected FFS costs….”

Under traditional Medicare, patients can go to any doctor or provider that accepts Medicare without prior authorization or restrictive networks. With privatization, profits ensue as additional restrictions are imposed, such as narrow networks, micro-managing physicians, and prior authorizations. Routine denials of care are also a common practice forcing patients into lengthy appeals with the insurers betting many will walk away. In NYC, retirees have had to file lawsuits to stop their own leaders from changing their coverage from traditional Medicare with a supplement to a Medicare Advantage plan.

These wasted tax dollars and huge profits for Medicare Advantage have skyrocketed over the years and contribute to draining the Medicare Trust Fund that supports all beneficiaries. While traditional Medicare has administrative costs of about 2%, the 10 private insurance companies that account for 80% of enrollees in Medicare Advantage have expenses of 15% including profits and advertising. The most recent Federal audits show that eight of the 10 largest Medicare Advantage companies have submitted inflated bills, and four out of five of the very largest have faced federal lawsuits with accusations of fraud. In 2020 alone, they exaggerated risk scores of patients and generated $12 billion in overpayments.

Labor Supports ACA – Vehicle For Privatization

With the passage of the ACA in 2010, the private insurance industry’s role as a taxpayer-subsidized vehicle for the healthcare delivery system was cemented and momentum for an alternative approach was stymied. Despite 600 union endorsements for Medicare for All Bill HR 676, union leaders joined Democrats to cheer the ACA as a resounding success.

Inserted into the passage of the ACA was language that created a new agency, the Center for Medicare and Medicaid Innovation under the Center for Medicare Services (CMS). Labeled as an office of “innovation,” it has been given the authority to establish “pilot projects” that hand traditional Medicare to corporations.

These “pilots,” established under the Trump administration and continued seamlessly by President Biden, accelerate the privatization and are even more insidious. Now called ACO REACH (Accountable Care Organizations, Reaching Equity, Access and Community Health), this program auto enrolls beneficiaries who have selected traditional Medicare into a privatized program without their consent. These programs can be eligible for profits of 25 to 40 percent. The aim of CMS is to put all beneficiaries into a privatized plan by 2030. Incredibly, it has no congressional oversight and little pushback by Congress.

Top Labor Complicit as Biden Continues to Privatize

Why Should the Rank-and-File Care?

Even as labor negotiations continue to be inhibited by rising healthcare costs, labor refuses to expose the corruption and waste within the ongoing privatization of Medicare, harming its members, reducing union credibility, and contributing to the downward spiral of health benefits for all. The promotion of an official AFL-CIO Medicare Advantage plan and a do-nothing attitude towards ACO REACH must end.

The Alliance for Retired Americans, the AFL-CIO’s national retiree organization, has refused to issue any statement against the privatization of traditional Medicare. Activists

around the country are reporting that they are being cautioned to not call for the cancellation of the ACO REACH privatization program.

What we are facing in 2022 is the destruction of Medicare by corporate privatization, supported by many top labor unions and their compromised “allies” in Washington. For comparison sake, take a look at labor in Canada where the top five healthcare unions are taking a stand to warn the public that the government in Ontario is intentionally creating a healthcare crisis to justify privatization, just like in the U.S.

What Kind of Labor Movement Will Lead This Fight?

There is ample reason for hope. A budding bottom-up movement has already garnered signatures from over 250 organizations in a letter sent to Health and Human Services Secretary Becerra asking him to end the ACO REACH privatization program. Included were the Alameda County, CA and Austin, TX Central Labor Councils plus the state AFL-CIOs in Vermont, Maine, Washington, and Kentucky and other labor groups. There have also been resolutions passed against ACO REACH by the Seattle City Council, West Virginia Democratic Party and the Texas State Democratic Executive Committee. Labor has the resources and organizational strength to lead this battle. It needs to multiply these actions tenfold to grow a real movement on behalf of working people everywhere. These efforts accompany a broader movement for healthcare justice spanning beyond retirees which include recent referendums in counties in rural Wisconsin and parts of Illinois calling for a national healthcare program as well as supermajority support in the US for Medicare for All.

We need to be clear that change cannot be achieved without a sea change in the ideological direction of labor. Discussions and debates inside labor unions and among workers about the best strategies and tactics to tackle the corporate assault on public need are necessary. It’s clear that the current approach is not working. People are looking for answers that protect and advance the public interest. For unions to assume their proper role they must discard the petty, bureaucratic, and ossified approach of business unionism: a losing strategy which at its core is the “partnership” with corporations and a futile lobbying approach tied to the Democrats. It cannot meet the possibilities and needs of the day.

Labor needs to stop providing cover for the privatization of Medicare and join the fight to end ACO REACH. We must mobilize a broad independent movement that unites all for the public interest. It’s only the power of the people that can win this.

[Ed Grystar has more than 40 years experience in the labor and healthcare justice movements. He is co-founder and current chair of the Western Pennsylvania Coalition for Single Payer Healthcare. Served as the President of the Butler County (PA) United Labor Council for 15 years. Has decades of experience organizing and negotiating contracts for health care employees with the Service Employees International Union and the Pennsylvania Association of Staff Nurses & Allied Professionals.]

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