Shredding the Social Contract: The Privatization of Medicare

by John Geyman, 322 pp, with illus, paper, $16.95, ISBN 1-56751-376-X, Monroe, Me, Common Courage Press, 2006.

JAMA. 2006;295:1950-1951.

In Shredding the Social Contract, John Geyman examines the development of the largest social insurance program in the country‹Medicare‹identifies the multitude of influences that have led to the current state of the Medicare program, and suggests that national health insurance (NHI) may be the only solution to its problems.

In an investigative reporting style with generous use of quotations from policy makers, physicians, institutional providers, and beneficiaries, Geyman makes the case that Medicare's problems pose challenges to a broad array of stakeholders. He cites research demonstrating Medicare's impact on the federal budget and the financial health of practitioners and institutional providers; brings in information from media accounts, public documents, and scholarly journals; and offers personal accounts from beneficiaries to illustrate the obstacles that stem from hastily implementing new programs or reinterpreting existing ones. After reading these accounts, the reader comes away convinced that "fixing" Medicare will not be easy given the political, social, and economic forces molding the program's future.

Geyman's concern is that Medicare as an entitlement program is incrementally being eroded. The chapter on "Means Testing and Medicare" asks the question whether Medicare services should be delivered on the basis of economic need. Medicare is an entitlement program, whose benefits are to be equitably distributed to enrollees regardless of ability to pay or income level. Medicaid is a social welfare program, whose benefits are to be distributed according to means. This is an important distinction between the two programs. Yet Medicare's prescription benefit program is being administered according to means, and thus it breaks the social contract that the US Government has with its citizens. Since a portion of Medicare is now means-tested, there may be serious consideration given to making all of Medicare means-tested, especially with the current political rhetoric predicting the insolubility of the Medicare trust funds. The inevitable question becomes, Will Social Security become the next convert to means-tested distribution of benefits?

In Geyman's view, Medicare is being eroded in part by the economic interests of proprietary insurance and pharmaceutical companies and in part by a Congress amenable to the privatization of public services. He explains how this erosion is inherent in a system that allows private insurance companies to be fiscal intermediaries‹and how it has been exacerbated by Medicare + Choice (now called Medicare Advantage), in which beneficiaries have the option to join a managed care plan that delivers Medicare services. He points out that the overhead of managed care companies administering Medicare benefits is five to nine times that of traditional Medicare. And he notes that the recently enacted prescription drug plan was designed with the pharmaceutical companies' interests in mind, not the needs of beneficiaries. This shift toward favoring private interests is due in part to the political clout of private-sector lobbies. Their support of legislation favorable to their business interest neutralizes the interests of the middle class and outweighs the economically disadvantaged, who are socially marginalized, not inclined to vote, and in any case too poorly organized to impact legislation.

Geyman sees health care as a basic human need, not a commodity for private interests to package and sell in the marketplace. From this perspective, any reform must concentrate on the needs of the population, not the economic self-interest of managed care organizations and proprietary supplies of health care. Thus, Geyman suggests that creating NHI is the only way to repair the problems of Medicare. He suggests that a single-payer system under NHI can address the macroeconomic disadvantages of the current system. He points out that administrative overhead and profit taking account for up to 31% of the cost for direct patient care. Those without adequate insurance coverage delay seeking treatment until their condition further deteriorates and requires more costly treatment. Furthermore, incremental reforms during Medicare's tenure have not reduced overall cost and improved access to services.

Achieving NHI will meet with resistance in the current political and economic environment. Any attempt at a universal health plan may be thwarted by political compromises that could relegate the system to proprietary interests. Furthermore, administering NHI would have the same challenges faced by Medicare. One such challenge is inherent in our federal system of governance. Each state has the authority to regulate insurance contracts and license practitioners and health facilities. Thus, states determine the supply of health care services available in a given geographic area. Would control by the states change with NHI?

Additionally, Medicare was established as a means of distributing acute, short-term medical services to the elderly, but the greatest need today is for chronic care, and that problem would still have to be solved with NHI. Furthermore, the direction of Medicare or NHI has to be resolved. Should Medicare be administered as a public program or through partnerships with proprietary interests? And whose needs should take precedence? Those of the beneficiaries or those who insure or provide health care services?

Shredding the Social Contract is easy reading for general audiences, but there is an overabundance of lengthy quotations from policy makers and scholars. Health policy experts will have little difficulty sifting through the varied sources and synthesizing the book's essential messages. It may be more difficult for others to assess the strength of the argument made by the author. A condensed version might serve well as a catalyst to help the general public become more vigilant over the changes that are made to their entitlement program. Clearly Medicare needs fixing, and NHI would certainly be an ideal solution. The book's implicit message, however, is that the road to NHI will be met with challenges from the stakeholders. In the meantime, Geyman's explicit message is a wake-up call to the nation that Medicare as an entitlement program is being eroded by private interest.

Robert R. Kulesher, PhD, Reviewer
School of Allied Health Sciences
East Carolina University
Greenville, NC