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University of Florida Journal of Law & Public Policy

Abstract

Medicare and private insurance are often cast as diametrically opposed forces. This framing is not only inaccurate, but it obscures the dynamic relationship that has existed between these entities for several decades. Private insurers have been playing an active role in Medicare delivery since its passage in 1965, and their role has expanded over time.

This Article seeks to illuminate the way privatization has impacted Medicare and what current privatization policy choices mean for its future. This Article draws from the copious literature on government administration and privatization to explain two key models of privatization within the Medicare program. Highlighting the way that privatization has impacted both forms of delivery will allow for more constructive conversations about striking the right role for private insurance in the future of American health care.

The main argument of this Article unfolds in three parts. First, Part I begins by arguing that privatization should be understood as a spectrum of various models, rather than a finite, static instrument. This section argues that models of privatization that delegate high degrees of control to the hands of private insurers risk reduced public accountability through misaligned incentives and lower levels of transparency. Part II illuminates the two distinct models of privatization in Medicare and how each model responds to measures of public accountability. This analysis draws attention to the weaknesses of each model resulting from program design and highlights how Medicare Advantage—the more privatized model—has proven to be the most vulnerable to fraud and abuse due to a greater degree of misaligned incentives and more limited transparency.

Finally, Part III seeks to fill a major gap in existing scholarship by offering recommendations for improving the privatized aspects of Medicare. Much attention has been paid to improving Medicare Advantage, but little has focused on the program’s older and more time-tested model. Stabilizing the role of private insurers in this program is a more responsible policy approach than continuing to tolerate the accountability challenges posed by Medicare Advantage.

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