Medicare And Commercial Health Insurance: The Fundamental Difference

Health Affairs:  by Diane Archer and Theodore Marmor,February 15th, 2012.

As the debate over Medicare continues in connection to America’s fiscal problems, it is critical to understand how Medicare differs from commercial health insurance for working people.  There is a fundamental difference between these two types of health insurance plans, one social and one commercial.

The basic difference between Medicare and commercial insurance is that Medicare is designed to absorb risk,  serving individuals who have or may have costly and complex medical needs as well as the relatively healthy, whereas commercial insurance is required to protect its business interests by avoiding those most likely to use medical care.  That’s why Medicare was first enacted. People over 65 were unable to buy commercial insurance because they use three times more medical services than working people; it was unaffordable or insurers simply refused to provide it. And now it’s simply unrealistic to imagine that commercial insurance companies will change their fundamental business model and work to protect the health and financial security of most Americans.

Medicare’s mandate: Medicare is a federally administered insurance program that Americans pay into throughout our working lives and enroll in after they retire or in case of a serious disability. It pools the resources of the entire nation to protect older and disabled Americans from the risk of an unforeseeable financial disaster in the event of an acute illness, an injury, or an expensive chronic condition. All American workers finance the program and all are covered by it once eligible: no one is excluded because of their age, health status, or their income. Meanwhile the program is obligated to pay for all necessary care for the eligible population, wherever they live in the country and whatever else may be true about their history, prospects, and preferences. Medicare only denies claims for medically unnecessary care. Read Full Article