The Politics of Medicare

At a time of growing skepticism over private interests having a stake in government programs, the U.S. government still relies heavily on this model of governance. Wilson Center Fellow Kimberly Morgan is studying the role of private actors in our social welfare system, namely government contracts to private providers and the growing role of for-profit firms.

Her primary case study is Medicare, which provides health insurance to more than 44 million seniors and is a major source of revenue for health-related industries. In 2003, President Bush signed into law the Medicare Modernization Act (MMA), the largest social spending increase since LBJ's Great Society. The reform utilizes private insurance companies to deliver the new Medicare prescription drug benefit and augments their role in providing overall coverage, generating debate over the potential privatization of Medicare.

"Republicans agreed to spend hundreds of billions of dollars on the new benefit in the years ahead," said Morgan. "It was an expansion of the welfare state, but it was achieved through an expanded role of private insurance companies in the program."

Morgan, who teaches political science at the George Washington University, received foundation grants along with MIT Professor Andrea Campbell to study the politics of the MMA. Both are co-authoring a book due out this fall to be titled, The Delegated Welfare State.

The term "delegated governance," explained Morgan, is the use of publicly funded private entities to achieve collective aims. "When public money under a contract provision goes to a non-state group or firm, this is delegated governance." In addition to Medicare, she cited private military security in conflict zones around the world, the contracting of reconstruction tasks to firms at home and abroad, the use of commercial firms to run prisons across the country, and reliance upon for-profit and nonprofit organizations to provide social services for welfare recipients.

The current economic climate "has undermined our faith in private actors," Morgan said. "But any major health care reform would likely involve private insurance companies. They're a major force and it's hard to imagine [such an undertaking] without them."

Since World War II, three types of delegated governance have emerged. First, responsibility fell to the nonprofit sector as many of the Great Society's social programs provided services through voluntary organizations. Then, in the late 1970s, the emphasis shifted to for-profit actors to encourage a competitive market of contractors. Both of these models involved companies competing for the government's business, Morgan said. A third form, especially prevalent since the 1990s, emphasizes consumer choice, putting the onus of decision-making and risk on the individual rather than the government. The Medicare prescription drug benefit is an example of this third form, as beneficiaries choose drug plans among private, risk-bearing firms.

Delegated governance "dilutes and obscures lines of authority and responsibility," said Morgan. "This mode of administration has often undercut the effectiveness of public programs, fostered discontent about the role of government, and empowered private interests who exert considerable leverage over subsequent policymaking."

Utilizing primary research, including interviews with policymakers and a survey of Medicare beneficiaries, Morgan is exploring the politics around one of the most significant social policy reforms of our generation.