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Private Power in Public Programs: Medicare, Medicaid, and the Structural Power of Private Insurance

Published online by Cambridge University Press:  27 January 2023

Andrew S. Kelly*
Department of Public Health, California State University, East Bay, California, USA
Corresponding author: Andrew Kelly Email:


In 2019, nearly 70 percent of Medicaid beneficiaries received their health insurance coverage through a private, managed care organization (MCO). Twenty-five years earlier, 9.5 percent of Medicaid beneficiaries were enrolled in MCOs. This dramatic growth in Medicaid managed care enrollment represents the delegation of significant power by federal and state governments over a critical social program to private actors and market forces. Medicare, too, experienced a similar pattern of transformation. Together, Medicaid and Medicare, two critical pillars of American social policy, paid more than half a trillion dollars to private insurance companies in 2019 to provide public health insurance to 75 million people. This manuscript examines the policy consequences of building private firms directly into the structure of American social policies. In contrast to existing work on “submerged” or “delegated” policies, this manuscript highlights the structural power that such policies bestow on the government's private partners and develops a new theory of structural power in which firms are able to constrain health policy reform through their threats to disrupt the delivery of public policies and social benefits to millions of people across the United States.

Research Article
Copyright © The Author(s), 2023. Published by Cambridge University Press

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1 “Total Medicaid MCO Enrollment,” KFF, August 21, 2020,

2 “Annual Medicaid & CHIP Expenditures” [State Overviews], Centers for Medicare & Medicaid Services,; “Total Medicaid MCOs,” KFF, 2022,

3 Centers for Medicare & Medicaid Services (CMS), A Profile of Medicaid: Chart Book 2000 (Washington, DC: Health Care Financing Administration, 2000),

4 Mcguire, Thomas G., Newhouse, Joseph P., and Sinaiko, Anna D., “An Economic History of Medicare Part C,” The Milbank Quarterly 89, no. 2 (2011): 289–332Google ScholarPubMed; Meredith Freed, Jeannie Fuglesten Biniek, Anthony Damico, and Tricia Neuman, “Medicare Advantage in 2022: Enrollment Update and Key Trends,” KFF (blog), August 25, 2022,

5 MCOs do not, however, operate with complete freedom within either program, but are governed by federal and state regulatory powers and oversight mechanisms included in the contractual arrangements between MCOs and federal and state governments. Despite the regulatory powers and oversight, MCOs do maintain broad powers and responsibility for monitoring access and quality, as well as in setting benefits and costs within Medicare, in particular.

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8 McGuire et al., “An Economic History of Medicare Part C”; CMS, A Profile of Medicaid.

9 Madeline Guth, Rachel Garfield, and Robin Rudowitz, “The Effects of Medicaid Expansion under the ACA: Studies from January 2014 to January 2020” (San Francisco: KFF, March 2020).

10 Guth et al., “The Effects of Medicaid Expansion.”

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14 Hacker et al., “The American Political Economy.”

15 Kelly, “Boutique to Booming.”

16 Hacker, Jacob S., “Privatizing Risk without Privatizing the Welfare State: The Hidden Politics of Social Policy Retrenchment in the United States,” The American Political Science Review 98, no. 2 (2004): 243–60CrossRefGoogle Scholar; Starr, Paul, Remedy and Reaction: The Peculiar American Struggle Over Health Care Reform ( New Haven, CT: Yale University Press, 2013)Google Scholar; Oberlander, The Political Life of Medicare; Marmor, Theodore R., The Politics of Medicare (New York: Aldine De Gruyter, 2000)Google ScholarPubMed.

17 Starr, Remedy and Reaction.

18 Culpepper, “Structural Power and Political Science in the Post-Crisis Era.”

19 Chapin, Ensuring America's Health.

20 Ibid.; Starr, Remedy and Reaction; Oberlander, The Political Life of Medicare; Marmor, The Politics of Medicare.

21 Hacker et al., “The American Political Economy.”

22 Starr, Remedy and Reaction, 131.

23 Ibid., 145.

24 Hacker, “Privatizing Risk”; Marmor, The Politics of Medicare.

25 Chapin, Ensuring America's Health.

26 Kelly, “Boutique to Booming.”

27 Marmor, The Politics of Medicare.

28 Ibid., 179.

29 In The Political Life of Medicare, Jonathan Oberlander has argued that throughout much of its history, Medicare was governed by a “political consensus.” During this period, any changes made to Medicare were all made within Medicare's original social insurance structure. This political consensus, according to Oberlander, broke down after the 1994 elections. According to Oberlander, the 1994 elections and the Republican Revolution brought the era of bipartisan consensus and compromise to an end.

30 Marmor and Mashaw, “Understanding Social Insurance”; Jonathan Oberlander, “Voucherizing Medicare,” Journal of Health Politics, Policy and Law 39, no. 2 (April 1, 2014): 467–82,; Hacker, “Privatizing Risk.”

31 Hacker, “Privatizing Risk,” 253.

32 Adam Clymer, “Organized Labor Goes on the Offensive, and the Republicans Cry Foul,” New York Times, July 20, 1996. Gingrich's original quote is from a speech to the Blue Cross/Blue Shield conference in October 1995. In the speech, Gingrich describes a strategy for delivery of transformative change to Medicare through an incremental approach. “Now we don't get rid of it in round one because we don't think that's politically smart, and we don't think that's the right way to go through a transition. But we believe it's going to wither on the vine because we think people are voluntarily going to leave it—voluntarily.” The quote was later used against Gingrich and Republicans in an AFL-CIO advertisement during the 1996 election. Gingrich and Republicans, however, contended that Gingrich was talking about the Health Care Finance Administration, not Medicare. The final sentence, in which Gingrich describes people voluntarily walking away, however, indicates that the ultimate target was, in fact, Medicare.

33 For a discussion on Medicare and the policy preferences of business, including a discussion of the methodological challenges of identify the true preferences of business, see David Broockman, “The ‘Problem of Preferences’: Medicare and Business Support for the Welfare State,” Studies in American Political Development 26, no. 2 (2012): 83–106; Swenson, “Misrepresented Interests.”

34 Paige Minemyer, “Centene to Purchase WellCare in $17.3 Billion Deal,” Fierce Healthcare, March 27, 2019; Paige Minemyer, “How the WellCare Acquisition Is Driving Centene's Approach to Medicare Advantage,” Fierce Healthcare, October 8, 2020; Paige Minemyer, “Anthem Completes Acquisition of Puerto Rico-Based Medicare Advantage, Medicaid Plans,” Fierce Healthcare, June 30, 2021; Reed Abelson and Michael J. De La Merced, “WellPoint to Acquire Amerigroup Amid Health Care Overhaul,” New York Times, July 9, 2012; Bruce Japsen, “Medicare Advantage Mergers and Acquisitions Poised to Take Off,” Forbes, May 20, 2021; Shelby Livingston, “Why Molina Is on a Medicaid Plan Buying Spree,” Modern Healthcare, September 29, 2020.

35 Andrew S. Kelly, “Finding Stability and Sustainability in the Trump Era: Medicare and the Affordable Care Act in Historical Perspective,” in American Political Development and the Trump Presidency (Philadelphia: University of Pennsylvania Press, 2020), 130–50.

36 Herschel Nachlis, “Pockets of Weakness in Strong Institutions: Post-Marketing Regulation, Psychopharmaceutical Drugs, and Medical Autonomy, 1938–1982,” Studies in American Political Development 32, no. 2 (2018): 257–91.

37 Swenson, “Misrepresented Interests.”

38 Robert King, “AHIP: Adding Dental, Vision, and Hearing Benefits Could Boost Medicare Advantage Costs without Benchmark Changes,” Fierce Healthcare, August 24, 2021.

39 Oberlander, The Political Life of Medicare.

40 Marmor, The Politics of Medicare; Oberlander, The Political Life of Medicare; Jonathan Oberlander, “Through the Looking Glass: The Politics of Medicare Prescription Drug, Improvement, and Modernization Act,” Journal of Health Politics, Policy and Law 32, no. 2 (2007): 187–219.

41 Colin D. Moore, “State Building through Partnership: Delegation, Public-Private Partnerships, and the Political Development of American Imperialism, 1898–1916,” Studies in American Political Development 25, no. 1 (April 2011): 27–55,; Andrew S. Kelly, “The Political Development of Scientific Capacity in the United States,” Studies in American Political Development 28, no. 1 (April 2014): 1–25,; Elisabeth S. Clemens, “Lineages of the Rube Goldberg State: Building and Blurring Public Programs, 1900–1940,” Rethinking Political Institutions: The Art of the State 187 (2006): 189; Jacob S. Hacker, The Divided Welfare State: The Battle over Public and Private Social Benefits in the United States (Cambridge, UK: Cambridge University Press, 2002); Christopher Howard, The Hidden Welfare State: Tax Expenditures and Social Policy in the United States (Princeton, NJ: Princeton University Press, 1997); Suzanne Mettler, The Submerged State: How Invisible Government Policies Undermine American Democracy (Chicago: University of Chicago Press, 2011); Kimberly J. Morgan and Andrea Louise Campbell, The Delegated Welfare State: Medicare, Markets, and the Governance of Social Policy (Oxford, UK: Oxford University Press, 2011).

42 Hacker, The Divided Welfare State; Howard, The Hidden Welfare State; Mettler, The Submerged State; Morgan and Campbell, The Delegated Welfare State.

43 Mettler, The Submerged State, 3.

44 Hacker, The Divided Welfare State, 44.

45 Morgan and Campbell, The Delegated Welfare State.

46 Ibid., 52; Mettler, The Submerged State, 31.

47 Morgan and Campbell, The Delegated Welfare State, 191–92.

48 Gretchen Jacobson, Christina Swoope, Michael Perry, and Mary C. Slosar, “How Are Seniors Choosing and Changing Health Insurance Plans?” KFF, May 13, 2014, p. 14,

49 Mark Duggan, Jonathan Gruber, and Boris Vabson, “The Consequences of Health Care Privatization: Evidence from Medicare Advantage Exits,” American Economic Journal: Economic Policy 10, no. 1 (February 2018): 153–86,; Haiden A. Huskamp, Deborah W. Garnick, Kristina W. Hanson, and Constance Horgan, “State Health Care Reform: The Impact of Withdrawals by Medicaid Managed Care Plans on Behavioral Health Services,” Psychiatric Services 52, no. 5 (May 1, 2001): 600–602,; Jacobson et al., “How Are Seniors Choosing and Changing Health Insurance Plans?”; Peter T. Kilborn, “Largest H.M.O.'s Cutting the Poor and the Elderly,” New York Times, July 6, 1998; Jeannie Fuglesten Biniek, Anthony Damico, Juliette Cubanski, and Tricia Neuman, “Medciare Beneficiaries Rarely Change Their Coverage During Open Enrollment.” KFF (blog post), November 1, 2022,

50 Charles Edward Lindblom, Politics and Markets: The World's Political-Economic Systems (New York: Basic Books, 1977).

51 Culpepper and Reinke, “Structural Power and Bank Bailouts,” 428.

52 Culpepper, “Structural Power and Political Science in the Post-Crisis Era,” 405.

53 Ibid.; Lindblom, Politics and Markets.

54 Culpepper and Reinke, “Structural Power and Bank Bailouts”; Andrew Hindmoor and Josh McGeechan, “Luck, Systematic Luck and Business Power: Lucky All the Way down or Trying Hard to Get What It Wants without Trying?” Political Studies 61, no. 4 (December 1, 2013): 834–49,

55 Culpepper, “Structural Power and Political Science in the Post-Crisis Era,” 396.

56 Ibid., 394.

57 “Medicare Advantage,” KFF (blog).

58 The name TEFRA HMOs comes from the legislation that initially created private Medicare plans—the Tax Equity and Fiscal Responsibility Act of 1982.

59 Peter Backrach and Morton S. Baratz, “Two Faces of Power,” American Political Science Review 56, no. 4 (1962): 947–52.

60 Bruce Vladeck, personal communication with author, June 5, 2013.

61 Ibid.

62 Sandra Christensen, “Medicare+Choice Provisions in the Balance Budget Act of 1997,” Health Affairs 17, no. 4 (June 5, 1998): 228,

63 Marmor and Mashaw, “Understanding Social Insurance”; Starr, Remedy and Reaction; Hacker, “Privatizing Risk.”

64 Nancy-Ann DeParle, “As Good as It Gets? The Future of Medicare+Choice,” Journal of Health Politics, Policy and Law 27, no. 3 (2002): 495.

65 Robert Pear, “Beyond Medicare: New Choices in Health Insurance,” New York Times, August 10, 1997.

66 DeParle, “As Good as It Gets?” 505.

67 Robert A. Berenson and Bryan E. Dowd, “Medicare Advantage Plans at a Crossroads—Yet Again,” Health Affairs, November 24, 2008,; Christensen, “Medicare+Choice Provisions in the Balanced Budget Act of 1997”; Rick Mayes, “Medicare and America's Healthcare System in Transition: From the Death of Managed Care to the Medicare Modernization Act of 2003 and Beyond,” Journal of Health Law 38, no. 3 (July 1, 2005): 391–422.

68 Starr, Remedy and Reaction, 142.

69 Pear, “Beyond Medicare”; Marilyn Moon, “An Examination of Key Medicare Provisions in the Balanced Budget Act of 1997” (New York: Commonwealth Fund, September 1, 1997).

70 Lori Achman and Marsha Gold, “Medicare+Choice 1999–2001: An Analysis of Managed Care Withdrawals and Trends in Benefits and Premiums” (New York: Commonwealth Fund, February 2002).

71 DeParle, “As Good as It Gets?” 502. Larry Katzenstein, “Making Your Way through the Maze of Medicare Options,” New York Times, February 16, 2000.

72 Christopher Jennings, personal communication with author, April 30, 2013.

73 Marsha Gold and Lori Achman, “Monitoring Medicare+Choice, Raising Payment Rates: Initial Effects of BIPA 2000” (New York: Commonwealth Fund, June 2001).

74 Ibid.

75 DeParle, “As Good as It Gets?” 503.

76 Hacker, “Privatizing Risk”; Kelly, “Finding Stability and Sustainability in the Trump Era.”

77 DeParle, “As Good as It Gets?”

78 “Congress Nixes Competitive Bid Pilot,” Relias Media, November 1, 1997.

79 Hacker, “Privatizing Risk”; Marmor and Mashaw, “Understanding Social Insurance.”

80 Bryan Dowd, “More On Medicare Competitive Pricing,” Health Affairs 20, no. 1 (January 1, 2001): 306–308,

81 Bryan Dowd, Robert Coulam, and Roger Feldman, “A Tale of Four Cities: Medicare Reform and Competitive Pricing,” Health Affairs 19, no. 5 (September 1, 2000): 9–29,

82 Al Dobson, personal communication with author, November 11, 2013.

83 Christopher Jennings, personal communication with author, April 30, 2013.

84 Congressional Record, 106th Congress, 1st Sess., 1999, H3285.

85 Diana K. Sugg, “Medicare Experiment Set for Baltimore,” The Baltimore Sun, May 29, 1996.

86 William M. Salganik, “HCFA Less Sure It'll Try Medicare Bids Here,” Baltimore Sun, September 21, 1996.

87 William M. Salganik, “Medicare Changes Could Spur HMO Competition,” The Baltimore Sun, July 24, 1996.

88 Alice A. Love, “Bounced in Maryland, Medicare HMO Competition Demo Again Rejected,” Daily Record, April 29, 1997.

89 Diana K. Sugg, “Medicare Pilot Project Now in Doubt,” Baltimore Sun, June 17, 1996.

90 “Representative Cardin Is to Speak to Seniors at Vantage House,” Baltimore Sun, August 6, 1996.

91 Sugg, “Medicare Pilot Project Now in Doubt.”

92 Jonathan Gardner, “Medicare HMO Demo Project at Risk,” Modern Healthcare, May 5, 1997.

93 “Congress Nixes Competitive Bid Pilot.”

94 Congressional Record, 105th Congress, 1st Sess., 1997, 143, S5583.

95 “Congress Nixes Competitive Bid Pilot.”

96 Bonar Menninger, “Business Group Suspends Local Medicare Coverage Project,” Kansas City Business Journal, May 16, 1999.

97 Ibid.

98 Ibid.

99 Laurie McGinley, “Medicare Tests of Competitive Bidding Rile HMOs Fearing a Drop in Payments,” Wall Street Journal, May 14, 1999.

100 Ibid.

101 Julius A. Karash, “Medicare Plan Called Harmful HMO Demonstration,” Kansas City Star, July 2, 1999.

102 Ibid.

103 Ibid.

104 Steve Everly, “HMO Study Faces Delay,” Kansas City Star, July 17, 1999.

105 Congressional Record, 106th Congress, 1st Sess., 1999, S8691.

106 Len Nichols, “Lessons from the Competitive Pricing Advisory Committee Experience for the Medicare+Choice Program and Long Term Reform,” Statement before the United States Senate Committee on Finance, April 3, 2001.

107 Alan Bavley, “Medicare Project Is Delayed,” Kansas City Star, July 23, 1999.

108 Jeffrey Young, “Obama, Reid Take Dead Aim At Medicare HMOs,” The Hill, January 14, 2009.

109 Culpepper, “Structural Power and Political Science in the Post-Crisis Era.”

110 Morgan and Campbell, The Delegated Welfare State, 183.

111 Ibid.

112 Julia Paradise, “Data Note: Medicaid Managed Care Growth and Implications of the Medicaid Expansion,” KFF (blog), April 24, 2017,

113 “Total Marketplace Enrollment,” KFF (blog), April 6, 2020,

114 The ACA required that insurance companies provide cost-sharing reductions (CSRs) to people between 100 and 250 percent of the federal poverty level. In 2018, the Trump administration stopped reimbursing insurance companies for the cost of CSRs. Despite the termination of CSR payments by the federal government, insurance companies are still required to offer CSRs. As a result, insurance companies have increased premiums, which has driven the premium subsidies higher.

115 Between March 1, 2010 and March 1, 2020, the stock value of UnitedHealth increased by 758 percent; Centene, 889 percent; Molina, 733 percent; and Humana, 571 percent. These four MCOs are representative of the industry, with high exposure in Medicare Advantage, Medicaid, or both. Over this same period, the Nasdaq increased by 360 percent and the Dow Jones Industrial Average increased by 102 percent.

116 Barack Obama, interview by George Stephanopoulos, This Week With George Stephanopoulos, ABC, September 20, 2009.

117 Morgan and Campbell, The Delegated Welfare State, 188.

118 Bruce Vladeck, personal communication with author, June 5, 2013. Vladeck used the abbreviation “bennies” to refer to Medicare Advantage beneficiaries.

119 Oberlander, Jonathan and Weaver, R. Kent, “Unraveling from Within? The Affordable Care Act and Self-Undermining Policy Feedbacks,” The Forum 13, no. 1 (April 2015): 3762CrossRefGoogle Scholar; Kelly, “Finding Stability and Sustainability in the Trump Era.”

120 Marilyn B. Tavenner, Letter to Kevin Brady and Greg Walden, March 8, 2017,

121 Marilyn B. Tavenner and Scott B. Serota, Letter to Mitch McConnell and Charles Schumer, July 14, 2017,

122 Daniel Beland, Philip B. Rocco, and Alex Waddan, “Policy Feedback and the Politics of the Affordable Care Act,” Policy Studies Journal 47, no. 2 (May 2019): 395–422.

123 Jessie Hellman, “Four GOP Senators Pledge to Vote against Rolling Back Medicaid Expansion,” The Hill, March 6, 2017.

124 Jack Torry, “Portman Pushing Gradual Medicaid Cut Instead of Elimination,” Dayton Daily News, June 9, 2017.

125 Caitlin MacNeal, “GOP Sen. Heller Says He Won't Vote for Obamacare Repeal Bill,” Talking Points Memo, March 17, 2017, sec. M.

126 Shelley Moore Capito, “Capito, Portman Announce Opposition to Current Senate Health Draft,” news release, June 27, 2017,

127 Congressional Budget Office, “American Health Care Act: Budget Reconciliation Recommendations of the House Committees on Ways and Means and Energy and Commerce, March 9, 2017,” March 13, 2017,

128 Dranove, David, Garthwaite, Craig, and Ody, Christopher, “Uncompensated Care Decreased at Hospitals in Medicaid Expansion States but Not at Hospitals in Nonexpansion States,” Health Affairs 35, no. 8 (2016): 1471–79CrossRefGoogle ScholarPubMed.

129 Jon Kamp, “Health Insurers Tumble Amid Medicare Proposal,” The Wall Street Journal, February 19, 2013,

130 Jacobson, Gretchen A. and Blumenthal, David, “Medicare Advantage Enrollment Growth: Implications for the US Health Care System,” JAMA 327, no. 24 (May 23, 2022): 2393–94CrossRefGoogle ScholarPubMed.

131 Elizabeth Hinton and Lina Stolyar, “10 Things to Know about Medicaid Managed Care,” KFF, February 23, 2022.

132 Meredith Freed et al., “Medicare Advantage in 2022: Enrollment Update and Key Trends” (KFF, August 25, 2022),

133 Schneider, Andy and Corcoran, Allie, Medicaid Managed Care: The Big Five in PHE 19 (Q1 2022). (Georgetown University Health Policy Institute: Center for Children and Families, May 10, 2022)Google Scholar.

134 “Total Medicaid MCO Enrollment.”

135 Ibid.

136 Kelly, “Boutique to Booming”; Mettler, The Submerged State; Morgan and Campbell, The Delegated Welfare State.

137 As of June 2022, there were twelve states that had still not expanded Medicaid under the ACA. On June 1, 2022, North Carolina, which is one of the twelve remaining holdout states, passed legislation in the Senate to expand Medicaid under the ACA. The legislation then moved to the North Carolina House, but voting has not yet occurred. Since 2018, seven states that had previously refused to expand Medicaid have since expanded Medicaid either through legislation or ballot measures.