Liberal Values Defending Liberty and Enlightened Thought

Back in 2007, while campaigning in Iowa, I noted that Barack Obama criticized the extra money paid to care for patients in Medicare Advantage Plans compared to the regular Medicare Program. Obama cited the program at other times while campaigning when asked to name wasteful government programs which he would eliminate.

The government pays private insurance companies which run Medicare Advantage plans more than it costs to care for Medicare patients in the government Medicare program. Last year I also noted that the American Medical Association called for the elimination of these plans.

The New York Times has an editorial on Medicare Advantage plans today:

Medicare currently pays the private plans — now called the Medicare Advantage program — 13 percent more on average than the same services would cost in the traditional fee-for-service program. Some of the added payments are used to provide extra benefits for enrollees, like reduced cost-sharing or reduced premiums for such extra benefits as vision and dental care.

The added value averages more than $1,100 a year per patient. Not surprisingly, that makes them attractive to individuals and employers seeking coverage for retirees. It has fueled an explosive growth in enrollments. Almost a quarter of all Medicare beneficiaries, more than 10 million people, are enrolled in private plans.

The managed-care plans still arguably do a better job than traditional Medicare at coordinating care and eliminating duplicative services. Unfortunately, the fastest growth has occurred in private-fee-for-service plans, which do very little to coordinate care. They simply piggyback on the traditional Medicare program, relying on the same doctors and hospitals while using their subsidies to offer cost savings or extra benefits to enrollees.

As these plans have proliferated, Medicare’s costs to cover the subsidies have risen — with the taxpayers and the beneficiaries in traditional Medicare picking up the tab. The many competing plans have also increased Medicare’s bureaucratic burden and costs. And there is no sign that these plans provide better quality of care. Congress started this year to reduce the unjustified subsidies. But a lot more needs to be done. President-elect Barack Obama called during the campaign for eliminating the excessive subsidies and paying private plans only what it would cost to treat the same patients under traditional Medicare.

That would anger millions of enrollees as well as the insurance companies that use the subsidies to attract hordes of new customers. But it is only fair to treat all Medicare beneficiaries equally. Eliminating the subsidies could provide savings to help finance broader health care reform.

While some of the money goes towards extra benefits, most of it goes towards increasing profits for insurance companies at the taxpayers’ expense.

As the editorial notes, insurance companies as well as some enrollees, might be angered by elimination of these plans. Another group which would be angered by the elimination of these plans are insurance agents who are well paid for signing people up for these plans. The financial benefits paid to Medicare Advantage plans leads many to pay by the head for new enrollees while they look the other way when laws are broken. Some of the problems with fraud in the sales of Medicare Advantage plans were previously discussed here and here.

The attitude of insurance agents can be seen in the responses to some of my previous posts on Medicare Advantage plans, such as here. The post was linked on a board used by insurance sales people, leading many to attempt to defend their practices. While those responding are probably not the ones engaged in the more fraudulent practices noted in the other reports, it is alarming that the insurance agents did demonstrate considerable ignorance as to how Medicare really works, leading them to present incorrect information when selling these plans.