During the health care debate we saw a strange phenomenon–Republicans who would destroy Medicare if given a chance were attacking the Democratic health care plan for allegedly cutting Medicare. It certainly was amusing to see the Republicans position themselves as the great defender against Medicare cuts. We’ll be sure to remind of this should they get back into office and try to cut Medicare.
Actually the cuts weren’t to benefits received by Medicare beneficiaries. The cuts were to reduce extra payments to Medicare Advantage plans. These are private plans which provide the same health care to the same types of people as in Medicare, except that it costs around 13 percent more to care for them in the private plans than the government plans. The major difference is that the private plans pocket a huge chunk of this money to increase profits.
January Angeles, a Policy Analyst at the Center on Budget and Policy Priorities, explains this again, pointing out how the Democratic changes to Medicare will actually strengthen Medicare and are a good thing for Medicare patients:
As the Wall Street Journal reported recently, some seniors who receive Medicare coverage through private “Medicare Advantage” insurance companies rather than traditional Medicare are concerned about the health reform law’s impact on their benefits. They shouldn’t be worried: health reform will strengthen Medicare while protecting all beneficiaries.
Contrary to critics’ claims, the new law won’t cut the benefits that Medicare Advantage plans are required to cover. The plans will still have to provide overall coverage that’s at least as good as traditional Medicare. And they’ll no longer be able to charge more than traditional Medicare for certain critical services, like chemotherapy.
Instead, health reform will take strong steps to eliminate waste in Medicare Advantage. While private insurers were supposedly brought into Medicare to reduce costs, they receive 9 to 13 percent more per enrollee than traditional fee-for-service Medicare. These overpayments cost taxpayers $44 billion between 2004 and 2009.
A large share of the overpayments goes to padding insurers’ profits rather than providing additional benefits to enrollees. Among one type of Medicare Advantage plan — private fee-for-service plans — less than a fourth of overpayments go toward additional benefits on average, according to the Medicare Payment Advisory Commission, Congress’ expert advisory body on Medicare payment policy.
In fact, these plans are so overpaid that there’s no pressure on them to be more efficient and find better ways of providing care. The health reform law will phase down these overpayments starting in 2012 and use some of the savings to provide bonus payments to plans that provide higher-quality care.
Reducing the overpayments will also help enrollees by making Medicare’s long-term finances more stable. Along with other Medicare changes in the new law, it will extend the life of the Medicare Hospital Insurance Trust Fund by 12 years and keep beneficiary premiums lower.
Medicare Advantage plans need to start competing based on quality and efficiency, and that’s exactly what the health reform law encourages them to do.
This act to make Medicare more stable isn’t the only benefit to Medicare beneficiaries. Another key benefit is phasing out the donut hole which requires them to pay for their prescriptions after benefits have received a certain level for the year.
Not surprisingly when dealing with real world legislation, any legislation is going to have both good and bad aspects. One feature I do not like is the way the Independent Payment Advisory Board (IPAB) was set up in the final legislation. While there is some benefit to partially taking health care funding decisions out of the political process, the Senate bill gave the IPAB more power than I think was wise. Senate Republicans are now proposing legislation to repeal the board. Of course if they ever object to spending cuts recommended by the IPAB they could vote against them (with far more than a majority vote needed to override their recommendations). It will be interesting to see if Republicans actually vote against recommended spending cuts.