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[ Return To Senator Roy Dyson's Newsletter ]
Posted on December 18, 2008:
Traditional Medicare, operated and funded by the federal government, has provided health care coverage for seniors for nearly 50 years.
Under the assumption that private insurance companies could provide the same services as traditional Medicare at lower cost, the Bush Administration established Medicare Advantage in 2003. Medicare Advantage plans are delivered by HMOs and private insurance carriers. The plans delivered by private insurance carriers are called Medicare Advantage fee-for-services plans. Medicare Advantage plans were supposed to control costs and improve the quality of care for millions of American seniors.
That is not what has occurred. According to three separate studies published recently in Health Affairs, private plans have hiked costs, while failing to improve care.
Analysts from The Medicare Payment Advisory Commission, an independent federal panel that advises congress, points out that growing enrollment in Medicare Advantage plans has driven up Medicare costs because the government pays them more than what it would spend for the same beneficiary in traditional Medicare. The increased costs are borne by all beneficiaries. The Commission has said the payments to private Medicare Advantage plans should be reduced to the level of payments to traditional Medicare. If such action is taken by Congress it could save $160 billion over a ten year period.
On average, Medicare Advantage plans cost about 13% more per person than traditional Medicare. The Medicare Advantage fee-for-services, the fastest growing plan, costs government 18% more per person than traditional Medicare. The fee-for-services Medicare Advantage plan operates essentially the same as traditional Medicare. What this means is that taxpayers and enrollees are paying 18% more for the same services available through traditional Medicare. That makes no sense!
It should be noted that under the original 1980s formula adopted by the feds, Medicare paid private plans 95% of the cost of each enrollee in traditional Medicare. The theory was that private plans would save money by coordinating care and being more efficient.
The real beneficiary of Medicare Advantage plans is the private insurance industry. It's a bonanza for the insurance industry. In 2007, the federal government shelled out $76 billion to Medicare Advantage to provide care to seniors - up 33% from 2006.
Companies like Humana, UnitedHealth and BlueCross BlueShield that offer Medicare Advantage plans run appealing ads on TV telling Medicare seniors they will save money and receive improved care. They coax seniors into enrolling by telling them they will not have to get referrals to see a specialist and they can be treated by the doctor of their choice. What they fail to tell is that traditional Medicare offers the same benefits.
Medicare Advantage sales representatives have been known to use deceptive practices to get seniors to enroll. They have posed as representatives of traditional Medicare and told seniors that traditional Medicare was about to go out of business. They get away with these scams because there is little oversight of Medicare Advantage sales practices.
Evidently, the TV ads and the hard sell practices have worked effectively. There are 10.3 million seniors enrolled in Medicare Advantage plans. That number represents nearly one of every four Medicare enrollees. In Maryland, over 40,000 seniors are enrolled in Medicare Advantage plans. Nationwide, in 2003, just 26,000 people were enrolled in the fee-for-services Medicare Advantage. Today, there are 2.3 million enrollees in that plan.
The federal subsidies to Medicare Advantage have been described accurately as "giveaways" to private insurers. In his book about health care in America, former Senator Tom Daschle of South Dakota said, "Medicare's solvency is now threatened by overpayments to private insurers." President-elect Obama has declared, "We need to eliminate the excessive subsidies to Medicare Advantage plans and pay them the same amount it would cost to treat the same patients under regular Medicare."
To be of value, privatizing Medicare must yield lower costs and better health care. Medicare Advantage private plans do neither. Therefore, as I see it, its existence is not justified.
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