Many political opponents of healthcare reform say that they are concerned about massive government spending. They want the 'tax and spend' policy to stop. However many of their statements are inconsistent, perhaps even hypocritical. Some examples:
2008 Presidential candidate Senator John McCain (R-AZ) recently said on Fox News Channel:
“Which by the way, after Obamacare, they cut Medicare by half a trillion dollars, and also are doing away with Medicare advantage. So we don't talk about Republicans going to cut Medicare.”
The new health reform law does not do away with Medicare Advantage, at all. It reduces the program's over-payments to insurers and HMOs. (More on that just below)
First, however, consider the inconsistencies in Senator McCain's own proposals. During the 2008 presidential campaign a Wall Street Journal article “McCain Plans Federal Health Cuts” stated
“John McCain would pay for his health plan with major reductions to Medicare and Medicaid, a top aide said, in a move that independent analysts estimate could result in cuts of $1.3 trillion over 10 years to the government programs.”
That $1.3 trillion was required to finance highly regressive tax cuts for the most affluent Americans.
As for Medicare Advantage, Minority Leader of the House John Boehner (R-OH) raises the same talking points on his blog to criticize the new health reform law. He states,
“Because unlike ObamaCare, it (Medicare Advantage) actually applies the power of choice and competition to the health care industry – resulting in more choices and reduced costs for America’s seniors.”
In this blog piece Mr. Boehner tries to back up this misleading statement by quoting from a Florida Times-Union article,
“about 11 million Medicare Advantage beneficiaries will see their benefits reduced by about $67 a month, according to a Congressional Budget Office report in March.”
Perhaps Mr. Boehner was hoping that readers would not actually read the whole article. The same Florida Times-Union article explains the issue more accurately,
“Medicare Advantage offers seniors extra benefits, such as vision and dental care and prescription drug coverage. These plans are offered by private insurance companies, which are able to give out the extra benefits because the Medicare system pays them an average of 14 percent more [and up to 40 percent more] per patient than it pays traditional Medicare, according to numerous sources.”
FactCheck.org, a fact-finding project of the Annenberg Public Policy Center of the University of Pennsylvania adds:
The new health care law includes Section 3601 that says, "Nothing in the provisions of, or amendments made by, this Act shall result in a reduction of guaranteed benefits under title XVIII of the Social Security Act [the title that establishes the Medicare program]." And Section 3602 says that even Medicare Advantage recipients won't suffer any reduction of "any benefits guaranteed by law."
The private health care plans for Medicare recipients now known as Medicare Advantage (MA) was created in the 1980s to provide better services while costing less money to taxpayers. Yes - less government spending. So at the start, the government paid MA only 95% of what it spent at the time on the average person in traditional Medicare. The hope was that these private plans would out-perform traditional fee for service Medicare. MA would cost taxpayers less and at the same time insurance company would make money for themselves. The private insurance companies failed to maintain this initial and brief cost savings to taxpayers. Even as these plans inefficiencies became apparent, they were successful in lobbying Congress over the years to pay them more than traditional Medicare spends on the average senior citizen.
The Medicare Payment Advisory Commission (MedPAC) estimated that in 2009, Medicare would have paid the private plans 14 percent more per beneficiary than it would cost to cover these beneficiaries in traditional Medicare. The non-partisan Congressional Budget Office (CBO) also provides similar data. So much for privatization inherently producing efficiency and savings. According to the Center on Budget and Policy Priorities, taxpayers pay insurance companies about nearly $1000 more every year to cover a beneficiary than it would under traditional Medicare. Today every Medicare recipient pays about $36 a year in higher Part B premiums to cover these over-payments to the private insurance companies.
Why do private insurance companies need $114 to do a job that the government can accomplish for $100? Well for one thing, to pay for marketing, excessive profits and shareholder dividends. Also, there are layers of bureaucracy which includes many middlemen siphoning off money in the private system. Typically the insurance company takes a generous 15% or more cut off the top to pay themselves. Here is a shocking report from the Committee on Energy and Commerce. That big slice pays CEO salaries, bonuses, company retreats and their shareholders. Here are recent reports about insurance company profits and CEO compensation. They then pass the remaining 85% or less of the money from the government to a business group or large physician group to organize and take 100% financial risk for the actual care delivered. In an attempt to provide adequate medical care with the money left, these groups typically contract with primary doctors to take a fixed monthly capitation with the potential to get bonuses if they can keep expenditures below budget. Specialists, hospitals and outpatient facilities who agree to work with MA plans often contract for payment below traditional Medicare rates.
Many opponents of the new health care reform law are against the phasing out of this government over-payment to Medicare Advantage. No complaints about government over spending here. In the final analysis, they are mostly upset that tax payers will not be picking up the tab to pay for the insurance company marketing edge and profits. As the Florida Times-Union article explains, these extra benefits that cost tax payers at least 14% more “are merely inducements from the private insurance companies to get you to buy their plans."
I'm sure that there are legitimate criticisms to be made regarding the new health reform law. However its improved management of Medicare Advantage deserves support from seniors and every American.