What Will Health Care Reform Do to Medicare?

Many sufferers of mesothelioma and other asbestos-related disease are on Medicare. You may have heard the health care reform bill now being debated in Congress includes cuts to Medicare. Will this pose a hardship on America’s seniors?

The House bill trims $440 billion from Medicare spending over the next ten years, and the Senate bill cuts $420 billion. Yes, that’s a lot of money. But it amounts to only about 3 percent of anticipated growth in the program. The wonks say this much can be trimmed without cutting benefits. Savings can be found by reducing waste, fraud, and inefficiencies, they say.

Some parts of the program might get better. For example, I wrote in the last post that the House and Senate bills both promise to close the “doughnut hole” in Medicare Part D that costs many seniors thousands of dollars in out-of-pocket prescription drug expenses.

The biggest question mark is over the Medicare Advantage program. Through Medicare Advantage, the government pays private insurance companies to enroll seniors in managed-care networks. The plans often come with perks not available through “plain” Medicare, such as dental and vision coverage and health club memberships. About a quarter of Medicare recipients are enrolled in Medicare Advantage.

The problem with Medicare Advantage is that it is burning a hole in the federal budget, an even bigger hole than regular Medicare. And much of that money is not benefiting seniors at all.

Medicare Advantage was created by Congress with the theory that private insurance companies would be able to manage seniors’ health care more efficiently than the government. It was supposed to save money, in other words. Conservatives pushed for Medicare Advantage as a way to “wean” seniors away from regular Medicare and eventually do away with the original program entirely. Former House Speaker Newt Gingrich liked to brag that Medicare would “wither and die on the vine.”

But today Medicare Advantage costs the government 14 percent more per person than regular Medicare. Why? Well, possibly because 15 percent of each dollar our government pays to the Medicare Advantage insurers goes into profits, marketing, and corporate expenses. This “overage” is nearly 10 times the rate of traditional Medicare.

According to Matt Sedensky of the Associated Press,

“Advantage companies were paying for multimillion-dollar corporate retreats in exotic locales and hundreds of their executives were being paid more than $500,000 annually. Government reports have shown Medicare Advantage providers continually outpace profit projections. The congressional review released this month showed 34 Advantage companies devoted $27 billion in government subsidies from 2005 through 2008 to profits, marketing cost and other corporate expenses.”

The fact is, the wasteful overpayments to Medicare Advantage that aren’t helping anyone but insurance company executives are putting the whole Medicare Program at risk. If nothing is done, deep cuts in benefits will have to be made. Pulitzer Prize-winning journalist Saul Friedman wrote, “But did you know that many of people on Medicare — more than 8.6 million of you — are inadvertently helping to kill Medicare?” He was talking about Medicare Advantage.

The House and Senate bills both provide for cutting the subsidies to Medicare Advantage and putting limits on the profits the private insurers can make. So, while there are not supposed to be cuts in benefits in regular Medicare, it’s possible there will be cuts in Medicare Advantage plans. But if nothing is done, the whole Medicare program will be in danger.

— Barbara O’Brien

This entry was posted on Friday, January 15th, 2010 at 2:39 pm and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.