How the overhaul could alter the popular but costly Medicare Advantage

Cuts in private plans’ subsidies could force changes on seniors

Sunday, Sept. 20, 2009 | 2 a.m.

Chris Morris

Sticker shock: How the overhaul could exact a heavy toll on state finances

Archive of Sun health stories

Desperate for insurance, residents share health care woes (9-18-2009)
Harry Reid: Health care bill won't work for Nevada (9-16-2009)
Grant to aid 400 waiting for Medicare (9-14-2009)
Editorial: Lowering Medicare costs (9-2-2009)
Medicare Advantage plans may lose federal cash (1-16-2009)

Washington — One battle cry from senior citizens in the health care debate has rung loud and clear: Keep government out of my Medicare.

It’s a line that has drawn chuckles because Medicare is, of course, nothing if not a government-run program — a creation of the Great Society vision of the 1960s that today provides taxpayer money to care for 45 million elderly adults.

As with most punch lines, however, there’s a touch of truth lurking among the laughs.

One of the biggest targets for cost-cutting in the health care debate in Congress is Medicare Advantage, a relatively new offering that is wildly popular especially in Western states, including Nevada. One reason is that plans advertise enhanced coverage compared with traditional Medicare. One in three Nevada seniors on Medicare is enrolled in Medicare Advantage, and the state is often a testing ground for industry research on how well the program is working.

But here’s the catch: Medicare Advantage costs on average 14 percent more per person than traditional Medicare and is helping to bankrupt the program.

Now, under the health care reform bills, Congress is considering substantial reductions to bring the cost of the popular Medicare Advantage program in line with traditional Medicare. Cutting back the program is the single biggest piece of the estimated $500 billion in Medicare changes being considered by Congress. (In the House bill, the cuts would save $156 billion; in the Senate, $123 billion.)

With the Medicare trust fund projected to be insolvent by 2017, the extra payments Medicare Advantage enjoys are unsustainable, analysts say.

“The government is losing money on the Medicare Advantage plans,” said Tricia Neuman, vice president of the Kaiser Family Foundation and director of its Medicare Policy Project. “It is actually a drain on the Medicare trust fund and raising the Medicare costs for everyone.”

But the health insurance industry warns that if the cuts are made, some companies will opt not to participate, meaning seniors on those plans would have to find other options — either with companies still participating or traditional Medicare.

“Seniors in Medicare Advantage should not be forced to fund a disproportionate share of the costs to reform the health care system,” Karen Ignani, president and CEO of the America’s Health Insurance Plans, the industry trade group, said in a statement.

Not long after Medicare came into being, the precursor to Medicare Advantage started gaining ground as the program opened to private insurance plans in the 1970s.

Traditionally, seniors on Medicare would simply go to the doctor or hospital of their choice, and the care they received would be reimbursed by the program.

Private insurers offered Health Maintenance Organizations that were seen as a cost-effective alternative, a way to rein in rising medical costs by offering more prevention and disease management. HMOs and other private plans could charge no more than 95 percent of the average Medicare costs in a particular county. Enrollment was steady, at about 5 percent of the Medicare population, Kaiser reports.

But in the mid-1990s Congress started boosting payments to the private insurers as a way to entice them to offer plans for seniors. It was part of a philosophical shift by the Republican-controlled Congress during the Clinton administration toward what was promoted as privatization and outsourcing of Medicare.

The incentives worked. Responding to aggressive marketing, seniors flocked to the plans.

Payments to insurance companies rose sharply, because of congressional action, from $594 per senior per month in 2003, when the program was renamed Medicare Advantage, to $967 in 2008. So did the number of seniors enrolled in private plans, from 5.3 million then to 10.2 million today, according to Kaiser.

The result is not just higher costs, but also higher premiums for all Medicare beneficiaries.

Because Medicare’s monthly premiums are set at 25 percent of the overall costs of physician and hospital services, if the nation’s Medicare costs are soaring, as they are, the premiums for all seniors on Medicare rise as the higher costs are spread across the program. One estimate from House Democrats shows Medicare premiums are $90 a year higher because of Medicare Advantage.

But health industry studies show Medicare Advantage is popular, and in some cases may be providing better care.

A study released last week by America’s Health Insurance Plans, the leading industry lobby, which represents 1,300 insurance companies, said Medicare Advantage patients in Nevada had 23 percent fewer hospital stays and 33 percent lower readmission rates than those under traditional Medicare.

A 2008 report by the insurance industry pointed to the Medicare Advantage plans’ success in managing chronic health care problems, often using nurse coaches who dial up patients and remind them to take medications and keep doctors’ appointments and watch out for depression. The study noted one strategy at Health Plan of Nevada/Sierra Health & Life, where nurses made 370 calls in languages other than English to make sure patients understood their care.

But as AARP noted in congressional testimony in 2007, the increase in private plan options “has not come without a cost.” AARP advocated a neutral payment system and a gradual scaling back of the extra payments to Medicare Advantage.

But change can be challenging.

Democratic Rep. Shelley Berkley’s office has received many phone calls, e-mails and letters asking about the Medicare changes. The congresswoman explains to her constituents that the billions saved by scaling back Medicare Advantage will be pumped back into “making Medicare better for everybody,” her spokesman David Cherry said.

“To those seniors who come to her for answers, they hear from her a reassurance that she’s not going to let anybody take away Medicare.”

Democratic Rep. Dina Titus also supports the changes.

Often seniors sign up for Medicare Advantage because it allows them to keep using the same health insurance they had through their employer at the workplace after they retire.

President Barack Obama has often said that if you like your insurance plan, you can keep it. More recently, in this month’s joint address to Congress, he altered it slightly: “Nothing in this plan will require you or your employer to change the coverage or the doctor you have.”

But change may come to Medicare Advantage under the congressional proposal. If the insurance companies determine they need the extra payments to make their Medicare Advantage plans pencil out and decide to drop plans, seniors may have to find new forms of insurance. That may be other companies’ Medicare Advantage plans or traditional Medicare.

It could be better, it could be worse. Change is dicey that way.

But one thing is certain: The playing field for all seniors would be more equitable. And the Medicare trust fund would be a little further from bankruptcy.

Lisa Mascaro can be reached at (202) 662-7436 or at lisa.mascaro

@lasvegassun.com.

Discussion: 14 comments so far…

By neiman1

9/20/09 at 7:20 a.m.

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HMO's were sold to the public by the left. If only we could put people in a plan where outcome was reimbursed instead of procedures we could keep people healthy instead of treating illness later (does this sound familiar). The plans started holding back procedures to cut costs and were accused of rewarding doctors for not treating patients. Medicare advantage was part of this EXPERIMENT.

Now the administration attacks these plans as wasteful while arguing if we can just make everyone get into treating patients instead of illness we will save all this money to give away care to everyone. Sounds like exactly the same claims they made for the HMO's and now are running from them.

This is not about fixing health care, this is about making us all equal. They don't want anyone to be able to afford better care than someone else. Tax the best health plans and give care to the ones that can't pay.

It's income redistribution and it's painted to be anything else. This is all a cruel hoax.
By davidwayneosedach

9/20/09 at 7:26 a.m.

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If Medicare Advanatage is the only thing to be cut out of Medicare - so be it. Just don't start taking Medicare apart to fix it.
By BenDoubleCrossed

9/20/09 at 7:56 a.m.

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WOULD YOU HIRE FEDERAL GOVERNMENT TO REDUCE COSTS

The Federal Government lacks authority to preach fiscal responsibility. Federal politicians have exhibited none in my lifetime and have reduced the wealthiest nation on the planet to world's biggest debtor nation.

It is instructive that during the decades America enjoyed great wealth the Federal Government expressed no concern for the plight of the uninsured!

Unemployment is 10% or higher and there is no free lunch. I challenge Washington to bring back and keep good jobs in the USA and there will be no uninsured problem! If they fail I am for Cap and Trade: hand the politicians there caps and trade them in for new ones!
By Richard

9/20/09 at 8:56 a.m.

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Company plans and alleged income redistribution aside, Medicare Advantage is generally a huge advantage compared to regular Medicare programs for poorer seniors not qualified for Medicaid.

The reason basically is the largely unconscionable fees charged by for profit hospitals and most doctors. Medicare Advantage has arrangements with most hospitals and a reasonably large panel of doctors which result in reasonable copays for such services for the senior poor. Advantage programs overall quality of care might be somewhat less, but it is obvious that wealthier seniors tend to choose the more expensive regular options because they can.

It's a question of basic fairness to those caught in their late years who are not so poor as for Medicaid but cannot afford the better plans. Leave some form of such plans.
By boingo

9/20/09 at 9:30 a.m.

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This is the take away message you need to remember.

Medicare Advantage gives taxpayer money to PRIVATE INSURANCE companies, padding their profit margins at the expense of taxpayers.

Traditional Medicare pays doctors and hospitals.

Let me repeat this.

Medicare Advantage = $$$ for private insurers, the same companies that deny you care because acne and pregnancy are "pre-existing conditions"!

AGain, Medicare Advantage pays private insurance companies. It's hugely wasteful and undermines Medicare for the rest of us!
By LarryVegas

9/20/09 at 10:04 a.m.

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I see that the boingo has not put down his bong.

He doesn't like anything in the private sector.

I think what he is really saying is: ME, ME, ME...

Give it to ME, ME, ME...

Give everything to ME, ME, ME...
By jewlee

9/20/09 at 10:45 a.m.

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neiman1 wrote

"This is all a cruel hoax."

I agree with that answer. Seniors are the victims here.
By SgtRock

9/20/09 at 10:56 a.m.

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I wonder on how Ms. Taxus (Titus) will vote.

All those voting Seniors in her district will be watching closely see if their Medicare D will be taken from them and how much their regular Medicare will be cut to give health care to the illegals and the people who choose not to work hard in society.
By jewlee

9/20/09 at 12:23 p.m.

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Visit this website to see why they should not cut the advantage plan. Lisa you did not do your homework before you wrote the article.
http://www.medicarechoices.org/
By jsayler

9/20/09 at 12:39 p.m.

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HMOs Suck! I guess I am saying that from a left-leaning perspective.

The GOP is and always has been the problem. The insurance industry always knows that the longer they hold out the better will be their rewards. GOP has blessed them with unGodly profits and hugely EXCESSIVE executive compensation packages of salaries, stocks and golden parachutes.

The Anti-trust laws must be considered a major contributor to the current problem. Of course, the GOP does not want to enforce anti-trust laws into the insurance industry which enjoys an exempt status clearly derived simply for them and their lobbyists.

Should more plans be available that can offer the public healthcare that does not have a huge profit incentive, we will all win. Profits make for very poor decisions in health care. Never should a profit be considered more important than a person's well-being or life and currently it is!

Seniors need to beware the nay-sayers out there. Whatever we end up with, it will have to be better than what we have. No more insurance company executives will come into our doctor's office and tell us what they will cover and what they won't--it will be between you and your doc tor.

Insurance companies kill at will!
By LarryVegas

9/20/09 at 1:31 p.m.

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bsayler says:

"The GOP is and always has been the problem."
....Oops, I forgot to add the DMC.

"The insurance industry always knows..."
....Always? I just love it when they say always.

"GOP has blessed them with unGodly profits..."
....And bless you my son.

"The Anti-trust laws must...?
....I love the word "must."

"...we will all win..."
....Isn't that sweet.

"Seniors need to beware the nay-sayers out there."
....And beware of the nay-sayers right here.

"Whatever we end up with, it will have to be better than what we have."
....I hope when he says we, he has a frog in his pocket.

"it will be between you and your doctor."
....Only if the government is not there.

And, "Insurance companies kill at will!"
....A bunch of killers they are...

Always, must, need, of course, and never are words that one uses when one is not too sure of their position...
By qwill

9/20/09 at 11:40 p.m.

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Sorry but I'm confused - I may not be the brightest bulb in the chandelier but based on this article will the Medicare premiums go up? Will the Medicare advantage premiums go up?
By LarryVegas

9/21/09 at 10 a.m.

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qwill: Haven't you heard:

The big government plan is to cut/kill/do away with Medicare Advantage.

Then they will take the money that the government puts into Advantage and move it over to Medicare. That way they can insure more people.

Oh, you like Medicare Advantage like most senior citizens? Well too bad, quit your complaining, your too old to be of any value to the party.
By emm01

10/9/09 at 11:29 a.m.

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Jewlee,
To confuse legislators even more, the Insurance industry has called on its own sham "consumer" group, the Coalition for Medicare Choices, to push its agenda on the Hill. AHIP founded the group back in 1999 and still provides administrative support, according to spokesman Mohit Ghose. The address on the coalition's website turns out to be the same one as Democracy & Data Communications, a public relations counseling firm whose clients include AHIP, Humana and United Healthcare, another carrier riding the Part D gravy train with lucrative deals to sell plans to members of AARP, the retirees' organization. The coalition now has 400,000 members, in every state; and the group has gained 140,000 new members in the past sixty days. Its main purpose seems to be ginning up letters and calls to members of Congress "to protect choices and additional benefits provided through the Medicare Advantage program." Nowhere does it say that the coalition is a creature of the industry's trade association. Please understand Medicare advantage was started to save money not cost US tax payers more