Medicare Advantage – spending more was NOT the idea

A good article this morning on Medicare Advantage plans and how they are part of the health care legislation debate: Medicare Advantage tussle at heart of overhaul - Health care- msnbc.com: "Medicare Advantage tussle at heart of overhaul".

 

A key fact getting lost in the conversation is that these plans were originally created to SAVE the government money over traditional Medicare. Let’s take a look at the governments own definitions from the Medicare website (http://www.medicare.gov/choices/Overview.asp):

The Original Medicare Plan – This is a fee-for-service plan that covers many health care services and certain drugs. You can go to any doctor or hospital that accepts Medicare. When you get your health care, you use your red, white, and blue Medicare card.

The Original Medicare Plan pays for many health care services and supplies, but it doesn’t pay all of your health care costs. There are costs that you must pay, like coinsurance, copayments, and deductibles. These costs are called “gaps” in Medicare coverage. You might want to consider buying a Medigap policy to cover these gaps in Medicare coverage. You can also add prescription drug coverage by joining a Medicare Prescription Drug Plan.

For more information on the Original Medicare Plan, visit the Original Medicare Plan section of this website.

Medicare Advantage Plans – Available in many areas. If you have one of these plans, you don’t need a Medigap policy. These plans include:

• Health Maintenance Organizations (HMO),
• Preferred Provider Organizations (PPO)
• Private Fee-for-Service Plans
• Medicare Special Needs Plans
• Medicare Medical Savings Account Plans (MSA)

These plans may cover more services and have lower out-of-pocket costs than the Original Medicare Plan. Some plans cover prescription drugs. In some plans, like HMOs, you may only be able to see certain doctors or go to certain hospitals to get covered services.

Click here for more information on Medicare Advantage Plans.

 

Originally, Medicare Advantage plans were conceived to save the government and plans money. By contracting with private managed care plans, the government would pay less (95%) than for standard Medicare beneficiaries but the members would get enhanced benefits because of course (note sarcasm) private industry could be more efficient.

That intent did not last in the face of special interest lobbying as the payment threshold for Medicare Advantage plans rose compared to traditional Medicare. Some more background from the Kaiser Family Foundation Medicare Fact Sheet, May 2009 (http://www.kff.org/medicare/2052.cfm):

For many years, payments to Medicare HMOs were generally set on a county-by-county basis at 95% of Medicare FFS costs in each county because HMOs were thought to be able to provide care more efficiently than FFS… Medicare Advantage plans are currently paid more, on average, than FFS costs in their area. According to MedPAC, payments to Medicare Advantage plans per enrollee in 2009 will average 114% of FFS costs for the counties where Medicare Advantage enrollees reside.

Again the original intent was lost, so now we are faced with disparate Medicare plans with only a subset of seniors receiving enhanced benefits (due to greater government expenditures – not due to the efficiency of the private plans). To try and preserve these enhanced plans makes no sense. If we want to make the decision to spend the 114% of current traditional plan expenditures on all seniors, so be it. However, to continue to spend money desperately needed elsewhere just because certain industry lobbyists have perpetuated these plans (with ever increasing expenditures) makes no sense. Just because some seniors by the luck of the draw have ended up in these rich plans is not a reason to preserve them and is not equitable.