Cutting Subsidies to Insurers Are Not Benefit Cuts

Let's be very clear about who, in this ongoing health care reform debate, is truly threatening to cut seniors' Medicare benefits. It's not President Obama. It's not health care reform proponents in the House or Senate.

In fact, the only threats of benefits cuts have come from private insurers offering Medicare Advantage plans. Why? Because the industry is at risk of losing billions in federal subsidies--subsidies that have raised premiums for every beneficiary in Medicare (not just the 20% in private MA plans) and stolen more than a year from the Medicare trust fund. These subsidies continue to amass over time, ultimately costing the Treasury and every senior in Medicare $169 billion during the first decade alone. It's a sweet deal for insurers. A deal they're now fighting hard to protect.

But this is a tough economic climate to try to sell Americans on the need to subsidize an industry which has shown record-breaking profits thanks to the growing seniors' market. So the overpaid private insurers and some allies in Congress have opted to convince retirees that the proposed subsidy cuts are actually benefit cuts--with threats to drop seniors, drop coverage, or cut benefits if the Medicare Advantage slush fund is trimmed. One insurer, Humana, even went so far as to pitch their scare tactics directly to beneficiaries in possible violation of their provider's agreement with the federal government.

Unfortunately, this is nothing new. For decades, the insurance industry has told Congress it could provide better health care for seniors while saving Medicare money. However, it has never happened. Seniors in Medicare have been threatened before with losing their private coverage because there just wasn't enough profit in it for the insurance industry. In the '80s, insurers promised to deliver coverage for retirees at 95% of Medicare's costs. However, by the late '90s, even after dropping the sickest beneficiaries, raising premiums and reducing benefits, many private plans withdrew from Medicare and dropped beneficiaries entirely. Sound familiar?

It's time we call this decades-long dance with the insurance industry and Medicare what it is-- political extortion--not benefit cuts. Privatized Medicare cannot deliver on its promise because without massive government subsidies to boost profits, the industry inevitably loses interest in providing coverage for America's elderly. In spite of the many opportunities given to insurers to compete against Medicare, they have consistently failed to deliver more cost-effective coverage for seniors. The Congressional Budget Office has concluded:

Though Medicare Advantage plans cost more than care under the FFS program does, on average, they would be more cost-effective if they delivered a sufficiently higher quality of care. The limited [quality] measures available suggest that Medicare Advantage plans are not more cost-effective than the FFS program.

The fiscal truth of the matter is Medicare cannot afford to continue to give away $169 billion dollars of taxpayer funds to America's insurance industry. The industry is quick to highlight extra benefits provided to MA beneficiaries (such as eyeglasses, dental coverage, and gym memberships) but why shouldn't these benefits be provided to all seniors, not just those in private plans?

Conversely, MA insurers don't talk about benefits that are shortchanged like chemotherapy treatment and home health care services. All too often, seniors discover these coverage limits only after a serious diagnosis or illness. If insurers want a piece of the senior market, they should compete fairly to earn it and health care reform proposals now being considered in Congress reflect this. The independent advisory panel which oversees Medicare, MedPAC, has also recommended that Congress "level the playing field" by setting payments to private plans at the same levels as it would cost to serve comparable beneficiaries under the traditional Medicare program.

Seniors have a lot at stake in this health care reform debate but their attention has been diverted by a public relations campaign designed to masquerade industry giveaways as benefit cuts. While current health care reform proposals do not threaten Medicare's fee for service benefits, continuing to pour billions of dollars in subsidies into America's insurance industry certainly does. Passing up this historic opportunity for system wide health care reform in favor of the unsustainable status quo only speeds Medicare towards insolvency and puts a target on Medicare's back for potential funding cuts of unprecedented levels in the future. And that's the scariest proposal of all.

Comments

[mlyon01]

I agree with Barbara Kennelly's statements on Medicare Advantage plans but it's a mistake to focus on the Medicare Advantage plans when assessing the currently-discussed health plans’ dangers to Medicare. Eliminating the Medicare Advantage overpayments would reduce the expected growth in Medicare costs by only $180 billion over the next ten years, but the discussed plans call for cutting at least $400 - $500 billion.

Business and government are unwilling to do the things that could really control costs: (1) eliminate private health insurance (single payer), (2) negotiate drug prices and hospital charges, and (3) put doctors on salaries so their practices are no longer businesses with built-in incentives to either over-treat us or under-treat us.

Without real cost containment, the currently-discussed plans would require huge Medicare savings that would require ending Medicare’s “entitlement” status. Medicare’s budget would no longer grow automatically as enrollment increases. Obama and influential think tanks like the Brookings Institution have repeatedly called for getting Congressional and Presidential control over the budgets of Medicare, Medicaid, and Social Security.

Whatever private-in­surance-ba­sed plan is chosen, it will neither provide care nor contain costs, as the Massachusetts plan shows. Meanwhile we must demand the plan include the Kucinich amendment so states can have their own single payer plans. This struggle will continue.

See http://mlyon01.wordpress.com/2009/09/23/obamacare-takes-form-race-to-the-bottom-vs-our-aspirations/

[TomDegan]

Here an excerpt from an open letter to the American people written recently by my brother, Jeff:

"In the US, you pay more, get less, and die younger than we do in Europe. What part of that don't you understand?

"My fellow Americans, you have nothing to fear except those who would use fear to keep you enslaved to the myth of the might of the American health care system."

Jeff Degan

What can I tell you, the guy is a communist. Not only does he live in France, he actually likes it there! Go figure.

http://www.tomdegan.blogspot.com

Tom Degan
Goshen, NY

[PlaceboStudman]

The problem that *no one* seems to be able to wrap their minds around is that, even if you eliminated the insurance companies from the equation, the profit margin drive of BigPharma would continue, and even increase, and costs would stilll be outrageous. And, even worse than the outrageous prices is the disastrously low level of quality of care that we receive.

*SOMETHING* must be done to reform and improve medical R&D and give us better product for our money, or I don't see any reason why anyone is paying anything