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When a Medicare cut isn't exactly a cut

Max Baucus, healthcare reform, Medicare, Medicare Advantage, benefit cuts, Wall Street Journal editorialAn editorial in today's Wall Street Journal finds a new setting for the argument that the Democrats' healthcare reform bills would reduce Medicare benefits -- this time, lambasting Senate Finance Committee Chairman Max Baucus (D-Mont.) for calling on an Obama administration "crony" to punish Humana Inc. for warning customers that their Medicare Advantage benefits were at risk. According to the Journal's editorial, Humana wasn't saying anything that Congress' chief budget analyst, Doug Elmendorf, hasn't said.

The Journal's right about Baucus and the Democrats' proposals, and yet it paints a misleading picture of the policy at issue. Medicare Advantage is an HMO-style approach to Medicare, with care managed by private insurers such as Humana. The healthcare reform bills would phase out the additional subsidies that insurers receive for Medicare Advantage programs, bringing the cost into line with conventional Medicare. The reduction will almost certainly lead to the elimination of some of the extra benefits that those programs provide. But think about that for a moment. 

Insurers created HMOs to cut healthcare costs by steering consumers to a network of doctors and hospitals that had agreed to charge the insurer lower fees. Hoping to tap into those savings, Medicare has been encouraging seniors to join HMOs since the 1970s. In the past decade, however, the insurance industry's allies in Congress have ratcheted up the subsidies for Medicare HMOs (dubbed "Medicare Advantage" in 2003), enabling those programs to offer extra benefits in the hope of attracting more subscribers. By MedPAC's estimate, every $1 in added benefit cost the Medicare program $1.30. Medicare Advantage no longer tries to save taxpayer dollars; instead, it exists mainly to shift the elderly into privately run plans by delivering more benefits, but in a less efficient way than the basic Medicare program does. 

Those extra benefits, by the way, typically consist of lower co-payments, although they occasionally take the form of additional services. Medicare Advantage plans aren't as generous as Medigap policies, but those have monthly premiums and Medicare Advantage doesn't. If the healthcare reform legislation drains the extra subsidies from Medicare Advantage, those enrollees will feel the pinch. But they won't receive less than their counterparts in the basic Medicare program -- most likely, there will still be some advantage to Medicare Advantage. Which brings us back to the issue here. Are the Democrats proposing to cut Medicare benefits? No, they're proposing to trim the sweeteners that had been used to draw the elderly into privately managed plans. And if the private plans cost taxpayers more than basic Medicare, why do we have them?

Picture credit: Alex Wong / Getty Images

-- Jon Healey


Comments () | Archives (7)

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Denise in AZ

When the Democrats cut payments to Medicare Advantage (and that is happening in 2010), the 10.5 million "members" will see their Medicare benefits cut. Republicans have set a perfect trap for Democrats, who hate Medicare Advantage. In states like California, Arizona, Pennsylvania, and Florida, 25%-35% of seniors are in these private plans. And seniors enrolled in these plans are going to see higher co-pays and higher premiums. They will get this news in October when their plan changes are announced. Many seniors never read their "annual notice of change" for their Medicare Advantage plan, but I'll bet Republicans will be watching them carefully and will pounce on any increase in costs. http://www.medicareblog.org

Daniel Meng

I have been a HMO user for over fourteen years, and I think the whole thing is a farce.
Why, its like I said to my own primary Doctor, I said Doc, let me ask you something!
Once a year I come and see you and you give fifteen minuets of your time. The nurse does the preliminary work, by taking my blood pressure, heart rate, and checks my ears. Then they put me in a room to wait for you to come and see me. If anything is wrong you prescribe a medicine that does nothing for me other than it constipates me, and oh, thank goodness I discovered prunes. Oh, and my fifteen minutes are up! The good Doctor was rolling with laughter. He than said seriously, "that is true, there is really not much I can do" I said I know that and that is why I am going to take control of my own body. The moral of the story is, I do not care what those politicians do, because they only say what you what to hear, and then go and do what they all ways do, is nothing.


When is a cut not a cut? Why, when it's an Obamessiah proposal that's when. If this knife in the back of seniors was part of a GOP reform the "Times" would be howling like a gut shot dog. 2010 will be be payback time.

Dan Jeffs

It is troubling to know that most of the press is ignoring the potential
plight of seniors enrolled in Medicare Advantage, most of whom are low
income, while President Obama throws us under the bus. Medicare Advantage is
a program wherein private health insurance companies contract to manage
Medicare patients' healthcare, allowing us to obtain complete health
insurance at lower insurance premium rates.

President Obama accuses the insurance companies of unjustly profiting from
the programs, which is not true. Most insurance companies, particularly the
Kaiser Senior Advantage program, manage Medicare better than Medicare does,
at a lower cost with better care. Kaiser has also spend $5 billion over 5
years to computerize all their medical records for their entire system of
health care. Kaiser is the model for good health care system.

President Obama lied when he promised that there will be absolutely no
change for all of us who have health insurance. My personal concern is that,
in the name of waste, fraud and abuse, Obama intends to eliminate Medicare
Advantage for 10 million seniors, which will double or triple our premiums.
If the congressional committees working on health care legislation propose
to reduce or eliminate the Medicare Advantage program, they should
reconsider their actions or suffer the consequences.

Jon Healey

@Dan -- Medicare is headed for insolvency in eight years, so the subsidies for the Medicare Advantage program are going to get cut regardless of whether Congress overhauls the healthcare system.

You overlook a couple other things that bear repeating. Medicare Advantage is not an efficient use of taxpayer dollars -- every $1 of added benefit costs $1.30. And second, cutting the subsidy level for Medicare advantage doesn't eliminate the program. It will crimp the benefit level, true, but if private insurers really are better administrators than the government, they still should be able to offer a better package than standard Medicare benefits. And if they can't, there's no point in having the program, is there?

It's too bad Medicare Advantage got caught up in the healthcare reform debate, because it really is worth having a separate discussion about why it exists. Its subscribers get more than basic Medicare users do, but then, the public pays more for that. If those extra benefits are important, why not increase the subsidies for everyone? Because we couldn't afford it without raising Medicare taxes. So why are we providing the supplement to the lucky few?

Walter Myers

Why is medicare cutting benefits in 2010. I need a supplement for 2010 because my present plan deactiveates in 12/31/2009. I looking for a supplement. However, I wish to know that if the government would stop taking monies out of medicare then I truly believe there would be no problem I need this information to get a supplement in any case.

Ann Non

Jon Healey says:
(Referring to Advantage Care) "...Its subscribers get more than basic Medicare users do, but then, the public pays more for that. If those extra benefits are important, why not increase the subsidies for everyone? Because we couldn't afford it without raising Medicare taxes. So why are we providing the supplement to the lucky few?"
Here's a suggestion. GWB wanted to privatize SS, couldn't, so, he tried to privatize Medicare. It's just my theory. I looked this up about Advantage Plans and this is what I found.
For each enrolee in Advantage Care at least $850. per month (unless you have a chronic condition such as high blood pressure, and then it is more) is spent from the Medicare Trust Fund. An additional $96.50 (current year Medicare premium) per enrolee also goes out of the fund. This is money going directly to the insurance company who only pays out a percentage of that to helath care providers. If you get glasses, yearing aids, health club subsidies from your Advantage Care Plan and you do not use them, guess who keeps that money. And these plans are not just for low income seniour, they are for well to do seniors who are healthy and they are spending their Medicare premiums on cruises, yachts, etc., etc. These plans could be replaced with something for truly low income seniour. There is already a plan for low income seniour, BTW. This was a GWB plan to sink Medicare - that is the inefficiency you see. This is what the Obama administration is trying to correct. All traditional medicare recipients such as myself and my husband believe this to be inequitable because we are paying for you who probably could afford traditional medicare. My friend recently told me that her co-pays are rising under Advantage Care. Whopee! I could have predicted. It is PRIVATE INSURANCE. Why couldn't you predict it. Medicare was doing great until the Advantage Care plans were injected. Also, the drug program is an agreement, made by the GWB admin., with private companies who do everything to get every penny possible out of their drugs. This will change over time.



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The Opinion L.A. blog is the work of Los Angeles Times Editorial Board membersNicholas Goldberg, Robert Greene, Carla Hall, Jon Healey, Sandra Hernandez, Karin Klein, Michael McGough, Jim Newton and Dan Turner. Columnists Patt Morrison and Doyle McManus also write for the blog, as do Letters editor Paul Thornton, copy chief Paul Whitefield and senior web producer Alexandra Le Tellier.

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