The disingenuous rhetoric from Washington, D.C., this week about “raiding Medicare” and that seniors “can no longer access the care they need” made it clear that yet another political broadside is underway against the 2010 Affordable Care Act.
Now in the cross hairs: changes in the way that the federal government reimburses private health insurers for Medicare. For the past decade, seniors in the federal government’s Medicare program have been able to choose each year between traditional coverage in which the federal government pays for medical bills or signing up with private plans in which the government pays insurers a set amount per enrollee to administer coverage. These privately run “Medicare Advantage” plans may have extra benefits such as vision coverage, but they may have narrower provider networks.
The number of seniors choosing Medicare Advantage plans has risen rapidly over the past decade and now stands nationally at nearly 30 percent of total Medicare enrollees. Minnesota leads the nation with 47 percent of Medicare enrollees in private plans.
That growth and the escalating criticism of a recently announced round of payment reductions to insurers — in a testament to the industry’s lobbying might, Republican and Democratic senators signed letters this week protesting changes — is why the debate over this issue needs to go beyond the misleading “Obamacare is gutting Medicare” sound bites.
The reality is that over the history of the Medicare Advantage program, it has cost the government more on average to cover Medicare enrollees who choose private plans than those who choose traditional fee-for-service coverage. A 2009 Commonwealth Fund analysis estimated the additional costs at $1,139 per enrollee, with the annual bill for the extra payments at that time totaling $11.4 billion for Medicare Advantage’s then-enrollment of about 10 million.
The ACA gradually starts reining in these overpayments so the privately run plans’ costs are closer to traditional Medicare. It also moves toward a system that rewards health plans that meet quality benchmarks. It’s worth noting that Medicare Advantage plans run by Minnesota’s nonprofit insurers typically get top quality marks and are often paid less than companies in areas such as Florida with high medical costs.
The Medicare Advantage changes under ACA are hardly radical. Health policy experts and the Medicare Payment Advisory Commission, a congressional advisory agency, for years have strongly recommended a move to equalize costs with traditional Medicare and to reward quality.
The Government Accountability Office has also sternly warned about “substantial excess payments” to Medicare Advantage plans due to what is often politely referred to as “upcoding.” Payments to plans are risk-adjusted for enrollee health, with more paid for sicker patients.
“Documented evidence shows that [Medicare Advantage] plans tend to report higher patient severity than is actually supported by medical records. It also shows that the reported patient severity increases faster than for comparable patients in traditional fee-for-service Medicare,’’ Democratic Reps. Sander Levin and Henry Waxman said in a 2013 statement.
A spokesman for Minnesota-based, for-profit UnitedHealth Group — one of the largest providers nationally of Medicare Advantage plans — declined this week to comment about the proposed rate reductions or the firm’s profits from the program.
In contrast to the sky-is-falling rhetoric coming from politicians, Wall Street shrugged off the proposed cuts. Health insurer stocks rallied this week as Humana, a large insurer, said it expected cuts of 3.5 to 4 percent vs. initial estimates of 6 to 7 percent, according to the Wall Street Journal.
The ACA began curbing Medicare Advantage payments in 2011. But last year, federal officials reported that premiums were down 10 percent since 2010 and that enrollment was up nearly 33 percent. Payment changes, in other words, haven’t driven up enrollee costs or led to benefit changes that drove enrollees away. It’s important to note that the plans must still provide all of the benefits of traditional Medicare (except hospice).
Rather than undermining Medicare, the ACA is strengthening the program by more judiciously using taxpayer dollars and pressuring insurers to become more efficient. Seniors, who are already benefiting from the law’s efforts to close Medicare’s prescription drug “doughnut hole,” ought to laud the law’s changes instead of fearing them.