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Medicare Advantage Plans Speeding Us Toward Privatization

As I reported in the fall 2018 NRLN Focus newsletter, when reviewing the House Budget Committee 2018 budget, I became disturbed by House Budget Committee’s desire to privatize Medicare. This resulted in my researching and writing the NRLN whitepaper entitled, Medicare Advantage Plans – Privatization’s Trojan Horse: Is “Premium Support” a Better Deal for Our Country? I just completed major revisions of the first whitepaper. I have titled it, Medicare Advantage Plans – Speeding Toward Privatization: $350 Billion Wasted on Subsidies to Private Insurers.

Health insurers begged and bought their way into the Medicare business over 40 years but have NEVER, TO THIS DAY, PROVEN THEY CAN COMPETE WITH ORIGINAL MEDICARE and its Fee-For-Service cost management approach. The only market share gained has been driven by risk-adjusted government-subsidized rebates and “star quality” award bonus programs that are mismanaged.

The story is that these incentive rewards are used to buy extra benefits such as: lower or no premiums and deductibles, eye and dental protection plans and silver sneakers memberships prior to 2019. In November of 2018 a New England Journal of Medicine article referenced two sources and quoted that, “Studies suggest that the current rebate-based method may not be an economically efficient away of providing extra benefits to beneficiaries because plans are retaining a fairly large share of rebates for administrative costs and profit, passing on only 54% of rebates, on average”.

The “Bi-Partisan Budget Act of 2018” (BPBA), declared Congresses’ and the White House’s intentions to privatize Medicare. The BPBA created benefits and the Center for Medicare Services (CMS) authorized MA plans to spend $16.5 billion more in 2019 and 2020 for MA plan benefits available to 34% (20 million) enrolled in MA plans but NOT for 66% (38.8 million) enrolled in original Medicare Parts A and B plans. This two-year cumulative $16.5 billion is a 10-year authorization or $165 billion (for trips to fitness centers, doctors, pharmacies, over-the counter meds; eyedrops; vitamins; compression stockings; house calls by doctors & other help providers; home assistance – dressing, eating, chores and light housekeeping; shower grab bars; home delivered meals, wheelchair ramps & A/C units and carpet shampooing for asthma sufferers).

DESPERATION HAS SET IN, CONGRESS KNOWS IT FAILED TO PROPERLY FUND MEDICARE AND THAT AT THIS POINT ONLY PRIVATIZATION CAN SAVE THEM! However, Congress, other than for Rx drugs, has done little or nothing to reduce healthcare costs. This latest farce discriminates against the 38.8 million original Medicare beneficiaries. New benefits are gifts designed to fuel privatization through MA plans.

MedPAC, the independent Congressional agency created by members of Congress to advise them on issues affecting Medicare, reported on March 15, 2019… “We project the base benchmarks (that is, excluding quality bonuses) will average 103 percent of original Medicare Fee for Service (Medicare Parts A and B) spending.”

An analysis of Medicare privatization (aka Premium Support) by the Congressional Budget Office (CBO) showed that privatization will NOT lower the cost of health care, instead it will shift 18% of the federal tax burden and health care costs to seniors while protecting the health care provider and pharmaceutical industries.

MA private insurer plans carry about 12-15% overhead and profit burdens and have failed to compete without federal subsidies. Original Medicare has a much lower 3% overhead burden. Kaiser Health News on November 9, 2018 quoted a MedPAC report that MA plan insurers made a 5% margin in 2016, twice the average of Medicare plans overall. That’s 25% better than the healthcare industry’s 4% margin reported by Standard and Poor’s.

The Kaiser Family Foundation (KFF) study in 2017 found that payments for MA plans enrollees were 9.9% higher than payments made for original Medicare enrollees.

So, why not fix Medicare, by stripping out the cost of subsidies to private insurers for MA plans? Health and Human Services (HHS) has wasted a total of $350 billion of taxpayer’s money and short-changed Americans in original Medicare. It is time to derail Medicare privatization. The reward for competitive bids and acceptable quality in our country is that you get a chance to prove it or lose it – why should insurers get subsidies?

Currently, there are a little over 50 million Americans age 65 and older. The population of this age group will be 75 million by 2035 and 100 million by 2060. Our federal government must take action now to preserve original Medicare before the costs of providing health care for seniors is beyond a solution.

The revised whitepaper has retained what the NRLN has been calling on Congress and the Executive Branch to do:

• Grandfather and protect the 20 million seniors (34%), who have purchased MA plans in good faith, from future reductions in benefits and guarantee the protection of baked in subsidies as of December 31, 2019 and all future MA subsidies, rebates, rewards, bonuses and non-traditional Medicare plan benefits combined.
• Direct Government Accountability Office (GAO), CBO and the HHS Inspector General to investigate and report on MA and Original Medicare Part A and Part B independent financials and assess and publicly disclose the cost effectiveness of MA, with and without taxpayer subsidies (rebates, risk adjustments and star bonuses).
• Retract the 2019 and 2020 subsidies for home air filters and carpet shampooing for asthma patients, pay for heart healthy meals for those with heart disease and other services that represent a shift from services that prevented, improved or cured a patient’s conditions, to services determined by what a chronically ill patient needs, or make them available to the original Medicare A & B, FFS enrollees who have the same health conditions and needs.
• Reduce the $140 billion annual wrong and improper payments generated by all federal agencies (particularly the $85 billion attributable to Medicare and Medicaid). Sequester savings and use them to eliminate the 75-year deficits of Medicare Part A and Part B, then Part D. Payroll tax increases are an option.

Whether you are enrolled in original Medicare or MA plans, I hope you conclude the NRLN is being fair in its assessments and proposals. Click here to read the newly revised Medicare privatization whitepaper. .