Medicare's Disadvantage

by John M. Curtis
(310) 204-8700

Copyright Dec. 27, 2009
All Rights Reserved.                    

              Passing health care reform in the U.S. Senate Dec. 24 spelled trouble for Medicare Advantage plans that collect billions from the government and deliver a lot of empty promises to seniors.  Expected to take about $500 billion from Medicare Advantage, President Barack Obama hopes to help fund his new health care reform bill, offering health insurance to over 30 million uninsured.  When the General Accounting Office determined that Medicare Advantage plans paid executives millions in compensation and bonuses, it was clear the program benefited the greedy not the needy, wasting billions of taxpayer dollars.  They’re giving special benefits that are valuable,” said Mary Johnson, a policy analyst with the Senior Citizen League,” a nonprofit, 1.2-million member group  “But what people don’t understand are the “trade-offs,” like medical rationing.

            Senior Advantage Plans have been around for over 20 years, offering seniors zero deductibles, low co-pays, cheaper drug prices, meals-on-wheels and a host of other fringe benefits.   How they make money is by denying-and-delaying medical care, using layers of gatekeepers to prevent seniors from accessing medical benefits.  Medicare advantage plans emphasize “wellness” programs or alternatives to medical care to discourage seniors from using their plan benefits.  Medicare advantage plans contract with medical groups known as IPAs, Independent Practitioners Assns., where they accept a fixed monthly dollar amount per patient known as “capitation.” Unknown to unsuspecting seniors, capitation assures that med-groups lose money when senior use their medical benefits.  Medicare advantage plans promise more than they deliver because IPA’s routinely ration medical care.

            Barack’s new health care bill passed Dec. 24 in the Senate cuts about $500 billion from Medicare Advantage Plans to help finance insurance coverage for over $30-million uninsured citizens.  While the insurance industry makes money on Advantage Plans, they’ll make more money insuring millions of new patients.  When Sen. Joe Lieberman blocked Dec 13 the Medicare-at-55 provision, allowing 55-year-olds to buy into Medicare, it essentially killed the so-called “public option.”  Much ado was made about the “public option,” where liberals wanted to simply expand Medicare to every man, woman and child.  Republicans and moderate Democrats objected to the government competing with the private sector, despite the fact that Medicare has done that since 1964.  There’s wisdom to allowing the private sector to reap the rewards from selling insurance policies.

            Expanding Medicare, as Lieberman noted, would have taken a sizable bite out of the private insurance market, hurting the industry’s bottom line.  Creating insurance co-ops, where competitive insurance plans are made available to the public, boosts the insurance industry’s enrollment, improving profit margins.  Curtailing Medicare Advantage can be made up by expanding Med-gap coverage, where plans cover the 20% not covered by Medicare.  Either way you cut it, the government intends to subsidize the purchase of health insurance offered by the co-ops.  For those disappointed by no “public option,” it doesn’t matter whether the government or a private insurer pay subscribers’ medical bills.  Even today’s Medicare contracts with “intermediaries,” insurance companies to process Medicare payments.  As long as checks don’t bounce, no one cares who writes them.

            Recent news stories about Medicare Advantage Plans sponsoring extravagant payments and junkets for executives should surprise no one.  Whether in the insurance business or Wall Street, publicly traded corporations lavishly reward executives with benefits and compensation.  A Congressional audit released in December found that Medicare Advantage companies spent $27 billion in government profits on marketing and executive compensation.  Objecting the Senate’s cut in Medicare Advantage Plans, the industry fiercely lashed out.  “Seniors are going to lose many of the benefits that seniors like to rely on today,” said Robert Zirkelbach, a spokesman for America’s Health Insurance Plans,” an industry lobby group, warning about proposed cuts.  What Zirkelbach doesn’t tell you is that Medicare Advantage Plans make profit denying-and-delaying health care.

            Scaling back Medicare Advantage cuts some of fat out of a bloated system, providing an instant source of funding for Barack’s health reform program.  Despite whining from the insurance industry, the free ride of taking extravagant government largesse is over.  For years, the insurance industry took the government—with Medicare Advantage—for a ride, reaping obscene profits at the expense of seniors and the overall Medicare program.  “And in some parts of the country, seniors will lose access to their Medicare Advanatage plan altogether,” said Zirkelbach, warning Congress to think twice before de-funding a good part of the Advantage Program.  Despite industry propaganda, Advantage programs have operated with impunity like corrupt HMOs, promising extravagant benefits but, in truth, denying-and-delaying needed medical care to unsuspecting seniors.   

About the Author

John M. Curtis writes politically neutral commentary analyzing spin in national and global news.  He’s editor of OnlineColumnist.com and author of Dodging The Bullet and Operation Charisma.

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