Private Insurers Enroll Beneficiaries in Fight Against MA Payment Cuts

Private Insurers Enroll Beneficiaries in Fight Against MA Payment Cuts

The Coalition for Medicare Choices states that they are an advocacy group protecting the quality and affordability of healthcare for all Medicare beneficiaries. Yet is this really the case?

The Coalition is funded by America’s Health Insurance Plans (AHIP), an insurance industry trade group, and other private insurers such as Kaiser, and seems to be advocating primarily for the interest of private insurance companies and focused on preventing payment cuts to the Medicare Advantage program. One of the primary statements on their website home page is to “push for more health plan choice for every person with Medicare.” With 139 Medicare Advantage plans already offered in California, is more ‘choice’ really what beneficiaries want or need?

The federal government is set to pay insurers participating in the Medicare Advantage program this year more than twice what they were paid in 2003 ($76.3 billion up from $36.5 billion). The Congressional Budget Office (CBO) predicts payments will surge to nearly $200 billion over the next decade. However, the Coalition states that any cuts in payments will jeopardize the quality, affordability, and access of health care for the eight million beneficiaries enrolled in MA plans. Yet, based on experience in past years when the federal government increased Medicare Advantage plan payments, enrollee premiums and copayments still went up.

The Coalition emphasizes that millions of beneficiaries are enrolled in MA plans without mentioning that these ‘millions’ actually represent 18.5 percent of the Medicare population. Over 81 percent of beneficiaries are still in traditional fee-for-service Medicare because they prefer it, according to a 2003 Kaiser Family Foundation and Harvard School of Public Health survey. They prefer it because they: trust Medicare more than private plans; feel Medicare offers more choice of doctors and hospitals than private plans; think Medicare is more cost efficient than private plans; and think Medicare offers more generous benefits.

The Coalition is seeking the support of beneficiaries enrolled in MA plans as they lobby Congress to maintain their current payment rates, which some advocates view as overpayments. They are encouraging beneficiaries to join the Coalition online and to write their Congress people telling them that “Medicare Advantage is essential” and that it is their “lifeline!” In some cases they are arranging calls and visits between beneficiaries and lawmakers; and have chosen 50 members of Congress as targets, mostly Democrats in leadership posts or from areas with high MA enrollment. (See New York Times article, Democrats Press House to Expand Health Care Bill, July 23, 2007). The Coalition tells beneficiaries to stress that “seniors and disabled persons on low or fixed incomes cannot afford higher out-of-pocket costs for health care” and that they “need programs like Medicare Advantage to give [them] access to affordable health care coverage…” without providing any tangible proof that this statements are true.

While commercial plans do sometimes offer a variety of additional benefits or discounts such as dental, vision or preventive care, they also require different cost-sharing responsibilities than traditional fee-for-service Medicare. By using an “actuarially equivalent” benefit package, Medicare Advantage plans can increase cost-sharing for Medicare covered services utilized by sicker beneficiaries. People with health conditions who use more health services often pay more than they would in original Medicare. (For example, see last year’s article, Cancer Patients Take the Burnt of HMO Cost Increases.) This inequity in benefits can result in a concentration of high cost patients in traditional Medicare where they are more certain of their benefits and may be able to insure against their out of pocket costs.

In addition, many MA sponsors, and in particular private fee-for-service (PFFS) plans, charge more than traditional Medicare for in-patient hospital stays, skilled nursing facility (SNF) and home health visits, Part B drugs and durable medical equipment. (See the Center for Medicare Advocacy’s report on PFFS plans and California Health Advocates Attorney David Lipschutz’ May 22nd testimony to the House Ways and Means health subcommittee.)

The Coalition is also contacting various agencies such as California Health Advocates and some of the Health Insurance Counseling & Advocacy Programs (HICAP) to join their cause. With Medicare paying approximately 12 percent more per beneficiary in commercial plans than in the traditional Medicare program, and as much as 19 percent more in Private Fee for Service plans many advocates believe equalizing payments between the Original Fee for service Medicare program and MA plans make more sense. The Children’s Health and Medicare Protection Act (the CHAMP Act; H.R. 3162), which includes provisions to equalize MA and Original Medicare payments that AHIP is heavily opposing, already has strong support from AARP and the American Medical Association.

While health insurers do put government funds they receive towards providing health care and provide valuable benefits for beneficiaries, many are also earning a handsome profit with what remains. For example, Goldman Sachs estimates that Humana, a leader in the field, will earn 66 percent of its net income from Medicare Advantage this year. At UnitedHealth, Goldman Sachs estimates Medicare Advantage will account for 11 percent of its net income this year.

Transferring beneficiaries enrolled in Medicare Advantage plans back to the traditional fee-for-service program would save Medicare $5 billion annually (see KFF article 1.24.07). Also, according to a recently released Congressional Budget Office (CBO) report, $64.8 billion could be saved between 2008 and 2012 by equalizing payments to Medicare Advantage plans and fee-for-service providers.

Yet, AHIP and private insurers are pushing hard against any move to equalize MA funding. AHIP Chief Karen Ignagni, who is also one of Washington DC’s most prominent lobbyists, is working with the political consulting firm, Dewey Square Group to gain more Democratic support. Together they have made low-income and minority beneficiaries a major part of their message by claiming that these populations will be harmed by any attempt to reduce payments to MA plans. They describe Medicare Advantage as a safety net for a subset of Medicare beneficiaries with incomes of $10,000 to $20,000 a year who lack supplemental coverage like Medicaid to cover out-of-pocket costs. However, they fail to point out that in the case of Private Fee for Service MA plans that beneficiaries are restricted to a smaller pool of providers who will accept patients with these plans, and to higher out of pocket costs that can’t be eliminated with insurance.

Also, according to a recent report from the Center on Budget and Policy Priorities (CBPP) much of AHIP’s claims are based on a selective and distorted culling of their own data. For example, nearly half (48 percent) of all Medicare beneficiaries with incomes below $10,000 are enrolled in, and thus receive supplemental coverage through, Medicaid. This is nearly five times the proportion (10 percent) who are enrolled in Medicare Advantage plans. Even the percentage of beneficiaries with incomes below $10,000 who rely on Medigap coverage is slightly greater than the percentage enrolled in Medicare Advantage.

The picture is similar among Medicare beneficiaries with incomes below $20,000, a category that includes nearly half of Medicare beneficiaries with access to a private plan — and the overwhelming bulk of minority beneficiaries. (Some 72 percent of African American beneficiaries, 81 percent of Hispanic beneficiaries, and 79 percent of Asian American beneficiaries have incomes below $20,000.) Among beneficiaries with incomes below $20,000 who live in an area where a Medicare Advantage plan is available, a larger share receive supplemental coverage through Medicaid than through a Medicare Advantage plan. (See the CBPP report, Low Income and Minority Beneficiaries Do Not Rely Disproportionately on MA Plans.)

While advocates support helping lower-income seniors with out-of-pocket costs, they say it’s more efficient for the government to give the aid directly rather than subsidize MA plans to provide benefits to this population, especially since the majority of this population still relies mainly on traditional Medicare and Medicaid. Some argue that MA plans can better coordinate the care of beneficiaries with low-incomes. Yet, even so, the high overpayments to these plans may actually be harming millions of beneficiaries — including minority beneficiaries — by raising the Medicare premiums they pay each month. These premiums are most likely set at a higher level than would otherwise be the case in order to help cover the costs of the overpayments. According to the CBPP report, such subsidizing of MA plans could continue to threaten beneficiaries in coming years, contributing to Medicare’s financial shortfalls and the need for deeper Medicare cuts (or larger tax increases) than would otherwise be required.

Many advocates who support equalizing MA payment are working together to protect Original Medicare and demand these changes in payments be made. Medicare has been one of the most successful social programs in our nation’s history. It has offered cost effective, efficient health care for a previously marginalized population. Efforts to increasingly privatize Medicare serve only to fragment and raise the costs of this historically reliable social insurance program. It is imperative that inequitable payments to private insurance plans be stopped and that Medicare is preserved as a single, comprehensive, nationally available program.

One way advocates, beneficiaries, and family members can help is to join Center for Medicare Advocacy’s (CMA) campaign to ‘Say No to Medicare Cuts’ and tell their Congress people to:

  • Support traditional Medicare;
  • End unnecessary subsidies to commercial plans;
  • Equalize payments to Medicare Advantage and fee-for-service providers; and
  • Provide effective oversight of CMS to ensure that the agency does not unfairly promote Medicare Advantage options over the traditional Medicare program.

Visit www.fairmedicare.org for more information on this campaign. And visit www.medicarechoices.org for more information on the private insurance industry’s Coalition for Medicare Choice. People can also contact their Congress Representatives and Senators in support of the CHAMP Act.

Some information in this article was provided by Wall Street Journal article, “Insurers Fight to Defend Lucrative Medicare Business,” April 30, 2007.

Karen Fletcher
Our blogger Karen J. Fletcher is CHA's publications consultant. She provides technical expertise, writing and research on Medicare, health disparities and other health care issues. With a Masters in Public Health from UC Berkeley, she serves in health advocacy as a trainer and consultant. See her current articles.

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