When “Don’t Cut Medicare” Really Means Protect Private Insurers’ Profits”
The annual lobbying extravaganza by the multi-billion dollar private insurance industry which sells Medicare Advantage plans to seniors, will enter a new phase tomorrow when the Centers for Medicare and Medicaid Services announces it’s 2016 rate schedule. Lobbyists (America’s Health Insurance Plans alone spent nearly $5 million in just six months last year) have been in hyper-drive convincing Washington that trimming their billions of dollars in federal subsidies is the same as cutting seniors’ Medicare benefits. It’s not. But all that lobbying has paid off so far because not only have the proposed single-digit cuts been avoided; they’ve been replaced with rate increases:
“The Obama administration turned a proposed 1.9 percent cut to 2015 Medicare Advantage health plans into a .4 percent increase after heavy lobbying from insurers and the Hill. It was the second-straight year that the Medicare agency transformed a proposed rate cut into a raise. Still, Medicare Advantage enrollment has grown every year since the ACA passed in 2010. In fact, enrollment has increased more than 9 percent each year since 2012, when the ACA’s cuts to the Medicare Advantage started to take effect. The law is supposed to cut payments by $156 billion over 10 years because the program has historically reimbursed private insurers at a higher rate than the traditional Medicare program. Private plans are reimbursed at 106 percent of the traditional program, and Obamacare aims to close this gap.” Washington Post
Except that gap will never be closed as long as the powerful insurance industry is allowed to pretend that a 1.9% cut in their federal overpayment is unreasonable to ask from companies with financial reports like these:
“Revenues at Humana for 2014 climbed 17.4% year over year to $48.5 billion. Meanwhile, reported premiums and services revenues increased 9.2% to $3.1 billion, primarily on the back of an increase in average group Medicare Advantage membership.”
“UnitedHealth Group’s full year 2014 revenues of $130.5 billiongrew $8 billion or 7 percent year-over-year.UnitedHealthcare growth was led by strength in the public and senior sector.”
Let’s not forget that these giveaways to private insurers, covering just one-third of Medicare beneficiaries, are being paid for by taxpayers and the majority of seniors who don’t even participate in a private MA plan. The fact that these subsidies exist is terrible public policy. The fact they continue to be protected by lawmakers is indefensible. Especially when you consider the mounting evidence that the only advantage to Medicare Advantage plans is to the $884 billion dollar a year health insurance industry.
Reports of Medicare Advantage fraud continue to surface. Whistleblowers (including a former Bush administration official) have filed more than a half-dozen federal court cases detailing systemic over-billing by private Medicare Advantage insurance companies.
The Center for Public Integrity has investigated MA plans in depth. It reports CMS officials acknowledge billions of dollars have been improperly paid to private MA plans due to a practice called “upcoding” in which insurers exaggerate how sick their patients are to increase their “risk score” and collect higher Medicare reimbursements. Some of CPI’s other findings include:
Risk score errors triggered nearly $70 billion in “improper” payments to Medicare Advantage plans from 2008 through 2013 — mostly overbillings, according to government estimates.
Risk scores of Medicare Advantage patients rose sharply in plans in at least 1,000 counties nationwide between 2007 and 2011, boosting taxpayer costs by more than $36 billion over estimated costs for caring for patients in standard Medicare.
In more than 200 of these counties, the cost of some Medicare Advantage plans was at least 25 percent higher than the cost of providing standard Medicare coverage.
In 2012, CMS audits of six plans found that private insurers couldn’t justify payments for 40 percent or more of their patients. Those overpayments alone cost the Medicare program nearly $650 million in 2007. That’s just for six plans for one year.
The Government Accountability Office reports Medicare Advantage plans collected $3 – $5 billion in “excess payments” over just two years (2010-2012) because of private insurers “upcoding.”
A new Government Accountability Office investigation is now underway continuing its look into MA “upcoding” fraud which, by some estimates, has provided an $70 billion dollars of improper payments to private insurance companies.
This is just the fiscal side of what the privatization of Medicare has meant. Now let’s consider what beneficiaries in Medicare Advantage plans have faced. Unfortunately, that news is also disheartening.
The Center for Medicare Advocacy reports there is evidence that private insurers are “cherry picking” healthier seniors for their plans to keep costs down (and profits high.) “A recently released CMS report confirms advocates’ fears by concluding that disenrollment by individuals from MA plans back to traditional Medicare ‘continues to occur disproportionately among high-cost beneficiaries, raising concerns about care experiences among sicker enrollees and increased costs to Medicare.’”
The Kaiser Family Foundation says that “Since 2012 average out-of-pocket spending limits have been on the rise, which could expose a subset of enrollees to higher costs – mainly those who have significant medical needs.” Again, that means older and sicker seniors.
These rising premiums are confirmed by the industry itself in a survey distributed to lawmakers. Incredibly, the insurance lobby uses their premium hikes as justification for Congress to protect private insurers’ massive subsidies.
“The sickest patients who need the most care have seen their maximum annual out-of-pocket costs increase by as much as $761 since 2012, according to the study, which was conducted by the actuarial firm Milliman for the Better Medicare Alliance advocacy group. The value of extra benefits that the health plans provide fell by a national average of $180.24 from 2012 to 2015.” Congressional Quarterly
It’s hard to imagine how our political leaders can justify preserving federal over payments to private insurers in Medicare with a track record that looks like this. However, if early media reports are correct that’s exactly what’s likely to be announced tomorrow – federal subsidies to one of the wealthiest industries in America’s will be preserved while taxpayers and seniors in Medicare will continue to foot the bill.