Wayne O’Leary

Medicare Disadvantage

Americans of a certain age, early baby boomers mostly, may have noticed a not-so-subtle change in the nature of their postal deliveries. Like as not, a slew of unsolicited offerings are suddenly appearing at regular internals in their mailboxes from insurance companies and HMOs far and wide. In short, they’ve been discovered by the peddlers of Medicare Advantage plans, the latest hustlers to prey on the nation’s senior citizens.

Once the word seeps out that you’re approaching Medicare eligibility, the vultures descend—from giant predators like Aetna to smaller carrion feeders like HealthMarkets Care Assured. The pitch is seductive: envelopes full of glossy, colorful brochures featuring smiling, bright-eyed seniors who have taken the plunge and are living happily ever after. There are even advertised “meet-ups,” gatherings typically held in local restaurants, where sustenance is combined with salesmanship, and opportunities are presented for dispensers of advantage plans to sign on new Medicare enrollees and those already in what is dismissively termed “original Medicare.” Aetna’s pitch includes the following: “There’s still time. Call to see if you’re eligible to switch.”

What advantage-plan purveyors want seniors to switch to are privatized Medicare plans run by the insurance industry that, for a price, offer added features not provided by basic Medicare—dental, vision, or chiropractic care, extra drug coverage, unlimited specialist referrals, and the like. The price for this largesse is exacted in the first instance from seniors themselves, who must usually pay monthly premiums to the private insurers in addition to their normal Medicare premiums; the added premiums, kept small at first to entice new sign-ups, can rise at any time.

Another price is exacted from the taxpayers in the form of billions in federal subsidies to the insurers ($9 billion in 2007) over and above the basic reimbursements companies receive from providing benefits equivalent to those offered under traditional Medicare. According to the Medicare Payment Advisory Commission, the subsidies amount to an overall average of 12% more per beneficiary in annual Medicare reimbursements (10% more for HMOs, 19% more for fee-for-service plans) than for care provided through government-administered Medicare. That’s 12% on top of whatever premiums the advantage plans collect directly from seniors.

This windfall for the medical-insurance and managed-care industries had its origins, incredibly enough, under a Democratic president, one William Jefferson Clinton. Unbeknownst to most Americans, the Balanced Budget Act of 1997, which Clinton signed, divided the Medicare program into multiple, semi-privatized financing and delivery systems by creating something called Medicare Part C, the “Medicare Plus Choice” program. Medicare-Choice allowed HMOs, preferred-provider organizations (PPOs), medical savings account (MSA) plans and private fee-for-service (PFFS) plans to receive government funds and compete directly with traditional Medicare. Aimed originally at giving “choice” (i.e. enhanced benefits) to affluent seniors who could afford the extra cost, Part C was initially limited in its application. Through 2002, only 58,000 Medicare recipients had chosen the Medicare-Choice program.

Then, in 2003, the egregiously misnamed Medicare Modernization Act, which also established the Bush administration’s donut-holed Medicare drug benefit (Part D), renamed the Medicare-Choice option “Medicare Advantage” and expanded it exponentially by adding on the huge administrative subsidies that now enable insurers to grow the program by reducing the size of the supplemental premiums they charge seniors while still making an extravagant profit. The result of these incentives, plus the accompanying hard sell, has been a steady rise in the percentage of Medicare beneficiaries enrolling in Medicare Advantage plans—from 13% in 2004 to 20% (nearly 9 million seniors) in 2007. The figure is expected to rise to 25% by 2010, with a corresponding diminishment of the Medicare trust fund due to unjustified overpayments to private insurers that, according to the Congressional Budget Office, will approach $65 billion within five years.

The strategic long-run objective is to privatize Medicare by slow, incremental steps. Once the percentage of seniors in Medicare Advantage reaches 51%, the system will, in effect, be privatized, and a government-run social-insurance program will have been converted into what Republicans have always wanted, a private-sector business opportunity. For this, we have the two fathers of Medicare Advantage, Bill Clinton and George W. Bush, to thank. A triangulating Clinton created the opening, and a partisan Bush galloped through it, turning a brain-dead budget compromise into a potential ideological triumph for conservatives.

Of course, the pending victory of the right rests on shaky ground; it largely depends on a continuation of the profit-generating Medicare Advantage subsidies that many Democrats in Congress are pledged to repeal. Without the artificial edge such corporate welfare provides, private-sector companies couldn’t compete with low-cost traditional Medicare; they rely on an uneven playing field for their success.

A second Achilles heel of the back-door privatizers is the flawed operational nature of the Medicare Advantage plans themselves. First, there are the extra premiums they charge seniors, which limit participation to those with some means. One company, Humana, hits its plan members with an average of $800 a year in payments that are added to the minimum $1,157 they already pay into the Medicare system annually. Gold-plated plans can cost twice as much.

Then, there are the abusive business practices Medicare Advantage plans have stimulated, an inevitability once private enterprise became involved. Uncovered to date have been the following: misleading bait-and-switch sales pitches by unscrupulous insurance agents, hidden traps in policies that extract unwarranted out-of-pocket payments, the presentation of dozens of confusing and deceptive plan options, difficulties in accessing promised doctors and medications, arbitrary changes in plan rules resulting in discontinued benefits, and perhaps worst of all, the cynical marketing of advantage-plan drug coverage as a means of avoiding the “donut hole” in Medicare Part D.

As the Center for Medicare Advocacy, a nonpartisan legal-assistance group, has presciently warned, “With the advent of Medicare Advantage, the Medicare program and its beneficiaries are dividing into different systems.” A two-tiered, buyer-beware Medicare based on ability to pay is not what the system’s founders intended. It’s time to address this growing national scandal.

Wayne O’Leary is a writer in Orono, Maine.

From The Progressive Populist, May 1, 2008

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