Obama and Reid are aiming to scale back Medicare Advantage programs
15 01 09 - 13:05
Obama, Reid take dead aim at Medicare HMOs
By Jeffrey Young - The Hill
Senate Majority Leader Harry Reid (D-Nev.) had no qualms expressing his low opinion of private health insurance plans in Medicare.
“Medicare Advantage is gone,” Reid said last week during an interview with The Hill. He didn’t mean that literally, his press office later clarified. But Reid, like his fellow congressional Democrats and President-elect Obama, wants to scale back the program through which HMOs and other health plans provide benefits to more than 10 million people, or almost one-fourth of the 45 million people on Medicare.
Likewise, Obama singled out Medicare Advantage as an example of “programs that don’t work” during an appearance on ABC News’s “This Week” on Sunday.
By confronting the health insurance industry over Medicare Advantage, Obama and his congressional Democratic allies have already opened one front in the battle for comprehensive health reform with the sector mostly responsible for crushing President Clinton’s effort to achieve the same goal.
Democrats’ vow to cut as much as $50 billion in federal subsidies to HMOs and other health plans under Medicare Advantage could alienate a powerful industry with a major stake in the future of the U.S. healthcare system.
The health insurers’ leading trade group says there is no danger of the industry withdrawing from the health reform debate.
“Nobody said that healthcare reform is going to be easy,” said Robert Zirkelbach, a spokesman for America’s Health Insurance Plans (AHIP).
“At the end of the day, we are going to be on the side of health reform,” Zirkelbach said. “We’re confident that all stakeholders can come to the table.”
During the campaign, Obama made pointed references to the insurance industry’s presence at that table.
“It’s time to bring together businesses, the medical community and members of both parties around a comprehensive solution to this crisis, and it’s time to let the drug and insurance industries know that while they’ll get a seat at the table, they don’t get to buy every chair,” Obama said in a typical stump speech in Iowa in May 2007.
But being invited to the table and being a real part of the discussion are not necessarily the same thing.
Already, the insurance industry has made clear that Obama’s proposal to create a new publicly funded insurance plan that would compete with private insurers is a non-starter.
Not only have Democrats used harsh rhetoric against health insurers, lawmakers from the party have been trying since 2003 to undo lucrative subsidies President Bush and the GOP-controlled Congress created for Medicare Advantage plans. Last year, Congress overrode a Bush veto and cut $14 billion out of the program over the next five years.
Democrats are driven not only by their general mistrust regarding private-sector management of social welfare programs but by their thirst for tangible budgetary savings to offset the cost of a healthcare reform package that could weigh in at close to $1 trillion.
Compared to such a mammoth price tag, the $94 billion in subsidies granted to Medicare Advantage plans each year is a pittance — but Democrats say $15 billion of that annually amounts to “overpayments” that are the product of Bush and the Republican-led Congress boosting their friends in the health insurance industry.
When Medicare Advantage was created in the Balanced Budget Act of 1997, the program was billed as providing more services while costing the government less. But it hasn’t worked out that way.
Medicare Advantage cost the government 13 percent more per beneficiary on average than the traditional Medicare plan in 2008, according to the Medicare Payment Advisory Commission, which counsels Congress.
“We are spending a lot of money subsidizing the insurance companies around something called Medicare Advantage, a program that gives them subsidies to accept Medicare recipients, but doesn’t necessarily make people on Medicare healthier,” Obama said on “This Week.”
Reid was more blunt: “Hey, listen: Since Bush’s Medicare bill went into effect, insurance companies, HMOs and other managed-care entities have made $15 billion to purposely destroy Medicare. That’s what that’s all about.”
Reid favors reducing the subsidies to “bring the payments more closely in line” with the per-beneficiary cost of traditional Medicare, a spokesman wrote in an e-mail. Reid’s spokesman also said the figure is closer to $18 billion.
Rep. Pete Stark (Calif.), another influential Democrat, said last month that while even a Democratic bugbear like the Pharmaceutical Research and Manufacturers of America (PhRMA) should be consulted on health reform, health insurers could twist in the wind, as far as he was concerned.
“We’re not going to pass these plans if we don’t have the American Medical Association, the American Hospital Association — even PhRMA. You’re not going to get the insurance companies on board, I don’t think, but they’re the easiest to roll because nobody likes insurance companies. So, if they don’t like what we’re doing, I guess somebody has to be the bad guy,” said Stark, who chairs the Health Subcommittee of the Ways and Means Committee and will be one of the lead authors of House Democratic health reform legislation.
Stark has a sharper tongue than most of his colleagues, but his comments point up the challenges facing the health insurance industry as the health reform debate approaches.
Democrats, too, face challenges from the health insurers. Despite Democratic control of the White House and Congress, the health insurers remain an influential lobby.
The Medicare Advantage subsidies that Obama and other Democrats want to slash are not merely windfalls for the HMOs, AHIP maintains.
Those subsidies are used to buy things that many beneficiaries enjoy, such as coverage for prescription drugs, vision care and chiropractic services for which traditional Medicare does not pay. Medicare Advantage enrollees often also pay lower out-of-pocket costs.
“Cuts to the Medicare Advantage program would have a devastating effect on seniors who rely on the additional benefits and services these plans provide. Seniors would face reduced benefits, limited healthcare choices and higher out-of-pocket costs if Congress chose to cut the Medicare Advantage program,” Zirkelbach wrote in an e-mail.
Medicare Advantage is also disproportionately popular in rural areas and among racial and ethnic minorities. In 2007, AHIP sought to shore up Democratic opposition to Medicare Advantage cuts by courting the Congressional Black Caucus, with mixed results.
Medicare Advantage used to be called Medicare+Choice. The name change was included in the 2003 Medicare prescription drug law, which was mostly backed by Republicans.