Health Reform Strengthens Medicare
http://www.offthechartsblog.org/health-reform-strengthens-medicare/
Posted by: January Angeles
Posted in: Health Policy, Health Reform, Medicare
As the Wall Street Journal reported recently, some seniors who receive Medicare coverage through private “Medicare Advantage” insurance companies rather than traditional Medicare are concerned about the health reform law’s impact on their benefits. They shouldn’t be worried: health reform will strengthen Medicare while protecting all beneficiaries.
Contrary to critics’ claims, the new law won’t cut the benefits that Medicare Advantage plans are required to cover. The plans will still have to provide overall coverage that’s at least as good as traditional Medicare. And they’ll no longer be able to charge more than traditional Medicare for certain critical services, like chemotherapy.
Instead, health reform will take strong steps to eliminate waste in Medicare Advantage. While private insurers were supposedly brought into Medicare to reduce costs, they receive 9 to 13 percent more per enrollee than traditional fee-for-service Medicare. These overpayments cost taxpayers $44 billion between 2004 and 2009.
A large share of the overpayments goes to padding insurers’ profits rather than providing additional benefits to enrollees. Among one type of Medicare Advantage plan — private fee-for-service plans — less than a fourth of overpayments go toward additional benefits on average, according to the Medicare Payment Advisory Commission, Congress’ expert advisory body on Medicare payment policy.
In fact, these plans are so overpaid that there’s no pressure on them to be more efficient and find better ways of providing care. The health reform law will phase down these overpayments starting in 2012 and use some of the savings to provide bonus payments to plans that provide higher-quality care.
Reducing the overpayments will also help enrollees by making Medicare’s long-term finances more stable. Along with other Medicare changes in the new law, it will extend the life of the Medicare Hospital Insurance Trust Fund by 12 years and keep beneficiary premiums lower.
Medicare Advantage plans need to start competing based on quality and efficiency, and that’s exactly what the health reform law encourages them to do.
More About January Angeles
January Angeles is a Policy Analyst at the Center on Budget and Policy Priorities, focusing on Medicaid and state health policy issues.
Full bio | Blog Archive | Research archive at CBPP.org
The changes to Medicare in the health insurance reform bill will result in higher costs for people who are enrolled in Advantage Plans, pure and simple. Or access to quality care will be curtailed. Reduced payments to providers, e.g., hospitals and nursing homes, will result in higher costs to the patient or providers will no longer accept medicare patients, or providers will go out of business. Perhaps the changes will reduce medicare costs for the government, but benefits for the patient will be reduced across the board. There’s no glossing over this fact.
Thank you for your comments, Carol. We understand that many seniors are concerned about changes to the Medicare program. I’d like to respond by saying that reducing Medicare Advantage overpayments does not just reduce costs for the government, it also reduces costs for beneficiaries. Because beneficiaries pay for a portion of Medicare spending through premiums, having to pay private plans more than it costs to treat the same beneficiaries in traditional Medicare ends up costing all seniors, both those enrolled in Medicare Advantage plans and those enrolled in traditional Medicare. In 2009, these overpayments cost each elderly couple on Medicare about $90 a year in higher premiums. Moreover, scaling back the overpayments helped pay for benefit improvements for all beneficiaries, including filling in the Medicare “doughnut hole” over time and eliminating deductibles and cost-sharing for preventive services. Finally, the Medicare Payment Advisory Commission, Congress’ official advisory body on payment policy, is tasked with making policy recommendations that would make Medicare more efficient while at the same time ensuring that payments are adequate to ensure provider participation and beneficiary access to needed care. MedPAC has long recommended that the overpayments to Medicare Advantage plans be curbed and does not expect a reduction in access to care. Rather, it expects plans to continue to be able to offer additional benefits as long as they become more efficient and better coordinate care, as was the original intent for private plan participation in the Medicare program.