Privatized Medicare: Bush’s Parting Gift to Insurance Companies and Obama’s First Health Care Challenge

Having spent eight years bypassing the laws of the land via signing statements, executive orders, or just simple denial, the Bush Administration is adding to its grim legacy with a rush of last-minute orders and rule changes. Compiled here by ThinkProgress, these include everything from everything from cutting Medicaid and disabled veterans’ benefits to descreasing corporate taxes to allowing concealed, loaded firearms in National Parks.

Some parting shots are so low-profile that they might easily escape notice. The latest of these came today in the obscure form of a “call letter” to private insurance companies that want to contract with Medicare to provide health and drug coverage in 2010. Such calls are issued annually–but the call letter was released two weeks earlier than it was last year, and two months earlier than the previous year, ahead of the changing of the White House guard. Medicare advocacy groups view the early release as “an attempt by the Centers for Medicare & Medicaid Services (CMS) to assure continued leniency in the oversight of private plans for at least another year and as a last-ditch effort to promote private Medicare Advantage plans.”

Medicare Advantage (MA) plans–which offer managed care run through private insurers, paid for by the federal government–are the point of the stake that conservatives have long been trying to drive into the heart of traditional Medicare (which, for all its shortcomings, is the closest thing to a single-payer program that this country has ever seen). Columnist Saul Friedman recently wrote about the history of  of this effort, recalling a 1995 press briefing in which Dick Armey, Newt Gingrich’s collaborator on the “Contract With America,” announced their intent to “wean our old people away from Medicare.”  The first step was to introduce private Medicare HMOs–what later evolved into Medicare Advantage plans, with a big boost from the Republicans’ 2003 Medicare bill.

MA plans have come under increasing fire for their hard-sell tactics to elderly Medicare recipients, shoddy coverage, and rip-offs of the public purse. “Competition” from the private plans was supposed to reduce growth in Medicare spending–but in fact, they cost the government more. A September report from the Commonwealth Fund calculated that “payments to MA plans in 2008 will be 12.4 percent greater than the corresponding costs in traditional Medicare–an average increase of $986 per MA plan enrollee, for a total of more than $8.5 billion. Over the five-year period 2004-2008, extra payments to MA plans are estimated to have totaled nearly $33 billion.”

According to the advocacy groups, the call letter reflects few of the demands critics say are needed to ensure that the government gets what it pays for–and that old and disabled people get the decent coverage they need.

“The draft Call Letter issued today is another example of how CMS has failed to properly oversee private Medicare plans that receive billions of dollars above traditional Medicare without providing the extra benefits they tout,” Judith Stein, Executive Director of the Center for Medicare Advocacy says. “For example, the CMS Call Letter does not require private Medicare plans to coordinate care and sets no standards for those that purport to do so.”…

“We are dismayed that the current administration of CMS has failed to issue a Call Letter that protects beneficiaries and taxpayers by describing in detail what is expected by private Medicare plans,” says Kevin Prindiville, staff attorney with the National Senior Citizens Law Center. “We ask the incoming administrator of CMS to rescind the current Call Letter and issue a new document that demonstrates that CMS will exercise appropriate oversight over private insurance plans.”

What happens with Medicare Advantage plans–along with the privatized Medicare Part D prescription drug benefit–should be of interest to Americans of all ages, and not just oldsters, since it will almost certainly mark the Democrats’ first showdown on health care. As the Wall Street Journal reported:

Democrats are likely to go after some long-sought targets, especially private Medicare plans and the drug benefit–two areas where years of Republican control have left strong marks. Private insurers run those programs and offer seniors more choices–and some say, confusion.

Rep. Pete Stark (D., Calif.), chairman of the powerful House Ways and Means Health Subcommittee, says President George Bush and Republican lawmakers spent the past eight years “trying to privatize Medicare and turn it into a new voucher system.”

“I think that was wrong, and now we have to correct that,” he says in an interview.

How the new administration and Congress deal with Medicare will be a test of their moxie in dealing with health care reform in general. Creating any sort of health care system that gets Americans better care for better prices will require that the Democrats take a stand against the interests of the insurance and pharmaceutical companies. And if they can’t do it for us geezers, it doesn’t look good for everyone else.

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6 responses to “Privatized Medicare: Bush’s Parting Gift to Insurance Companies and Obama’s First Health Care Challenge

  1. Is there any documented difference in the performance of staff model HMOs vs IPA model HMOs with medicare Advantage Plans.?

  2. Jimmy1920: I am not aware of any studies of performance for the different types of HMOs with regard to Medicare Advantage, specifically. You sound like you probably know more about this than I do, but my understanding is that the staff/group model HMOs (in which providers see patients exclusively from one HMO, often in a dedicated facility) have generally gotten better marks from enrollees than IPA model HMOs (in which providers work out of their own offices and see patients from many HMOs). The staff HMOs are found to have fewer administrative problems and better access to care, though I’m not sure there’s much difference when if comes to quality of care. One survey on this subject can be found here: Staff HMOs are also more likely to be non-profit rather than for-profit. But unsurprisingly, they are a shrinking part of the HMO market.

    I guess I can see that in some cases Medicare beneficiaries might want to stick with a staff HMO that they’ve been using all along (for example, if they’ve used Kaiser Permanente while working, they might want to keep using it as Medicare enrollees, for the sake of continuity). But I can’t see any good reason to use an IPA model HMO Medicare Advantage plan, since traditional Medicare lets us see any doctor we want to. I’d be glad to hear your opinion on this, as well.

  3. Our group uses a Medicare Advantage Plan with a staff model HMO. Our group has a long history with the staff model HMO and there is a lot of loyalty, especially among the older and retired members.
    I confess, I didn’t even know there were IPA model Medicare Advantage plans until I read your piece. Shortly afterwards, one of our vendors was decrying lost business opportunities if this is shut down. I have a hard time getting my arms around the concept, especially when you factor in the Medicare Part D piece.
    I agree with you, the IPA model makes no sense. But I was wondering if there was some logic as far as the staff model is concerned.
    When Paul Ellwood sold the HMO idea to Nixon, he did not have the IPA model in mind. That was introduced by the free market knee jerk idealogues who continually put business ahead of service.
    I think it says a lot about the state of US health care when the ones screaming the loudest for reform are patients and doctors (perhaps not the same tune). You rarely hear the people in the middle complaining.

  4. Very informative article. Did you know that don’t get to choose whether you want Original Medicare or Medicare Advantage? Your former employer does, and you have to go to Medicare Advantage, which is really private Medicare DISADVANTAGE, to keep you supplement, if they chose it. Medicare Advantage, has to give similar services, but not all the same services, nor pay the same rate, nor have all the Medicare providers. They can operate it as a PPO (Preferred Provider Organization), which will probably and most assuredly be a much, much smaller network. They do not have to have all the Original Medicare providers, or even a small part of them. The Advantage Plan need meet only “CSM ratios”, Central Medicare Services Ratios, which means so many providers of a certain types within so many minutes, of so many plan participants. Since each of these private plans is small, with a small number of participants, when compared to Original Medicare, you could end up with a very small network. Say there are 5 nursing homes in you town, and 2 aren’t in you plan, and 2 are full; you end up in the worst nursing home in town. Remember the farther you live away from your former employer, the less of a network you will probably have, since it’s based on the number of participants in a given area. Also you could have problems going to specialists and better hospital outside your home area. Say you need to go Sloan Kettering or John Hopkins, if they’re not in your plan, even through they take Original Plan, then you could end up paying say 30 to 40 % more to go there, than those with Original Medicare. So in order to Original Medicare providers not in you Medicare Advantage network, you will have many additional charges. There will probably be double coinsurance charges, double deductible, double Out Of Pocket Maximum , same as out of network costs in other private insurances. Also the Medicare Advantage Plan can add other out of Network fees. You will also be paying the difference between the Medicare Advantage rate and the Original Medicare rate, if out of network. Of greater concern is that no one will be setting usual and customary charges when out of network, which means you could have to pay and additional 20% to 35% of the bill. All this to use a provider, that everyone gets to go to if they have original Medicare, but we have to pay more with Medicare Advantage. It would work the same way with a Medicare Advantage Private Fee for Service Plan (PFFS) if you go to an Original Provider who doesn’t take their rates, then we have to pay the difference, to use an Original Medicare provider under Medicare Advantage, than when using that provider under Original Medicare with a supplement from our former employee. Lastly the network or Medicare Advantage provider can be changed yearly by your former employer, so you really can’t count on anything. Also Original Medicare allows a second supplement, and Medicare Advantage does not. Original Medicare has a really broad network, all providers in the country who accept Medicare, so it’s near impossible to be out of network, and have all those extra costs. Medicare Advantage costs us more of our tax dollars, while the Medicare DIS- Advantage companies make outrageous profits on our tax dollars just to give out our own tax dollars and supplement premiums, and severely limit our access to many of the Original Medicare providers. We lose choice and it costs us more. What right do they have to force us off Original Medicare just to keep our supplements. We worked 30 to 40 years for our employer related insurance, and all it has to do is supplement Medicare, when we get old enough for Medicare. Only to keep our supplement, they can force us off Original Medicare. Medicare Advantage is nothing but a cash cow for private insurance companies.

  5. This last note only applies to some people, but constituted another take away of benefits that applies only to couples, where the spouses both worked and carried insurance on themselves and each other, one through one former employer and the other through another employer related plan. With Traditional Original Medicare when they retired, Medicare, of course, is the primary payer and pays first, and then through a Traditional Coordination of benefits, the private plans through the employer pays second, and the spouse’s plan pays 3rd, if there is anything left to pay. (This reverses for your spouse). This situation continues even, after both are on Medicare. In other words, Traditional Original Medicare allows 2 supplements. However, Medicare Advantage does not allow 2 supplements so you are forced to drop either your spouse’s insurance or yours. So after both have worked a lifetime for their employers, and earned both supplements, Medicare Advantage won’t let you have the 2nd supplement.
    So just by forcing retirees on to Medicare Advantage, former employer’s supplement has not only changed its benefits, but denied participants the right to participant in Traditional Original Medicare, and for those who had a 2nd supplement (for which their spouse worked) forced them to lose it. It messed up 2 to 3 insurances for each participant, with the stroke of a pen. Medicare Advantage rules steal the second supplement from participants, while providing a smaller network. Only the insurance companies win.

  6. Pingback: Reducing the Handouts to Privatized Medicare: A First Step « Unsilent Generation

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