Another Government Study Questions the Medicare Advantage Business

You can now add the Government Accountability Office (GAO) to MedPAC and the CBO as highly respected government agencies who have issued reports questioning the cost effectiveness of the private Medicare program.

This time, the GAO said:

• Insurers will receive $86 billion this year for the private Medicare plan--Medicare Advantage.
• Last year the government paid the private plans $8.3 billion more than the traditional Medicare program would have spent on the same enrollees.
• Private insurers will collect $54 billion more over the next four years than the traditional Medicare plan would have spent for the same seniors.
• A "relatively small" portion of the money will go to extra benefits for seniors.
• The extra benefits seniors get in these plans are financed partly by higher senior premiums deducted from their Social Security checks.
• 30% of the seniors enrolled in private Medicare plans are in plans that will spend less than 85% of their premiums on benefits.
• Overall out-of-pocket costs are less for seniors in the private plans but 16% of beneficiaries pay more for hospital stays and 19% pay more for home health care services.

Acting CMS administrator, Kerry Weems, defended the program noting that "choice" is "at the heart" of the value private Medicare brings to seniors. He also said the private plans add an extra $1,100 per beneficiary in value beyond original Medicare.

However, the GAO report reminded everyone that Medicare Advantage was never intended to be a way to channel more money to just the seniors who signed up for it--it was also created to save money overall for the Medicare program.

Democrats predictably jumped on the findings calling for Medicare Advantage cuts in order to fund other Medicare priorities--such as the Medicare physician fee fix.

At a Congressional hearing, only one Republican spoke on the record calling the report from the non-partisan GAO, "a fake report with fake conclusions."

Well, it is a lot more than that. It is yet one more analysis by a highly respected third-party saying that Medicare Advantage is costing taxpayers a lot more rather than saving anything.

Medicare Advantage payments to private health plans would have been cut last year if it were not for President Bush saying he would veto any bill that did so. But now President Bush has only 11 months to go and can be easily bypassed by the Congress waiting for the new President to take over and sign a budget.

It's going to take a lot more than some backbench Republican yelling "fake" to turn this debate around for the private Medicare plans.

Prior posts:
CBO Issues a Major Report on Medicare Advantage Plans--Pours More Fuel on the Private Fee For Service Fire

MedPAC Recommends a Reasonable Road Map For Reducing Private Medicare Advantage Payments--Plan Would Equalize Payments Over a Five-Year Period