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“Let’s Not Forget Medicare Advantage”: Selective Outrage Over Federal Health Care Costs

Knowing I’ve been both a critic of insurance company practices and a supporter of efforts to reform the industry, a FOX news producer reached out last week to get my take on accusations by conservatives that Obamacare will actually result in a bailout of big insurance companies.

Under the headline, “Bailing Out Health Insurers and Helping Obamacare,” The Weekly Standard on Monday urged Republicans to insist that future debt ceiling increases contain a no-bailout provision. The magazine also cited Sen. Marco Rubio’s, R-Fla., bill to repeal a provision of the Affordable Care Act designed to limit potential initial losses of insurers selling policies on the new health insurance exchanges.

I reminded the FOX producer that Republicans have been supporting — and vigorously defending — a much more expensive transfer of taxpayer dollars to private insurers than the one Obamacare foes are now concerned about.

Here’s the issue:

Lawmakers who drafted the Affordable Care Act knew that insurers would be reluctant to participate in the new health insurance exchanges — also called marketplaces — if the government didn’t create a temporary program to protect them against what’s known in the insurance world as adverse selection.

Insurers were concerned, for good reason, that the first people to sign up for coverage through the exchanges would be folks previously shut out of the insurance market — people who were older and sicker than the population at large. Those people couldn’t afford to buy coverage previously because insurers were able to charge them far more than younger, healthier people.

In many cases, insurers refused to sell coverage at any price to prospective customers with preexisting conditions. That’s a big reason why the number of uninsured Americans had reached nearly 50 million when Congress passed the reform law.

So it wasn’t the least bit surprising that the first few million who have signed up for coverage since the exchanges opened on Oct. 1 skew older than many expected. People who have been denied coverage for years are far more motivated to get insurance — and fast — than anyone else. There is not the same pent up demand among the young and healthy.

In anticipation of this, drafters of the reform law established a $25 billion risk fund to insulate insurers from big losses during the first three years. Although the risk fund has always been in the law, conservative pundits apparently just became aware of it.

Yes, $25 billion is a lot of money, but it is pocket change compared to the enormous amount of taxpayer dollars that have been flowing to private insurance companies for nearly three decades to keep them in the Medicare Advantage program, which has had the unwavering support of Republicans.

Republicans have long supported efforts to privatize Medicare, and the Medicare Advantage program is one of the ways they’ve tried to do it. Medicare Advantage is billed as a private alternative to traditional Medicare. When Americans reach 65, they can enroll in traditional Medicare or in a private plan operated by an insurer. If they opt for a private plan, the federal government still picks up the tab and transfers money to the private insurer every month.

As the U.S. Government Accountability Office explains it, the Centers for Medicare and Medicaid Services (CMS) adjusts the monthly payments it sends to private insurers to account for each beneficiary’s health status. As part of this risk adjustment process, CMS assigns each Medicare Advantage beneficiary a risk score — “a relative measure of expected health care costs,” as the GAO puts it.

We’re talking a lot of money here. In 2012 alone, the GAO calculated that the federal government spent about $135 billion on the Medicare Advantage program. The problem for taxpayers is that, according to the GAO, the government has been more than generous over the years to private insurers, having paid them way more than it should have because of shortcomings in how the risk scores are developed.

Interestingly, but not surprisingly, there was no mention of that, or any reference at all to the Medicare Advantage program, the biggest champion of which are Republicans, in The Weekly Standard’s “bail-out” story last week. If they are sincere in their alarm that Obamacare might reward private insurers with an extra $25 billion between now and the end of 2016, they should be apoplectic about the ongoing bailout known as the Medicare Advantage program.

 

By: Wendell Potter, The Center for Public Integrity, January 20, 2014

January 21, 2014 - Posted by | Affordable Care Act, Conservatives, Health Care Costs | , , , , , ,

6 Comments »

  1. Reblogged this on GoodOleWoody's Blog and Website.

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    Comment by goodolewoody | January 21, 2014 | Reply

  2. When I became eligible for Medicare, I decided that Medicare Advantage was a GOP plot to destroy Medicare and I declined to sign up for Medicare Advantage.

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    Comment by walthe310 | January 21, 2014 | Reply

    • And you were right!!

      Like

      Comment by raemd95 | January 21, 2014 | Reply

    • walthe310

      So most likely — based on Medicare statistics — you are richer than the average senior and decided to pay thousands of dollars more per year to uphold your principles. That is your right.

      But on average people choosing public Part C Medicare Advantage health plans are poorer and minorities (and/or have special needs). Don’t you think they deserve the same advantages that you get through the private Medigap plan or retiree insurance supplement you have added to your Original fee for service Medicare? Those advantages include things not available on Original fee for service Medicare such as an annual out of pocket spend limit, usually an annual physical and drug coverage, and often vision and dental coverage as well as much lower co-pays and deductibles than Original fee for service Medicare.

      I guess you don’t believe the poor and minorities deserve the same benefits you have or you would not have written what you wrote above. But… Again that is your right to support what is doing to the poor.

      Like

      Comment by Dennis Byron | January 22, 2014 | Reply

  3. Reblogged this on Bell Book Candle.

    Like

    Comment by walthe310 | January 21, 2014 | Reply


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