Quote-of-the-day mailing list
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Subject: qotd: Important! Medicare Advantage rip-off now quantified
Date: Wed, 10 Oct 2012 12:36:21 -0700
From: Don McCanne <email@example.com>
To: Quote-of-the-Day <firstname.lastname@example.org>
International Journal of Health Services (Forthcomimg)
Medicare Overpayments to Private Plans, 1985-2012
Shifting seniors to private plans has already cost Medicare $282.6 billion
By Ida Hellander, M.D., Steffie Woolhandler, M.D., M.P.H., David U.
Previous research has documented Medicare overpayments to the private
Medicare Advantage (MA) plans (also known as Medicare Part C or Medicare
HMOs) that compete with traditional fee-for-service Medicare. This
research has assessed individual categories of overpayment for a single
year, or at most a few years. However, no previous study has calculated
the total Medicare overpayments to private plans since the inception of
the Medicare program.
There are five ways in which private insurers systematically garner
excess Medicare Advantage payments from the Medicare program.
Prior to 2004, the selective enrollment of healthier seniors by private
plans – what we call "old cherry-picking" – was the major source of
excess payments. We conservatively estimate that this old cherry-picking
has added $41 billion to Medicare's costs since 1985. Medicare adopted a
new risk-adjustment scheme in 2004 based on 70 medical diagnoses
("hierarchical condition categories"), but this scheme has not curbed,
and may have increased, private plans' ability to game Medicare's
payment system, albeit with a new strategy: now, plans seek to
selectively enroll patients who have mild versions of the medical
conditions that determine payment. This "new cherry-picking" has added
$122.5 billion to Medicare's costs since 2004.
Congress mandated increased payment to private plans in the 2003
Medicare Modernization Act, adding $84.4 billion to the cost of Medicare
The Affordable Care Act (ACA) mandated a drop in these overpayments, but
a new demonstration project on quality will offset one-third of the
reductions called for by the ACA through 2014.
Another major way that private plans are overpaid is by enrolling
persons who are eligible for Veterans Health Administration (VA)
benefits. The VA has provided $34.8 billion in care to MA enrollees
In total, we find that Medicare has overpaid private insurers by $282.6
billion, or 24.4 percent of all MA payments, since 1985. In 2012 alone,
we find that MA plans are being overpaid by $34.1 billion, or 6.2
percent of total Medicare spending.
In 2012, 13.5 million Medicare beneficiaries are in private plans, 27
percent of total enrollment. Some proposals would push millions more
beneficiaries into private plans (e.g. voucher-type Medicare reform).
Risk adjustment does not and cannot work in the setting of for-profit MA
plans, which have a strong financial incentive, and the data and
ingenuity, to game whatever payment system Medicare devises. It is time
to end Medicare's long experiment with privatization and look toward
proven-effective methods for controlling costs and improving coverage.
PNHP press release (The full article can be accessed through a link
provided in this press release):
Comment: Although we have known all along that the private Medicare
Advantage plans have been ripping off the taxpayers, this study brings
together the data that quantifies the extent to which the taxpayers have
been cheated by the private insurance firms: $282.6 billion!
The full report provides the details. It should be downloaded and read
in full, and then used in your activism. Use the link above to access
the press release (which is also well worth reading), and then use the
link in the press release to download the full report.
The reason that this is so important is that it reveals the dishonesty
behind the efforts to privatize Medicare through "premium support" -
code for vouchers. Telling us that private insurers could provide
equivalent Medicare benefits at a lower cost was the first deception,
now proven false by three decades of experience. Nevertheless, because
of anti-government ideology, legislators moved forward with the Medicare
Advantage plans, deliberately paying them extra in order to draw
beneficiaries into their plans through extra funds for high-profile
marketing while affording them the ability to offer attractive extra
Once enough beneficiaries are drawn into these private plans,
legislators could then begin the gradual process of defunding the
traditional Medicare program. The premium support vouchers would provide
a means to that end. As access in the underfunded traditional program
diminished due to a decline in willing providers, beneficiaries would be
able to use their premium support to move into the "better" plans
offered in the private sector.
The traditional program might survive as a vestigial Medicaid-like
welfare program, but essentially all who could afford it would have
moved into the private plans. The next step? Reduce the value of the
premium support both through attrition and through more nudges and
pushes that the politicians would claim are absolutely essential to help
close the gaping deficit hole.
As many have figured out, a primary purpose of the tax cuts that the
politicians are telling us are essential is to increase the deficit even
more to force other cuts in spending - deficits that "cannot be made up
by tax increases because those taxes would destroy the economy." Closing
the deficit with tax cuts is one of the biggest lies of this campaign.
They want to increase the deficit to force upon us a government
We desperately need single payer - an improved Medicare that covers
everyone. A more urgent task for us to address immediately is to cut the
overpayments in the Medicare Advantage plans before the politicians
shove us into their fraudulent premium support scheme. Check Figure 1 in
the full report that you are downloading. When we had Medicare + Choice
plans, the deception was exposed and you will see that the plans started
dropping out. The rebound of the plans is directly attributable to the
fraud exposed in this report - deliberate overpayment of the private
Medicare Advantage plans.
People keep asking what they can do. This one's easy. Start organizing
protests against this outrageous scheme that has cheated us taxpayers
out of so much. Begin now, or start planning for your own austerity
program when premium support vouchers won't buy you or your children the
health care plan that you need. It's your choice.