Friday, January 4, 2013

Fwd: qotd: Uwe Reinhardt explains the complexities in pricing of Medicare Advantage plans

Quote-of-the-day mailing list

-------- Original Message --------
Subject: qotd: Uwe Reinhardt explains the complexities in pricing of
Medicare Advantage plans
Date: Fri, 4 Jan 2013 10:04:49 -0800
From: Don McCanne <>
To: Quote-of-the-Day <>

The New York Times
January 4, 2013
The Complexities of Comparing Medicare Choices
By Uwe E. Reinhardt

The roughly 50 million Americans covered by the federal Medicare program
have a choice of receiving their benefits under the traditional,
free-choice, fee-for-service Medicare program or from a private,
managed-care Medicare Advantage plan. The private plans have a steadily
increasing number of enrollees — currently 13 million, or 27 percent of

A fundamental question that has engaged health-policy researchers and
commentators for some time is whether coverage of Medicare's standard
benefit package under Medicare Advantage plans is cheaper or more
expensive than it is under traditional fee-for-service Medicare.

The answer is yes.

At the risk of going over ground already covered in Economix and in the
scholarly literature on the subject, this answer may warrant some

(At this point, Professor Reinhardt provides an excellent explanation,
with numerous helpful links, of the complexities in pricing of the
Medicare Advantage plans. If you wish to understand this topic better,
and understand why his answer is "yes," the full article is well worth
reading. DMc))

NYT Reader Comments:

Don McCanne
San Juan Capistrano, CA

The only correct "yes" is that Medicare Advantage plans are more
expensive. The extra cost is invisible to beneficiaries because it is
borne by taxpayers. The plans can be considered less expensive only if
you believe that it is fair for taxpayers to provide the private plans
with extra funds for their ability to cheat through well documented
favorable selection (HSR DOI: 10.1111/1475-6773.12006) and the gaming of
risk adjustment (GAO 12-51, Jan 12, 2012 and NBER Working Paper No. 16977).

While we're at it, we should also mention the profound administrative
waste of not only the Medicare Advantage plans but also the private
Medigap plans (the latter paid by excessive premiums), and the
administrative burden that they place on the health care delivery system.

Congress should stop wasting our public funds in these efforts to push
us into private plans. If they took the same public and private funds
already being spent and used those to improve the benefits of the
traditional Medicare program (especially reducing cost sharing and
capping out-of-pocket spending), then we would have an even better
Medicare program. In fact, it could become the basis of the Improved
Medicare for All that many of us long for but has remained elusive to a
large extent because of the elevated stature that the private insurance
industry holds in the Halls of Congress.

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