Is It Last Call for Medicare Advantage?

Posted March 3, 2009 at 6:31pm

Attempting to make good on campaign promises to curb wasteful spending, President Barack Obama recently ordered deep cuts to a Medicare program favored by the insurance companies, whose criticism of the proposal may be situating the powerful industry for a prime seat at the table when deliberations begin later this week.

In a budget outline released last week, the new president proposed saving $176.6 billion during the next decade by establishing “competitive bidding— for Medicare Advantage, a taxpayer-financed health care program administered by private insurance carriers that is popular with seniors living in rural areas.

“We applaud the president for laying out a broad health care agenda and for laying out the framework needed for health care reform,— America’s Health Insurance Plans spokesman Robert Zirkelbach said this week. “Unfortunately, this budget would ask seniors and Medicare Advantage to fund a disproportionate share of the costs to reform the health care system.—

Originally intended to save taxpayer dollars through competition, the program, by some estimates, now costs as much as 15 percent more than regular Medicare benefits — costs that wind up in carriers’ coffers, critics say. In reference to the federal program, a White House spokesman said Tuesday that “we need a system where taxpayers aren’t having their money wasted.—

Even the AARP, the nation’s largest seniors’ lobby, supports Obama’s proposed cuts. AARP spokesman Jim Dau said the new budget “would require MA plans to compete with each other, which would encourage higher-quality care at lower prices.—

“Private Medicare Advantage plans were created to deliver Medicare benefits for 95 percent of what it costs under traditional Medicare, yet today they cost around 14 percent more,— Dau wrote in an e-mail Tuesday. “This would not only help level the playing field for MA and traditional Medicare — a goal which AARP supports — but also save Medicare billions of dollars that could be used to improve Medicare and our entire healthcare system.”

Despite apparent outrage by the industry, AHIP’s Zirkelbach said the normally aggressive trade association is not preparing a public relations onslaught to salvage the program. Instead, the association plans to reach out directly to lawmakers, undoubtedly those from states and districts with high populations of seniors.

“We continue to share with policymakers the value that Medicare Advantage provides, we’re sharing with them the additional benefits that the Medicare Advantage program has, such as vision, hearing and dental,— he said.

Alissa Fox, a lobbyist with Blue Cross and Blue Shield Association, confirmed that her group is taking a similar approach, saying that “we will be working with the administration and the Congress to explain what this will mean for the 10 million Medicare beneficiaries that currently enjoy benefits.—

“It could mean as much as a 5 percent cut to the payments to Medicare Advantage plans, which translates into premium increases and benefit cutbacks,— Fox said.

A Democratic health care lobbyist, however, said not to believe the hype: The program is dead on arrival — and insurance companies know it. The source speculated that the normally vocal sector is staying relatively quiet on the cuts because “they realize that this is an indefensible subsidy.—

Although the program’s original intent may have been noble, the lobbyist said insurance carriers are now being paid for drugs that they no longer must provide — the Medicare drug benefit takes care of that — and operate in markets without much competition.

“It’s a sweet deal for them,— the lobbyist said. “They literally have a subsidy.—

Perhaps illustrating the lobbyist’s point, even outspoken Medicare Advantage supporter Sen. Chuck Grassley (R-Iowa) these days is hedging on the future of the program. According to spokeswoman Jill Kozeny, “Sen. Grassley supports the general idea of making the system more competitive … we need to make sure it’s done the right way.—

“He’s also interested in making sure that rural America isn’t shortchanged and left without benefits that people in Florida have,— she said.

As one of Medicare Advantage’s last defenders, the insurance industry is merely establishing a point from which to negotiate when talks begin later this week, the Democratic lobbyist speculated.

On Thursday, Obama is expected to formally kick off his push for health care reform, hosting a White House summit that undoubtedly will include insurance interests.

“This is all going to about sharing [the cost] of health care reform and [insurance companies] know they’re going to get a piece taken out of them,— the lobbyist said. “That’s why they fought this hard over the last few years, because if [Medicare Advantage] were already gone, what else would they have to give up?—