BusinessThe Economy Hub

New evidence that Medicare Advantage is an insurance industry scam

MedicarePoliticsInsuranceArts and CultureAffordable Care Act (Obamacare)Republican Party

A big part of the argument made by enemies of the Affordable Care Act that the Act is hurting Medicare applies to a category of health plan known as Medicare Advantage. New evidence has just come in showing that Medicare Advantage is a ripoff that fattens the health insurance industry while scarcely helping its enrollees, all at public expense.

Medicare Advantage plans differ from traditional Medicare by offering its enrollees ostensibly better care and sometimes broader services--free eyeglasses, even gym memberships--in return for reimbursements from the government that are 14% higher than traditional Medicare reimbursements, or more. And yes, the Affordable Care Act aims to pare the government's reimbursements for Advantage plans by a total of about $200 billion over 10 years.

These plans cover more than 15 million seniors, or about 30% of all Medicare members, so it's unsurprising that Republicans are playing the cuts for all they're worth. "Democrats are about to awake and provoke a political giant -- senior citizens," wrote a spokesman for the National Republican Senatorial Committee in February. (Several Democratic senators up for reelection obligingly, and cravenly, called for this year's Advantage reimbursement cuts to be suspended.)

Critics have long argued that the extra reimbursements for Advantage plans are a waste of money, just a handout to the insurance industry. A new paper by three Wharton School economists gives the critics powerful new ammunition

The authors, Marc Duggan, Amanda Starc, and Boris Vabson, found that only about one-fifth of the extra reimbursement gets passed through to patients in the form of lower premiums, better care or more services. Where does the money go? Insurers pocket much of it as pure profit. Some they spend on advertising--to attract more Advantage members, so they can claim more of the enhanced reimbursement, which they use to advertise to get more members...you can get dizzy following this daisy chain.

The study used data from the government's Centers for Medicare and Medicaid Services, which oversees those health programs, covering Medicare plan types, enrollee composition, pan quality measures, spending levels, and other quality measurements in more than 3,000 counties, then tracked changes in those measures as reimbursements changed. 

The Wharton findings about how little of the Advantage reimbursements help enrollees are just devastating. The authors looked extremely hard for evidence that higher reimbursements showed up in more positives for patients. Here's how that turned out:

Are higher payments to the insurers associated with fewer restrictions on care or better outcomes? "No evidence of a significant relationship."

More intensive treatments? "No significant association."

Any change in the health profile of members? No "evidence of changes."

More access to specialists? More doctor visits? Better mental health status? "No evidence of a significant relationship."

The researchers tested the conjecture that these indicators might not have budged because the Advantage plans were attracting members in poorer health or more medically challenging demographics, therefore the improvements in services to most of the enrollees were harder to find because of the poorer health of the new members.

But no. "No evidence of changes" in selection or enrollee composition.

The new findings track very closely to previous studies of Medicare Advantage. A study by Austin Frakt of Boston University and colleagues placed the pass-through to patients even lower, at 14 cents of every dollar of additional reimbursement. The National Committee to Preserve Social Security and Medicare pointed the finger at unethical marketing of Advantage plans by insurers, and also debunked the industry's claim--cynically repeated by the GOP anti-ACA lobby--that cuts in Advantage reimbursements would fall hardest on low-income seniors.

You shouldn't be surprised that the health insurance industry is leading the charge against Advantage cuts, terming them "devastating for seniors." Devastating to the insurers' bottom lines, they mean to say. It's important to remember that the money comes from premiums paid by non-Advantage enrollees in Medicare, and from taxpayers. 

Republicans love to portray themselves as guardians of the public purse. Yet here they are, lining up to protect one of the most wasteful claims on government resources of all. What could account for that?

Reach me at @hiltzikm on Twitter, Facebook, Google+ or by email. MORE FROM MICHAEL HILTZIK

Obamacare success stories you haven't read

The toll of the anti-vaccination movement, in one scary map

Net neutrality is dead. Bow to Comcast and Verizon, your overlords

Copyright © 2014, Los Angeles Times
Comments
Loading