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Republicans for Waste and Abuse in Medicare

The emerging Republican attack on health-care reform is that Democrats are going to cut your Medicare. If imitation is the highest form of flattery, Democrats must be feeling pretty flattered right now.

But is it true? Sort of. At issue are payments to the Medicare Advantage program. Medicare Advantage is a Medicare carve-out that allows private insurers to offer plans for seniors. The original vision for the program was simple enough: Private competition will drive costs down. The private market, as you may have heard, is more efficient and effective and adaptable. No reason seniors shouldn't benefit from that ingenuity. So Medicare would give private insurers the money it would spend on a beneficiary, and the private insurers could try to do a better job with it.

Medicare Advantage, however, failed in its mission: prices shot up. Private insurers complained that they couldn't compete with Medicare for the same amount of money Medicare spends. So Republicans systematically increased reimbursement rates, and now Medicare has to pay the average private plan 114 percent what it would've spent to cover that beneficiary itself. That's helped the private plans provide better service (as you would expect), and now 23 percent of seniors are in an Advantage plan.

Democrats don't want to eliminate the Medicare Advantage program. But they want it to live within the same budget that Medicare uses. Republicans argue that pulling back these payments will force some Medicare Advantage plans to trim their benefits. That may well be true. But it is an argument against ever eliminating government overpayments to any program. It is an argument, in other words, for waste and abuse.

It is also an interesting moment of insight into the conservative philosophy on these matters. The problem with government programs, we're often told, is that they are expensive and wasteful, and the private market could do better. But faced with an instance where the government program proved relatively lean and efficient, and the private market expensive and wasteful, Republicans have mounted a ferocious defense of the market's right to continue burning through taxpayer dollars.

By Ezra Klein  |  September 24, 2009; 10:09 AM ET
Categories:  Health Reform  
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Well Ezra, what you say is correct, but there is much more to the Medicare Advantage story. Until 2004, the gov't didn't pay Medicare Adv. plans any subsidies. But, subsidies were added in 2004, in part to encourage health plans to enter rural areas, such as the home states of Senators Baucus and Grassley. So it's not quite as simple as R's vs D's, as you say. Plenty of rural Dem Senators wanted these subsidies.

Posted by: mbp3 | September 24, 2009 10:30 AM | Report abuse

Republicans are for socialism as long as it's corporate socialism.

Posted by: SteveCA1 | September 24, 2009 10:31 AM | Report abuse

"Democrats don't want to eliminate the Medicare Advantage program. But they want it to live within the same budget that Medicare uses. Republicans argue that pulling back these payments will force some Medicare Advantage plans to trim their benefits."

A full assessment would point out that the Medicare Advantage plans frequently offer more benefits than Medicare. One of the most cited benefits that is unique to Medicare Advantage plans-- chronic care management-- is being touted by Democrats as a potentially long-term cost saving option and are putting dollars into the plan to initiate these programs.

Posted by: wisewon | September 24, 2009 10:32 AM | Report abuse

And what mbp3 said.

Posted by: wisewon | September 24, 2009 10:33 AM | Report abuse

This is why I am convinced that our politicians are completely incapable of holding down the costs on government healthcare longterm. Neither side can resist the urge to attack the other side even when reasonable cost saving measures are proposed. There is no incentive for politicians to be the one to hold the line.

Posted by: spotatl | September 24, 2009 10:39 AM | Report abuse

"That's helped the private plans provide better service .... Republicans argue that pulling back these payments will force some Medicare Advantage plans to trim their benefits.... It is an argument, in other words, for waste and abuse."

I really don't know much about this subject, and so will say nothing about the merits of cutting or not cutting Medicare Advantage.

However, I would like to point out that in your urge to be cute you were inconsistent and silly. "Better service" equals "waste and abuse"?

Posted by: ostap666 | September 24, 2009 10:39 AM | Report abuse

It's cute, isn't it, how the politics of collectivism corrupts everyone who spends much time around it.

It's even cuter, though, how stalwart collectivists can stand, point, and cry, "hypocrite" at those newly won to the collectivist standard.

Posted by: msoja | September 24, 2009 10:55 AM | Report abuse

See, I think this is an actual debate worth having about HCR instead of all that Glenn Beck BS. I'm not wholly convinced stripping Medicare Advantage to the bone is the way to go. Yes, it's 14% more than Medicare, but as wisewon says, there are added benefits (at times) and though early studies aren't showing a dramatic difference in outcomes, it's still pretty early and a lot of dust is still settling around what the impact of the MIPPA legislation will be (many parts going live in 2010), the expansion of PFFS, and so on.

So again, this is the sort of thing I wish we began debating 4 months ago. It's a legitimate uncertainty worth taking the time to talk about.

Posted by: ThomasEN | September 24, 2009 11:00 AM | Report abuse

--"[T]his is the sort of thing I wish we began debating 4 months ago."--

Collectivism was just as immoral then as it is now.

Posted by: msoja | September 24, 2009 11:14 AM | Report abuse

its funny how Ezra is turning this around against the Republicans. He's being more fair than most left wing bloggers I'd suspect but not as much as he should. They put forth an ammendment yesterday that would have forced the savings in Medicare to STAY in Medicare to shore up the trust fund that's being depleted due to over-utilization and fraud and abuse as he states. Instead the Democrats want it spread throughout the system. Is it Political, sure it is. Is it right, well I guess it depends on your perspective.

Oh and the truth of it is that Republican's just want to be able to campaign in 2010 on the fact that Democrats took money from seniors and spread it throughout the system. Is it true, Yup. Is it right, no.

Posted by: visionbrkr | September 24, 2009 11:25 AM | Report abuse


we've all been scheming with ACORN and the czars in our shadow government to bring about the Glorious People's Health Ministry. You can't stop us! No one can!

Posted by: ThomasEN | September 24, 2009 11:28 AM | Report abuse

As a footnote to mpb3's comments above,the problem, particularly in rural areas, is that as Advantage plans pull back to the urban areas, as most of them had done before they started receiving the large subsidies in 2004, millions of people have no way to get supplemental coverage other than buying a Medigap policy. But many of them cannot afford these unsubsidized policies, which are usually sold by the same insurers that sponsor the Advantage plans. So, these individuals are left with no affordable options for supplemental coverage. The Advantage plans, on other hand, are affordable options, since more than 90% of these plans have no premiums. Without some type of supplemental coverage, if an individual on Medicare falls and breaks her hip, say, she will have to pay 20% of the doctor's bill and other outpatient costs, plus more than a $1,000 if she has an overnight stay in a hospital. There are millions of these individuals who do not qualify for Medicaid and cannot afford Medigap policies. Without supplemental coverage they are exposed to substantial risk as well as incentives not to see their physicians even when they are ill.

Posted by: wdarmes | September 24, 2009 11:59 AM | Report abuse

Was the original vision really to drive costs down, or was a back-door attempt to privatize medicare? It must drive Wall Street crazy to see all this money in medicare and social security with no middleman to scim some off the top. Med-A to subsidize private insurance, Med-D to subsidize drug co.s, but they missed the mark with efforts to privatize SS.Free markets are only free for those big enough to dominate the market.

Posted by: oldblevins | September 24, 2009 12:10 PM | Report abuse

First, shouldn't it be a truism to state that if you pay more, you get more? Advantage costs more and some beneficiaries get more. So? That would be true under regular Medicare FFS too.

Let me add some comments from MedPac staff about Advantage plans:

“Private plan participation in Medicare was originally intended as a way to achieve efficiency through care coordination and other innovations in the delivery of care… Over time, however, this original vision of the potential of private plans has been compromised and ultimately undermined by successive payment increases to plans. Payment increases have been so large that plans no longer need to be efficient to attract enrollees. The result is that, on average, Medicare pays far more for each beneficiary who opts for an MA plan than it would if they stayed in FFS. In addition to promoting inefficiency in MA, this misalignment increases the burden on taxpayers and beneficiaries, who must pay higher Part B premiums, whether they are in managed care plans or not.”

MedPac is particularly concerned with Private FFS plans which add no value at higher costs. I have heard more than once about deceptive practices used to get seniors to sign up for these plans.

Posted by: steveh46 | September 24, 2009 12:20 PM | Report abuse

If one were sincere about discussing health care reform, I should think that HR 3400 would enter the discussion. In a "pros and cons" analysis about how to actually help people get affordable care, I think it far outshines both HR 3200 "Obamacare" and the Baucus Senate bill. You do not read, however, much about HR 3400. Why?

Posted by: MKS1 | September 24, 2009 3:22 PM | Report abuse

I would look at HR 3400 except it was posted on a site that doesn't allow viewing by minority OSs. Nice "open government", there, as long as you don't support open source. lol

Posted by: zosima | September 24, 2009 4:14 PM | Report abuse

Medicare Advantage does use private insurers. But so does supplemental insurance or "gap" insurance that AARP and others offer. All use private insurers as intermediaries, and in fact "bare" Medicare is administered in a variety of regions in the U.S. via Private insurers. So please don't make the accusation that MA somehow is the pawn of private insurance companies while AARP's supplemental gap insurance to plain old Medicare is not. AARP's supplemental plans are administered by UNITED HEALTHCARE!! Very few people nowadays go bare and just have Medicare alone.

Posted by: LindaB1 | September 24, 2009 9:12 PM | Report abuse

"I should think that HR 3400 would enter the discussion."

Since HR3400 bans using comparative effectiveness studies to "deny coverage of an item or service under a Federal health care program" does that mean Medicare will start paying for Laetrile treatments for cancer?

Posted by: steveh46 | September 25, 2009 11:30 AM | Report abuse

Make no mistake about it, we have a health care crisis. But few people realize why, and that our politicians want to cover it up. They are the source. It isn't because of ideology or political philosophy or party; it's because America has this thing called campaign contributions. Cash bribes for favors returned. The public wants health care reform and the insurance industry wants exactly the opposite, and they gave $46 million in campaign cash and the public gave peanuts. Who do you think is going to win?

Yes, it's political corruption by both political parties, and it affects all Americans and now all countries. Health care is only a small part of it. Because the bankers gave loads of cash, congress in the 1990's started eliminating banking regulations and caused an international crisis. Big corporations gave cash for a hands-off immigration policy, and then availed themselves of cheap labor. What jobs weren't taken by immigrants were outsourced. Businesses gave campaign cash that stifled any attempt to limit outsourcing of jobs, and our nation's economy trashed in the process. Money that should be spent on children's schooling and health, and on police and fire protection, is spent instead on special interest giveaways.

No, our corrupt political system is the cancer, our politicians are tickled pink, and we Americans must apologize to the world.

Jack Lohman

Posted by: jlohman | September 25, 2009 1:16 PM | Report abuse

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