If it is hard to argue an indefensible proposition, the Bush administration is showing no obvious signs of distress. It continues to vow that it will go to the mat to protect the Medicare Advantage program, even in the face of overwhelming evidence that it mainly serves the needs of shareholders and health insurance executives, at a breathtaking cost to taxpayers.
In another era this would have astounded conservatives, who prized fiscal restraint over everything else. This White House has made a religion out of the concept of privatizing Medicare and rewarding its business cronies.
As of this writing, it seems that some House Democrats are signaling retreat on using major cuts in this managed-care boondoggle to finance an array of changes to the Medicare program, part of their broader plan to extend the State Childrens Health Insurance Program. As we have argued, this retreat is not a bad thingfor now. Better to send Bush a clean SCHIP billfinanced by an increase in tobacco taxes and backed by a bipartisan, veto-proof majoritythan to see a veto sustained, harming children in the process.
But down the road, probably when there is a different balance of power in Washington, scrapping Medicare Advantage will be to the advantage of almost everyone. In 2003, we were sold a bill of goods on how handing some extra money to insurers in the short term would produce long-term savings to the program, while allowing insurers to deliver more services at lower premiums.
A new analysis by the Congressional Budget Office gives the lie to that notion. It shows that the Medicare Advantage payment structure would preclude any such savings unless insurers can deliver services at half the cost of fee-for-service Medicare. In the dry language of CBO Director Peter Orszag, such an outcome is implausible.
Instead, the CBO projects that extra payments to Medicare Advantage would amount to $150 billion over the next decade.
For this, what do we get? An American Medical Association survey found that more than half of physicians said their Medicare Advantage patients had been denied coverage of services that fee-for-service Medicare routinely picks up. The Medicare Rights Center finds that access to needed care is often hindered by overly strict rules on pre-authorization by the private plans. A Kaiser Family Foundation report found that seniors in poor health may be charged more for coverage. Medicare Advantage fee-for-service planswhich are the fastest-growing segment of the program and receive the highest rate of extra paymentsdont provide care coordination, often charge higher copayments and dont offer much in the way of extra benefits.
The CMS admits it has failed to keep track of extra benefits offered to beneficiaries and, according to a recent report from the Government Accountability Office, it also has failed to adequately keep track of much of anything else. The CMS is required each year to audit one-third of Medicare Advantage plans to see if they are providing the benefits they say they are, but the GAO found the percentage of plans audited has been going down sharply, to just 14% in 2006.
In one year of audits they performed, the CMS identified about $34 million in government payouts that could have been used by the plans to provide extra benefits to beneficiaries. And that was in 2003, before the huge additional payments mandated by the Medicare Modernization Act of 2003. The CMS told the GAO it had no plans to pursue financial recoveries because the agency lacked authority to do so. The GAO said the law clearly spells out such power.
One could joke that maybe the CMS could privatize its enforcement activity, but with $77 billion being wasted on the program this year alone, it is no laughing matter.