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Medicare Private Plan Overpayments: No Bang for the Buck
May 24, 2007 • Volume 7, Issue 21In its ongoing effort to sell the privatization of Medicare, the Bush administration released a report this week claiming that private Medicare plans provide an average of $86 per month in added value to their enrollees.
Reading the report’s fine print, however, reveals that this number includes “overhead” costs—profit and administrative expenses—for delivering these supposed extra benefits, such as dental cleanings or flat copayments for doctor visits.
So, in reality, these private plans provide somewhat less than $86 per month in exchange for the $7.5 billion in overpayments they will receive this year.
Private fee-for-service plans (PFFS), the most expensive, least efficient type of private Medicare plan, only provide about $66 in extra benefits, the Centers for Medicare & Medicaid Services (CMS) admitted in testimony to the House Ways and Means Committee yesterday.
More money in, less money out.
And CMS is barred by law from checking to see whether the enhanced benefits that PFFS plans claim to provide actually add up to the extra money they are paid to provide them. That means a PFFS plan can receive an extra $1,000 in annual payments for enhanced benefits and provide its enrollees just one dental cleaning worth $100. CMS’ Abby Block, director of the Center for Beneficiary Choices, told the committee that this special loophole for PFFS plans might need to be closed.
It took a little more effort, but Block finally admitted that CMS, in fact, has no accounting of whether any private Medicare plan, whether it is an HMO, PPO or PFFS plan, actually provides any additional benefits to their enrollees.
The private plans may look good on paper. What you get after you sign up is a different story.
Take, for example, the plans CMS cited in its recent report as providing good value for people with Medicare in poor health. Four of the five required prior authorization from the plan for services such as hospital admissions, home health care, durable medical equipment like wheelchairs, diagnostic tests, outpatient surgery and doctor visits. Copayments for these services may be relatively low, but only if the plan allows you to receive them. When the plan denies care, your pocketbook or your health—or both—takes a hit.
Finally, it is worth remembering that all people with Medicare, whether or not they sign up for a private plan, pay an extra $24 a year in their Part B premium because of the added costs of these private plans.
When you factor in the higher Part B premiums, the profits and administrative costs of the plans, the costs of care denied and, finally, the higher taxes needed to subsidize the private plans, it doesn’t add up to $86, or even $66, per month. In fact, it doesn’t add up at all.
There is only one equation that makes sense. Payments to private Medicare plans should equal the costs of providing care under Original Medicare.
Medical Record
“I am an elder advocate with an Area Agency on Aging. Even though several Medicare Advantage plans, including four PFFS plans, are listed as plans accepted in our county, that is actually not the case. Once a beneficiary enrolls in one of these Advantage plans, it turns out the providers in this county do not accept the plans. If the beneficiary cannot see a provider in this county, they are forced to leave the county to find providers. Some have to drive 50, 100 and 200 miles to see a provider, or get their prescriptions, because there are no providers in our county who will accept their plan. Many of these elderly people can't drive because they have poor eye sight, dementia, etc. These elderly beneficiaries come to our Area Agency on Aging to get out of these Medicare Advantage plans because the local hospital and their doctors will not accept the plans” (Story submitted to the Medicare Private Health Plan Monitoring Project, Medicare Rights Center, April 30, 2007). For more information on how Medicare private health plans can fall short on people’s needs, see “Too Good to Be True: The Fine Print in Medicare Private Health Plan Benefits.”
“In 2007, MA plan enrollees are receiving an average of $86 in additional benefits monthly. These benefits can include lower cost-sharing, additional benefits beyond the original Medicare benefit package (including enhanced Part D coverage), and Part D and Part B premium reductions” (“Overview of the Medicare Advantage Program,” Medicare Advantage in 2007, Centers for Medicare & Medicaid Services, May 2007).
“In addition to problems finding providers who are willing to treat them, some PFFS enrollees face higher out of pocket costs for services in PFFS plans or find that services that were previously available to them are not covered by their new plan. Some Medicare Advantage plans in general, and PFFS plans in particular, charge greater out of pocket expenses for certain services than the Original Medicare program, such as in-patient hospital stays, skilled nursing facility visits, cost-sharing for drugs covered under Part B, and durable medical equipment” (Testimony of David Lipschutz, California Health Advocates, before the House Committee on Ways and Means Subcommittee on Health, May 22, 2007).
***** The Medicare Rights Center (MRC) would like to hear about your experience, or that of someone you know, enrolled in a private health plan. With information about what the issues are with Medicare Advantage plans, we will be able to demand that those problems be fixed.
Medicare Private Health Plan Monitoring Project
Submit your story at http://www.medicarerights.org/maplanstories.html.
*****
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