Asclepios
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No Friend to the Poor
September 6, 2007 • Volume 7, Issue 35Insurance companies, having proven they can’t save taxpayers money by delivering Medicare benefits, now justify the excessive subsidies they receive by claiming the money—$65 billion over the next five years—funds better benefits for low-income people with Medicare, particularly in minority communities.
That’s the story the insurance lobby is peddling to Congress, which is considering cutting these overpayments in part to expand enrollment programs that directly help the poor by lowering their premiums and copayments for drugs and medical care.
The story has a few holes in it.
First, the insurance lobby has greatly exaggerated the proportion of low-income people with Medicare, and African Americans and Latinos in particular, that supposedly benefit from Medicare private health plans. Far more poor people with Medicare benefit from Medicaid, which pays all their cost sharing for medical services.
Second, the story fails to mention the sizable portion of overpayments that goes directly to the companies’ bottom line. The explosion in enrollment in Medicare private health plans is the principal cause of expanding profit margins in major insurers like Humana and UnitedHealthcare.
Third, many Medicare private health plans charge more for hospital stays, home health care, chemotherapy and other vital services than Original Medicare. Poor folks who enroll in these plans are the least able to afford these services.
Finally, the payment system for Medicare private health plans, which sets rates by county, does not target subsidies toward communities where the most low-income people with Medicare live. As a result, once the subsidies are funneled through the insurance companies, poor older adults and people with disabilities can pay higher premiums for the same plan than their wealthier neighbors. Some companies sell different plans in different counties, charging enrollees in impoverished, predominantly minority communities more for hospital care or other services than they charge in affluent suburbs in the same state.
This skewed payment system means that residents of the wealthy Virginia suburbs of Washington, DC, where many insurance company lobbyists live, or Palm Springs, California, where they retire, pay half as much for the same Medicare private plan as someone scraping by in an Appalachian holler in Southwest Virginia. Similar disparities in Utah, California, Ohio and Colorado are detailed in a report released today by the Medicare Rights Center.
That report also demonstrates that a more efficient, targeted and fair way to help low-income people with Medicare is to expand the Medicare Savings Programs. These programs directly help the poorest older adults and people with disabilities, helping to pay Medicare premiums and coinsurance for medical care and automatically qualify enrollees for Extra Help with their drug costs. Unfortunately, a retired couple getting by on as little as $1,600 a month does not qualify for these programs. An individual who accumulated just $4,000 in savings over a lifetime is also ineligible in most states.
The Children’s Health and Medicare Protection (CHAMP) Act, which recently passed the House, would raise those limits, paying for it by reducing the overpayments to insurance companies. It is up to the Senate now to adopt these important reforms when the two chambers reconcile their bills reauthorizing the State Children’s Health Insurance Program.
Please write and urge your senator to support the vital improvements to Medicare in the CHAMP Act.
Medical Record
“Private plans were brought into the Medicare program with the promise that they would reduce costs by injecting competition into the program. Instead they have consistently been proven to cost more than Original Medicare. As a result, the insurance companies offering Medicare Advantage plans have settled on a new argument to justify continued overpayments—the extra benefits that overpayments fund for plan members with low incomes, particularly African Americans and Latinos. This after-the-fact rationalization, however, is contradicted by the very payment structure it was designed to protect” (“Medicare Private Health Plans vs. Medicare Savings Programs: Which Is the Better Way to Help People with Low Incomes Afford Health Care?” Medicare Rights Center, September 2007).
“Claims that low-income and minority Medicare beneficiaries rely heavily and disproportionately on private plans for supplemental coverage are not valid.… Nor does the claim that low-income and minority communities would be particularly hurt by reining in the Medicare overpayments stand up under scrutiny. Millions of minority beneficiaries who are not enrolled in the private plans are forced to pay higher Medicare premiums every month to subsidize the large overpayments the private plans receive…. Some of the savings from curbing the overpayments could be used to provide substantial, targeted help to low-income and minority individuals…” (“Low-Income and Minority Beneficiaries Do Not Rely Disproportionately on Medicare Advantage Plans: Industry Campaign to Protect Billions in Overpayments Rests on Distortions,” Edwin Park and Robert Greenstein, Center on Budget and Policy Priorities, April 12, 2007).
“It is difficult to detect any meaningful benefits either to patients or to rural communities that is derived from these enormous government subsidies. In fact, there is mounting evidence that PFFS plans are luring their enrollees with false promises, skimping on benefits and reimbursement rates, and using their government subsidies primarily to increase profits for their shareholders” (“Statement by the American Medical Association to the U.S. House of Representatives Subcommittee on Health,” 2007).
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Medicare Part D Monitoring Project
The Medicare Rights Center (MRC) would like to hear about your experience, or that of someone you know, enrolled in a Medicare private drug plan. With information about what the issues are with Medicare Part D, we will be able to demand that those problems be fixed.
Submit your story at http://www.medicarerights.org/partdstories.html.
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The Louder Our Voice, the Stronger Our Message
Asclepios—named for the Greek and Roman god of medicine who, acclaimed for his healing abilities, was at one point the most worshipped god in Greece—is a weekly e-newsletter designed to keep you up-to-date with Medicare program and policy issues, and advance advocacy strategies to address them. Please help build awareness of key Medicare consumer issues by forwarding this action alert to your friends and encouraging them to subscribe today.
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The Medicare Rights Center (MRC) is the largest independent source of Medicare information and assistance in the United States. Founded in 1989, MRC helps older adults and people with disabilities get good, affordable health care.
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