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The Fix We're In
December 6, 2007 • Volume 7, Issue 47On Tuesday, the Secretary of Health and Human Services Michael Leavitt warned senators drafting a Medicare bill that the president would veto any legislation that cut overpayments to Medicare private health plans, so-called “Medicare Advantage” plans.
In order to fund legislation that would avert a scheduled 10 percent cut in payment rates to doctors under Original Medicare, the Senate Finance Committee has been considering modest reductions in the excess subsidies the insurance companies receive for sponsoring Medicare Advantage plans. These companies are grossly overpaid—roughly $1,000 more per enrollee than it costs to care for the same person under Original Medicare.
That adds up to more than $54 billion over the next five years. Taking away just a fraction of those excess subsidies is the most sensible—in fact, the only fiscally responsible—way of paying to keep doctors payments steady and for other important Medicare reforms. That is why Iowa Senator Charles Grassley, the top Republican on the Finance Committee, told reporters that the veto threat showed the administration did not care whether doctors received a 10 percent pay cut next year.
Every year, for the last five years, President Bush has signed legislation that headed off a series of Medicare payment cuts to doctors scheduled to take effect under a flawed payment formula written into law. Why is it that this year the administration is raising new obstacles to passing this legislation?
Many analysts believe it is pure partisan politics: The Democrats are running Congress this year, and the administration is gambling that Congress will be held responsible for failing to prevent a Medicare cut for doctors. It looks like the president is using the same partisan play book that he used for children's health insurance legislation: Veto the bill and blame the Democrats.
If the administration succeeds with this strategy, the impact will be much greater than a shift in the polls. A 10 percent rate cut will likely make it difficult financially for many doctors to accept new Medicare patients and even to continue treating the ones they now serve. That would undermine one of the principal reasons for Medicare's popularity—a free choice of doctors. That change will push more people into Medicare private health plans that, through the privatized drug benefit, aggressive marketing and the too-often false promise of extra benefits, have already seen a surge in enrollment.
Original Medicare will start to “wither on the vine,” in the prophetic words of Republican strategist Newt Gingrich, while the ballooning payments to insurance companies push Medicare ever closer to the brink of insolvency.
Medicare is threatened with “a very clear and imminent risk from this overpayment that will put this country in an untenable position,” Glenn Hackbarth, the chairman of the nonpartisan Medicare Payment Advisory Commission, warned Congress in March.
Will Congress heed this warning? Please write to your senators and representatives and ask them to stand for older American and people with disabilities: Cut the excess subsidies Medicare pays to insurance companies and override a presidential veto if it comes.
Medical Record
“The National Committee to Preserve Social Security and Medicare (NCPSSM), joined by the Alliance for Retired Americans, delivered 48,000 petitions today signed by National Committee members throughout the nation asking the Senate to eliminate or reduce billions in insurance industry subsidies to private Medicare providers and to strengthen the traditional Medicare program” (“Seniors Nationwide Urge Senate to Reform Medicare Advantage, USA,” Medical News Today, December 6, 2007).
“‘Given the aging of the baby boomers, [Medicare] will be a growth opportunity for many years to come,’ Humana’s chief executive, Mike McAllister, told analysts recently . . . And Humana is transforming itself into a big-time government contractor. It will get almost three-fourths of its projected $1.28 billion in pretax profit this year from Medicare, mainly from the Advantage program, according to analysts” (“Two Insurers Increase Bet on Medicare,” New York Times, December 5, 2007).
“The overpayments will total $54 billion over the next five years and $149 billion over ten years, according to CBO. That puts an added strain on Medicare, moving up by two years (from 2021 to 2019) the date when its trust fund will become insolvent, according to the chief actuary at the Centers for Medicare and Medicaid Services (CMS). It also means restoring solvency will require much larger benefit cuts and/or tax increases than would otherwise be needed; as MedPAC chairman Glenn Hackbarth warned Congress, Medicare faces ‘a very clear and imminent risk from this overpayment that will put this country in an untenable position.’ Similarly, CBO director Peter Orszag has testified that if current trends in Medicare Advantage continue, ‘the result would be a fundamental change in the nature of the Medicare system that may then be hard to reverse’” (“Curbing Medicare Advantage Overpayments Would Strengthen Medicare,” Center on Budget and Policy Priorities, December 5, 2007).
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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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