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Which Side Are You On?
December 13, 2007 • Volume 7, Issue 48Humana and UnitedHealth, two of the largest sponsors of Medicare private health plans, each will make around $1 billion in profit from their Medicare business this year.
It's a lucrative business line—Medicare pays them on average 12 percent more for each enrollee in a Medicare private health plan than it costs to cover the same person under Original Medicare. Insurers' newest Medicare product—private fee-for-service plans that promise, but don't deliver, access to any doctor who takes Medicare—cost on average 19 percent more than Original Medicare. These excessive subsidies make companies like Humana and UnitedHealth highly profitable, but investment analysts believe insurers in the Medicare business could absorb about $15 billion in cuts without undermining their profit potential.
In fact, Congress is now considering cuts of about $15 billion to the extra payments to Medicare private health plans. That is less than one-quarter of the projected overpayments to insurance companies and about 2.5 percent of total spending on the “Medicare Advantage” program over the next five years.
The money would be used to give doctors a pay increase of half of 1 percent next year (instead of the 10 percent cut scheduled to take effect) and to make important improvements to programs that provide financial assistance for people with Medicare living below, or just over, the poverty line ($851 a month for an individual). These improvements would allow hundreds of thousands of low-income people with Medicare to receive drug coverage through the doughnut hole—the gap in the Part D benefit—even if they have modest nest eggs saved for their retirement. Programs that help poor people pay for their medical costs and Part B premiums would be updated for the first time in over a decade, and the Social Security Administration and state governments would coordinate efforts on outreach and enrollment.
These proposals have broad support in Congress. But the Bush administration is threatening to veto the bill. It refuses to accept even modest reductions in the profit margins of the insurance middlemen. Most members of Congress are willing to vote for the plan anyway. But some lawmakers are siding with the Bush administration and the insurance companies, and against older adults and people with disabilities struggling to pay their health and prescription drug bills.
Medical Record
“Certainly there is a lot of money to be made from Medicare Advantage. If the program goes unchanged, government spending on it is projected to exceed $100 billion annually by 2009. Under Medicare Advantage, the insurer provides coverage through a network of doctors, and the government pays the insurer a flat annual fee per enrollee. That federal payment varies from county to county, but it averages about $9,000 per enrollee nationwide” (“Two Insurers Increase Bet on Medicare,” New York Times, December 5, 2007).
“AARP believes in choice, and MA can be an important option for many Medicare enrollees. In fact, next year AARP will endorse a managed care plan offered by United Health Care. But the current unnecessary level of excess MA payments is costing Medicare—and taxpayers—too much. Plans should compete on performance and quality, not on the basis of excess payments from the federal government. Furthermore, it is unfair that the 80 percent of beneficiaries who choose to remain in traditional Medicare continue to pay higher premiums each month to subsidize these excess payments” (Letter from AARP Chief Executive Officer William Novelli to Health and Human Services Secretary Michael Leavitt, “AARP Baffled by Administration’s Medicare Inconsistencies,” AARP News Release, December 7, 2007).
“I'm a 60-year-old widow who has been on disability for five years. Each year since Part D began, I have fallen into the coverage gap (doughnut hole) and I have to reduce my meds. My doctor has been able to give me some samples, but this doesn't cover all my meds. I have to do without an inhaler because she doesn't carry samples for it. When the first of the year comes around, I'll be able to get all my meds, but it will still be a challenge, since my Part D plan only covers generic brands. I take three brand-name meds that cost $90-$100 per month. With monthly expenses—home upkeep, taxes and utilities, it is very hard. When do I get a BREAK?” (Story submitted to the Part D Monitoring Project, Medicare Rights Center, November 30, 2007)
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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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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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