SUBMITTED NEWS RELEASE
WASHINGTON, D.C.—Nevada Senator Harry Reid released the following statement this afternoon in reaction to Senator Hatch’s proposed amendment to The Patient Protection and Affordable Care Act. The Hatch amendment would restore $120 billion of wasteful spending to the Medicare Advantage program:
“Senate Democrats want to fix Medicare Advantage and make sure that more money from that program goes to seniors’ benefits and less to insurance companies. It is unfortunate that Senate Republicans will not join with us to fix the inequities in Medicare Advantage. Their amendment is an early Christmas gift to insurers and a cold shoulder to our seniors.
“Senate Democrats will continue to show the American people that we’re serious about making reform work in a fiscally responsible way that puts money toward care instead of profit.”
Medicare Advantage lines the pockets of insurance companies
Medicare Advantage is Run by Private Insurance Companies. Medicare Advantage plans are run by private insurers who receive a monthly payment from Medicare to provide covered health benefits to Medicare-eligible individuals. This means that seniors participating in Medicare Advantage have left the traditional fee-for-service Medicare program. [CRS, 3/3/09]
- GAO: In One Year, Private Medicare Advantage Plans Reaped Over $1 Billion in Extra Profits. In a recent report, the GAO found that private insurers that participate in Medicare Advantage spent less on beneficiaries than they projected in 2005. This lower spending created a windfall profit for these plans of over $1 billion. These additional profits were on top of the $35 billion in revenues these plans generated in the same year. Medicare Advantage plans are supposed to use the additional payments they receive from the government to provide their beneficiaries extra benefits; instead, too much of this money is going, not to seniors, but to big insurance company profits. [GAO, 6/24/08]
Medicare Advantage Costs More Than Traditional Medicare. The Medicare Payment Advisory Commission (MedPAC) found that in 2009, payments to private Medicare Advantage plans are 14 percent higher than the cost of insuring a beneficiary in traditional Medicare. That’s an increase from 2008, when private insurers received a 13 percent overpayment. Payments to Medicare Advantage plans are projected to cost $110 billion this year. MedPAC estimates that Medicare pays $12 billion more to provide Medicare beneficiaries with covered health benefits than it would cost to cover them in traditional Medicare and notes, “The Congressional Budget Office estimates the additional 10-year cost at more than $150 billion.” [MedPAC, 3/09; MedPAC, 6/09]
- Medicare Advantage Has Increased Medicare Spending. The Government Accountability Office found that Medicare Advantage “health plans were originally envisioned in the 1980s as a potential source of Medicare savings, such plans have generally increased program spending.” [GAO, 2/08]
Medicare is Closer to Bankruptcy Because of Medicare Advantage Overpayments. These overpayments bring Medicare closer to bankruptcy. The Center for Medicare and Medicaid Services estimates that Medicare Advantage overpayments will reduce the period of time the Medicare Trust Fund is solvent by 17 months. [Center on Budget and Policy Priorities, 9/14/09]
All Medicare Beneficiaries and All Taxpayers Pay a Hidden Tax to Private Insurance Companies Running Medicare Advantage. The Chief Actuary at the Centers for Medicare and Medicaid Services (CMS) found that overpayments increase premiums for beneficiaries in traditional Medicare by more than $86 per year per couple. In addition to overpayments, CMS reports that Medicare Advantage plans had an improper payment rate of 10.6 percent, or $6.8 billion in 2006. [Center on Budget and Policy Priorities, 9/14/09; CMS, 11/17/08]
- Medicare Advantage Can’t Deliver for Seniors Without “Massive Government Subsidies.” As Barbara Kennelly, President and CEO of the National Committee to Preserve Social Security and Medicare, recently wrote, “For decades the insurance industry has told Congress it could provide better health care for seniors while saving Medicare money. However, it has never happened…Privatized Medicare cannot deliver on its promise because without massive government subsidies to boost profits, the industry inevitably loses interest in providing coverage for America’s elderly.” [HuffingtonPost.com, 9/28/09]
AARP: “Up to the Insurance Companies” to Manage Reduction in Overpayments, “Entirely Within Their Realm to…Deliver Medicare Benefits at the Same Level They Do Now.” David Sloane, AARP senior vice president for government relations, recently stated that Medicare Advantage enrollees could easily see no change in benefits under competitive bidding. In responding to subsidy reductions likely to occur under competitive bidding, Sloane said, “It’s up to the insurance companies to decide how they want to manage. We believe it’s entirely within their realm to continue to deliver Medicare benefits at the same level they do now.” [Washington Post, 9/28/09]
Health insurance reform creates a market for seniors’ business
Health Insurance Reform Creates Competitive Bidding to Reduce Substantial Overpayments to Private Insurance Companies. Senate health insurance reform creates a competitive bidding structure for Medicare Advantage plans, allowing the market to set payment rates and ensuring that payments to private insurance companies reflect the actual cost of caring for seniors and saving billions of dollars. As the Wall Street Journal puts it, “The bill would force the insurers to bid competitively to run the plans, a change from current law.” This will ensure that private insurance companies participating in Medicare bring value to all Medicare beneficiaries and taxpayers. In addition, bonus payments will be available to plans that coordinate care for enrollees and demonstrate measurable quality. [Wall Street Journal, 9/24/09; Patient Protection and Affordable Care Act, accessed 12/1/09]
Medicare Advantage Enrollment Will Continue to Grow Under Competitive Bidding. CBO projects that, under current law, Medicare Advantage enrollment will increase from 10.6 million in 2009 to 13.9 million in 2019. Appearing before the Senate Finance Committee, CBO Director Douglas Elmendorf testified that, under the Chairman’s Mark, Medicare Advantage enrollment would be reduced by 20 percent in 2019, or 2.7 million beneficiaries. The CBO Director went on to say that “almost all” of this reduction results from Medicare beneficiaries not joining Medicare Advantage plans, and is not a result of beneficiaries leaving the plans. Comparing these numbers to CBO’s previously released enrollment estimate demonstrates that Medicare Advantage enrollment will be approximately 11.2 million 2019, a projected 5.7 percent increase over 2009 enrollment levels. [CBO, 5/18/09; CQ Transcript, 9/22/09]
Medicare Advantage Will Continue to be Offered in Existing Areas Under Competitive Bidding. CBO Director Douglas Elmendorf told the Senate Finance Committee that “the competitive bidding system would, in our judgment, keep the plans essentially the same place as they would be under current law…the competitive bidding process should enable these plans to continue operate (sic) where they are…” [CQ Transcript, 9/22/09]
Republican Senators Have Supported Competitive Bidding in Medicare Advantage. Eight Republican Senators have cosponsored legislation that includes a competitive bidding program for Medicare Advantage. Senators Alexander, Bunning, Burr, Chambliss, Graham, Inhofe and Isakson are cosponsors of Senator Coburn’s Patients’ Choice Act (S. 1099). A description of the bill indicates that “to promote competition among Medicare Advantage plans and to increase the quality of care furnished under such plans, this provision establishes a competitive bidding mechanism that will apply to these plans beginning in 2011.” [The Patients’ Choice Act, Section-by-Section, access 9/24/09]
Republicans Senators Are Now Abandoning Their Free Market Ideology to Keep Subsidies Flowing to the Private Insurance Industry. On many issues, Republicans demonstrate a strong adherence to free market ideology. When speaking of health insurance reform, Republicans have argued that we just need to “get out of the way and allow the market to work” and that what we “need to do is unleash the marketplace that you’ve got.” But now, Senate Republicans claim concern over both the cuts to the Medicare Advantage program and the idea it would become competitive. [Congressional Record, 7/20/09; The News and Observer (NC), 8/28/09]
