The unspoken disadvantages of Medicare 'Advantage'

By Frank Kaiser, Special to the Times
Published October 30, 2007

Like its predecessor, Medicare+Choice, the current Medicare Advantage program is a shimmering mirage of cheap copays, cheaper hospital stays and the quaint notion that it's free of some anonymous Washington bureaucrat pushing you around.

At least that's what the pushers of this chimera told us. Various insurers touted big discounts on dental, vision and hearing needs. Deals so good we found ourselves saying, "What do we have to lose?"

A lot, it turns out.

Patched together by drug and health insurance lobbyists, the 415-page 2003 Medicare Prescription Drug, Improvement, and Modernization Act has indeed improved the lot of Medicare beneficiaries.

Today, thanks to Part D, only 8.5 percent of us lack drug coverage. Of the 8.7-million currently enrolled in private Medicare Advantage MA plans (Part C), most say they are pleased with the benefits formerly covered under traditional Medicare (Parts A and B).

At least until they get sick.

Then, as the Commonwealth Fund and the Kaiser Family Foundation reported in August, they are likely to pay, on average, $300 per month more for drugs through Part D than is paid by folks getting their medicine through the VA or employer-based health plans.

Further, according to the Medicare Rights Center, the sickest of those enrolled in MA pay far more for health care than they would pay for traditional Medicare. That organization has reported:

"People who receive chemotherapy, inpatient hospital care, home health care and skilled nursing care through private health plans incur greater out-of-pocket costs than they would through the public Medicare program, and they cannot insure themselves against these prohibitive costs."

Profitable for some

And look at the cost. This year, according to the Medicare Rights Center, MA plans will cost taxpayers about $75-billion. Those with Medicare will pay an additional $74-billion in Part B premiums - above the cost of care under traditional Medicare funding - in subsidies received by Humana, WellCare, and other insurance providers.

Still, until Democrats took over Congress last year, no one paid much attention to such wretched excess.

Oh, there were signs. A year ago, Humana's profits tripled, then doubled again this year. All because of the enrollment of new Medicare drug plan members. Executive salaries, too, reflected this extravagance. In 2005, the CEO of UnitedHealth Group, AARP's health insurance arm, took home $135.5-million. Aetna's CEO, $57.5-million. Cigna's CEO, $42.1-million.

Now, two new reports help bring it all into focus.

Last month, investigators from the Government Accountability Office found that, besides failing to run effective oversight and enforcement on marketing abuses by Medicare Advantage programs, the Bush administration did not meet statutory requirements to audit at least one-third of the insurance companies each year.

In 2003, when those audits did take place, Medicare found significant errors at four of five of the companies that were checked. Auditors said that insurers kept "$59-million that beneficiaries (should) have received in additional benefits, lower copayments or lower premiums." The Bush administration took no action.

The administration did, however, send dunning letters to more than 135,000 Americans on behalf of the insurance companies, saying these people still owed premiums for 2006.

'D' for defective?

Then, earlier this month, Rep. Henry Waxman's House Oversight and Government Reform Committee released a report finding that the Medicare Part D program:

- "Suffers from high overhead costs. Sales costs, administrative expenses, etc., will reach $3.6-billion this year. Add $1-billion in profits and you have costs about six times higher than traditional Medicare."

- "Fails to negotiate significant drug manufacturer rebates. The 8.1 percent rebates negotiated in 2007 by Part D insurers compares poorly with the 26 percent received in rebates by Medicaid."

- Disregards requirements that insurers give Medicare beneficiaries "access to their negotiated prices," including discounts, rebates and other price concessions.

In other words, instead of delivering lower drug prices or filling coverage gaps like the so-called "doughnut hole," this year alone $1-billion will flow in the opposite direction, to the drug companies' bottom lines.

Frank Kaiser is a nationally syndicated columnist who lives in Clearwater. His Web site, www.suddenlysenior.com, includes nostalgia and links to senior-focused sites. Contact him at frank@suddenlysenior.com or by writing to 2431 Canadian Way, Suite 21, Clearwater, FL 33763.

[Last modified October 29, 2007, 14:25:24]