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Letter to the editor

Special coverage: Medicare

Private Medicare plans cost us $15B more, study shows

By KRIS HUNDLEY
Published October 30, 2007

A few years ago, Congress put taxpayers' money on the bet that private companies could provide medical and drug coverage to seniors at a lower cost than the federal government.

But, according to a recent congressional study, that was a bad bet. Using data supplied by a dozen of the biggest providers of Medicare Advantage plans, including Tampa-based WellCare, the report found that such plans will cost taxpayers an extra $15-billion in 2007.

The reason? When Congress launched the Medicare drug plan in 2006, it was so eager to get private insurers involved it offered them a bonus. The companies are paid 12 percent more for providing medical coverage for a senior than the federal government spends under traditional Medicare.

That extra cash means extra frills like free gym memberships for seniors, as well as bigger profits for insurers like WellCare, which reported $180-million in earnings in the past 12 months. But it also means a much bigger tab for all taxpayers.

Though Democrats in Congress directed the latest attack on insurers' overpayments, concern over the issue cuts across party lines. Tom Scully, who advocated the overpayments when he ran Medicare from 2001 to 2003, said in March it was time to cut back. And last summer the bipartisan Medicare Payment Advisory Commission MedPAC warned that as more seniors enroll in deluxe Medicare Advantage plans, it will become more difficult to bring them back to parity with traditional Medicare.

But the bill will come due. By 2030, an estimated 24 percent of personal and corporate income tax revenue will be spent on Medicare, up from 10 percent today.

"Overpaying in the short run is never a strategy for achieving long-run efficiency," the commission wrote.

Kris Hundley can be reached at hundley@sptimes.com or (727) 892-2996.

[Last modified October 30, 2007, 06:18:28]