Friday, September 25, 2009

The Disadvantages of Advantage plans

Republicans are now trying to convince people who use and depend on Medicare that reforms to the program will cost seniors important benefits. This should be unconvincing, coming from the party that largely opposed Medicare (see since the inception of the program.

The party of the rich has been pointing to a Congressional Budget Office (CBO) report that under proposed health care reforms, the government would severely cut and probably eliminate the so-called Medicare Advantage (MA) plans. Maybe 20 - 25% of America's seniors belong to such plans. As a result of these cuts, the GOP is claiming that Medicare recipients will see their benefits decrease. How likely is it that the party that fought Medicare is correct in charging that the party that created Medicare is trying to harm its beneficiaries?

Here's some background. The basic, straightforward Medicare program came first in 1965 (under LBJ). This established parts A hospital (patients pay deductible but no premiums) and B doctors (patients have copays + premiums) coverages. The part B copays are 20%, but part B is optional. Later (1997) a Medicare + Choice (M+C)plan was created which enabled subscribers to buy insurance covering the hospital deductibles and doctor copays; in this simple form it is often called Medi-gap or "supplemental" Medicare, and is offered by private insurance companies.

It was theorized in 1997 that Medi-gap would be very popular, and its no-frills price would be kept low by competition among insurance companies. However, in 2003 the Medicare Modernization Act (MMA) established the Drug Benefit or Medicare Part D as well as the existence of the MA (Advantage) plans. Both of these aspects resulted, arguably, from the Republicans traditional desire to help big business. In the case of Part D it was "Big Pharma" -- the pharmaceutical industry -- and in the case of the MA plans it was the insurance companies. For the drug plan the collusion was out in the open. Far from promoting competition, the MMA explicitly forbid the government from negotiating favorable rates with drug companies; it also established the infamous "doughnut hole": the interval of drug expenses uncovered by Medicare, where seniors were often forced to chose between their prescription drugs and food or rent.

The Advantage plans were another story, puncturing once again the tired myth that elimination of regulation combined with the "free market" would lower costs through competition. Under these plans, the entire benefit that a retiree would have under Medicare -- and then some -- would be directed to an insurance company. In other words, Medicare would not pay doctors directly, but pay the premiums for a private insurance plan. The consumer is effectively out of the loop. The only protections are from cancellation or rejection due to health risks or pre-existing conditions. (Also, by law, seniors can opt out or change plans once a year.)

In theory, MA plans offer extra benefits above doctors' care; these sometimes include dental or optical care, or extras such as free health club memberships and certain preventive measures such a periodic check-ups and tests. Because the benefits are set by the insurance company, the theory is that competition, control of the level of care and medical salaries, and preventive care, would keep medical costs down, hence keep the rates charged to the government Medicare system low. One of the main tools created for doing this was the HMO or Health Maintainance Organization, a group of doctors, nurses and other medical personel contracted by the insurance company to handle each patient's total medical care.

And here is where "rationing of healthcare" became manifest. Since HMOs are under contract to the insurance companies, there is an obvious tension between their direct expenses in the form of therapies and doctors' hours, and their reimbursment by the insurers. Since Advantage plans by-pass the Medicare 20 - 80% copays, they can charge the government more -- which they do. They also put the squeeze on the HMOs., which is, in turn, reflected in less choice for the patients and more restrictions on procedures and visits covered; thus, what get what we now call rationing.

In reaction to actual rationing and perceived rationing, other types of care plans were invented -- alternatives to HMOs. These include PPOs, which offer more flexibility in which doctors a patient may see. There are also PSOs, in which groups of health care providers themselves replace the insurance companies.

Finally, insurance companies and many -- maybe most -- HMOs or PSOs are for-profit organizations, which have obligations to stockholders and highly-paid corporate officers.
The result has been exactly the opposite of what was initially promised. Medical Advantage plans became more expensive -- about 8% more -- than pure Medicare FFS (Fee For Service). Also, according to many studies, there is no hard evidence that these plans actually provide more or better care for their members, in spite of the eyeglasses and health clubs. However, the government is still subsidizing MAs to the tune of the extra 8%, which amounts to billions of dollars annually. Meanwhile, healthcare costs are going up at a rate about 3 times the rate of increase in family income.

There is simply no reason for the government to subsidize insurance company and for-profit HMO stockholders and executives. Advantage plans are not improving hardly anyone's health care and their existence is yet another straw breaking the Medicare camel's back.*

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