Demand parity among Medicare programs

What a shame: Reimbursement rates are going up for private Medicare Advantage plans.

Contrary to its April 7 announcement that private Medicare reimbursement rates would be reduced, the Centers for Medicare & Medicaid Services has just reversed course and announced that it will increase overall Medicare Advantage rates. The change in policy came after pressure from the political parties and insurance companies. As Medicare spending per beneficiary grows at a slower pace, subsidies to Medicare Advantage plans should also be reduced. Medicare Advantage should reflect actual market costs if we really want to improve Medicare financing and the federal budget.

Passed by Congress in 1997, Medicare Advantage is a means of receiving Medicare coverage through private insurance plans. Many advocates find that the system is fraught with difficulties, particularly when enrollees need post-acute care.  This is made worse by requirements that specialty care be pre-approved, and by an appeals system that is often arbitrary. Economic calculations — rather than quality of care — guide many coverage determinations.

The Centers for Medicare & Medicaid Services’ recent decision allows private Medicare to continue to cost more than traditional Medicare. While this may be good for the bottom line of insurance companies that offer Medicare Advantage plans, it is not good for Medicare, the vast majority of Medicare beneficiaries, or American taxpayers.

Why should we spend more of our limited public funds on private Medicare when traditional Medicare costs less? Why should taxpayers ensure private profits to deliver public Medicare coverage? After all, the experiment in privatizing Medicare was originally intended to see if a private model would cost less, while providing the same or better coverage than traditional Medicare. That was not to be.

Private plans left the market when their reimbursements were capped at or below the per capita price of public Medicare. The Centers for Medicare & Medicaid Services failed to learn from that experience, and maintain the cost of traditional Medicare as the maximum taxpayers would pay for private plans. Instead, since the Medicare Act of 2003 we actually pay private plans more than traditional Medicare.

This result is not good for the financial security of the Medicare program or for the federal budget deficit. It’s not good for the vast majority of beneficiaries who continue to choose the traditional Medicare program. It’s not even best for many Medicare Advantage enrollees, especially those with long-term and chronic conditions, who often get less coverage than they would in traditional Medicare. And remember, by design, Medicare Advantage plans have limited networks of providers, so private Medicare Advantage enrollees have fewer choices in physicians and other health care providers than they’d have in traditional Medicare.

The Center for Medicare Advocacy continues to call for parity in payments between private Medicare plans and traditional Medicare. It’s the best deal for taxpayers, the Medicare program, and the vast majority of Medicare beneficiaries. Common sense should prevail.

Judith Stein is executive director, Center for Medicare Advocacy.

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