It’s Time to End Medicare [No] Advantage

People say the sweetest things about the private insurance "Medicare Advantage" program.  Health Beat Blog referred to it as “a money-eating monster.”  Paul Waldman described it thus, “So does it work? Only if by ‘work,’ you mean ‘do the opposite of what it's supposed to.’” Sen. Baucus said the way these plans operate is, simply, “wrong.”

Add a new one to the pile, from President-elect Barack Obama:  they’re examples of “programs that don’t work.”  After a twelve year run in which they have cost too much from the government, cost too much to their beneficiaries, not improved health more than traditional Medicare, and not yielded the promised “innovations” that would make them worthwhile, it’s time to drawn the curtains on this failed experiment.

Back in the “well, why not?” days of 1997, with record job growth and a looming budget surplus, the Medicare Part C plans that were then known as “Medicare+Choice” seemed like a worthwhile experiment.  Why not test the central tenet of our health care debate – that, given the choice, more Americans would prefer the private health insurance industry than the government-run Medicare?  To make the playing field level, Medicare Advantage plans had to match Medicare’s standard benefit package, although they could offer additional benefits like dental, vision and health club benefits… er, more on that last one in a second.  The experiment really kicked in to high gear with the Medicare Modernization Act of 2003 (hey look!  The same legislation that brought us Medicare Part D’s prescription drug boondoggle!) when funding for Medicare Advantage was kicked up a notch, all out of a belief that using the private plans would reduce costs by being more efficient.

So, eleven years later, in this atmosphere of trillion dollar deficits, economic gloom and health care spending so bloated that it makes Jabba the Hutt look svelte, how did the experiment do?  Well, according to the Commonwealth Fund, Medicare Advantage in 2008 will cost the government an extra 12.4% per enrollee.  (Wanna guess why?  That’s right – administrative costs!)  In the 5 years since the program was expanded, it’s cost us about $33 billion dollars in additional spending.  And that’s just overcharging Uncle Sam.  A GAO report says that Medicare Advantage costs more in out-of-pocket expenses by charging patients the full cost of some procedures they don’t cover (a situation Medicare is regulated to prevent.)

Not so much on the customer satisfaction either – 21% of Medicare Advantage plan holders choose to leave during the year, compared to 9% for other supplemental Medicare plans under Part B. Suffice to say the “C” in Medicare Part C stands for Choice.  Granted, some providers are leaving traditional Medicare because of low compensation rates, but anyone who’s spent a few hours trying to figure out if their doctor takes their insurance knows that “choice” isn’t all it’s cracked up to be.

But those extra administrative fees are doing something right – they’re helping the program grow from 4.8 million in 2004 to 8.7 million today, despite the complete lack of an Advantage.  That’s some superior marketing working for you – with a particular nice touch being the gym memberships to help self-select healthier patients out of traditional Medicare.  And hey, although there’s no evidence that they make people healthier than Medicare (CQ Health Beat suggests “the plans are not helpful for sick enrollees who need to use their benefits” - gosh, thanks for the head's up), they are excellent at making a profit:  $3.36 billion in 2006, according to the GAO.

People may continue to choose the flashier private insurance plan (until they drop out of it mid-year), but that doesn’t mean we should throw completely unnecessary money out the door in the name of a free market experiment that hasn’t worked in a decade.  The federal government has a choice to make, too.   And it looks like Obama is poised to make the right one.  As he said on ABC’s This Week on Sunday:

We’ve got to eliminate programs that don’t work, and I’ll give you an example in the health care area.  We are spending a lot of money subsidizing the insurance companies around something called Medicare Advantage, a program that gives them subsidies to accept Medicare recipients but doesn’t necessarily make people on Medicare healthier.  And if we eliminate that and other programs, we can potentially save $200 billion out of the health care system that we’re currently spending, and take that money and use it in ways that are actually going to make people healthier and improve quality.

It’s time – let’s end the Medicare Advantage experiment.