Obama Faces New Dispute Over Subsidy For Medicare

August 19, 2009|By Christi Parsons and Andrew Zajac | Christi Parsons and Andrew Zajac,Tribune Newspapers

WASHINGTON - -With the wildfire over so-called "death panels" still smoldering, President Barack Obama faces what could become another emotion-charged obstacle to his vision of overhauling health care - his plan to trim the federal subsidy for a program called Medicare Advantage.

The program pays insurance companies a hefty premium above traditional Medicare reimbursements for enrolling senior citizens in managed care. But whether the higher payments are worth the cost is a matter of dispute.

Obama and many congressional Democrats see Medicare Advantage as a wasteful bonanza averaging about $17 billion a year for the companies, which critics say provide few benefits beyond regular Medicare. And cutting out the extra pay is crucial to financing the health care overhaul under the Democrats' plans.

The companies and their supporters say they earn the extra payments by providing seniors with significant added benefits, including freedom from government red tape. And many Medicare recipients who may pay nothing for the "extras" seem to agree. Almost a quarter of Medicare beneficiaries are enrolled in Advantage programs.

But what lifts the disagreement over Medicare Advantage above many other points of contention in health care is its potential for spreading fear and outrage among Medicare recipients as a whole, much like the outcry after Republicans accused Democrats of trying to create "death panels" to cut off care for severely ill seniors.

Though scaling back Advantage payments would have no effect on most Medicare users, it would create an opening for opponents to make the allegation that Obama wants to cut Medicare benefits, as some Republicans are beginning to say. Obama and his supporters acknowledge the risk.

"Some beneficiaries will be dislocated," said Robert Berenson, a physician and health care policy analyst at the Urban Institute. "This is not painless."

The White House is counting on persuading seniors, with their powerful lobbying presence in Washington, that in order to fix the health care system, they have to cut the fat out of one part of it.

For the past few years, Medicare Advantage has been a sheltered corner of the national health plan. When congressional Republicans began expanding private insurance Medicare options in 1997, advocates said the plans would deliver services more efficiently, and hence less expensively, than Medicare's traditional fee-for-service reimbursement. But the spending on Advantage plans grew, with critics contending that GOP majorities were deliberately overfunding it to make the private plans more attractive to seniors than traditional Medicare.

As a result, the private plans now cost the government about 14 percent more per person than does regular Medicare, according to a recent analysis by the Medicare Payment Advisory Commission, which recommends reimbursement rates to Congress.

"Payment increases have been so large that plans no longer need to be efficient to attract enrollees," MedPAC Executive Director Mark E. Miller told Congress in 2008.

Today, the sheer size of the private program, which serves about 10.2 million seniors out of more than 45 million Medicare users overall, offers an opportunity for savings that the Office of Management and Budget puts at $177 billion over 10 years. That is an inviting figure to an administration looking for ways to expand access to health care to millions of Americans.

Obama joined Advantage critics in 2007 as a candidate on the stump in Iowa, when he began to criticize the arrangement as an example of waste that hurts the Medicare program as a whole. Now, his plan is to reduce the payments to Advantage so that it receives little or no federal subsidy.

As part of their health care talks, lawmakers have suggested reducing the rates through competitive bidding or by fiat, perhaps mandating that payments for the private plans not exceed those of traditional Medicare.

"We should not be subsidizing insurance companies to provide Medicare benefits that cost 14 percent more," said Kenneth Baer of the president's Office of Management and Budget, "especially when we can reform this system and save approximately $177 billion over the next 10 years."

Some members of the senior citizens lobby like the idea of trimming Advantage payments.

"We think having choices and competition within Medicare is important," said AARP's Jordan McNerney, "but they should not add to the cost of the program." Though the organization isn't backing a particular health care bill at the moment, McNerney said, "We are in support of cutting back the subsidies to private insurers over time so they compete on a level playing field with traditional Medicare."

But the insurers who provide the Advantage plans see it differently. And so do many seniors who have enrolled in it.

In July, Maurice Engleman, 82, of Palm Springs, Calif., made the rounds on Capitol Hill, presenting himself as living testimony to the benefits of Medicare Advantage. Last year, Engleman was diagnosed with tongue cancer shortly after his wife of 59 years died. His Medicare Advantage managed care firm, Desert Oasis Healthcare, assigned a nurse to guide him through a thicket of doctor visits and hospitalizations, including what turned out to be 30 radiation treatments.

"There wasn't an appointment she didn't come meet me," Engleman said. "Physically and emotionally, I felt completely supported. I really don't think I would have made it without this continuum of care."

Engleman, who said he is now cancer-free, acknowledged the added expense of Medicare Advantage - to taxpayers, not to him - compared with traditional Medicare, but said it was cost-effective in the long run. "It might cost $1,000 more, but if I didn't have to go to the hospital, that might save Medicare $5,000," he said.

Baltimore Sun Articles
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.