Patients Would Pay More if Romney Restores Medicare Savings, Analysts Say

By Jackie Calmes
The New York Times, August 21, 2012

Mr. Romney has been especially critical of the cuts for insurance companies that provide Medicare Advantage, a popular private-policy alternative to Medicare. “This is the president’s plan: $716 billion cut, four million people losing Medicare Advantage and 15 percent of hospitals and nursing homes not accepting Medicare patients,” he said in a recent campaign appearance.

But Medicare Advantage, which was created 15 years ago in the hope that private-market competition for beneficiaries would result in lower prices, has consistently cost more than standard Medicare — costs that Medicare beneficiaries must help subsidize through their premiums.

The reductions for Medicare Advantage providers are “a matter of basic fairness because they’ve been overpaid for years,” said (Marilyn Moon, vice president and director of the health program at the American Institutes for Research). As for beneficiaries, she added, “they’re guaranteed basic Medicare benefits. They may lose some extra benefits they may have been getting, but in effect you’re saying some of the windfall benefits may go away.”

“The bottom line,” said Representative Chris Van Hollen of Maryland, the senior Democrat on the House Budget Committee, which Mr. Ryan leads, “is that Romney is proposing to take more money from seniors in higher premiums and co-pays and hand it over to private insurance companies and other providers in the Medicare system.”

Why would Mitt Romney support overpayments to the Medicare Advantage program? The reason is that they want a vibrant market of private health plans in order to be able to put into place their plans for a premium support (voucher) program for Medicare, even though those plans cost more than does the traditional Medicare program.

The precursor to Medicare Advantage (Medicare + Choice) already demonstrated that private insurers cannot meet Medicare’s lower costs for comparable Medicare populations. They pulled out of patient markets with average or worse levels of health, keeping the healthier regions enrolled in their plans. In the Medicare Advantage program, they have gone even further. They are receiving unwarranted risk adjustment payments by submitting data indicating that their patients are sicker than they actually are.

(There has been some misleading publicity about Medicare Advantage bids this year being only 98 percent of traditional Medicare costs, but the complicated formulas still result in payments well in excess of Medicare costs.)

Once the premium support system is up and running, the intent is to cap the amount that the government contributes to the premiums for the private plans, shifting an ever-increasing portion of the costs to the Medicare patients – sort of a delayed gratification for anti-government ideologues.

(Although today’s message is about the nefarious plot to foist off on us the privatization of Medicare, some may wonder what the NYT headline means. The scheduled reduction in payments to Medicare come from two sources – reduction of overpayments to the Medicare Advantage plans, and reductions in payments to some health care providers, but not from a reduction of benefits in the traditional program. The savings are shared with Medicare beneficiaries in the form of lower premiums and lower coinsurance payments. When Romney restores the Medicare cuts, costs go up for both the taxpayers who finance the government and for Medicare beneficiaries through higher premiums and coinsurance payments.)