By Kenneth Dolkart, M.D.
Valley News (West Lebanon, N.H.), October 18, 2024
Vice President Kamala Harris recently announced important new proposals for vision, hearing and long-term home care benefits via traditional Medicare. Pundits wasted no time in telling us this was “unaffordable.” People are unaware that their tax money is already funding such programs but is landing in private pockets.
In 1965, health insurers didn’t offer coverage to seniors, as they couldn’t determine how to make a profit on older Americans who often incurred hospital costs. The federal government created Medicare, which has since provided affordable medical coverage for seniors at 2% administrative costs. Long-term care was not a part of original Medicare: back then, male life expectancy was 67 years. Subsequent treatment advances and lengthening life expectancy prompted our need for long-term care services.
In considering this, let’s remember how the smartest guys in corporate boardrooms promote profit-directed insurance “innovations” while industry and well-lobbied politicians instill dread of “government expansion” of traditional Medicare.
This era is dominated by the mission of the Heritage Foundation: to promote public policies “based on principles of free enterprise and limited government.” Governmental services formerly considered a “public good” are privatized toward profit or attacked as “communism.”
The Medicare Modernization Act of 2003 and Medicare Part D, is an example of such philosophy. Lobbyists for BigPharma designed Part D as an opaque, stand-alone program using for-profit pharmacy benefit managers (PBMs) to administer medication coverage for Medicare. Seniors are left to scramble for ever-changing drug plans, which use hidden industry rebates and charge Medicare inflated costs, while BigPharma and PBMs reap record profits. (The Inflation Reduction Act of 2022 repeals the prohibition against Medicare negotiating with drugmakers to bring down prices.)
Traditional Medicare provides 100% of hospital costs but only 80% of outpatient services, with the remaining 20% of outpatient care covered by purchasing private supplementary “Medigap” insurance. The 2003 legislation required enrollment in private Part D plans to avoid later penalties, so both Medigap and Part D plans need be selected, and Centers for Medicare and Medicaid (CMS) rebranded Medicare Part C as “Medicare Advantage.” (MA)
Managed care insurers then designed lucrative government contracts to administer Medicare dollars, and integrated with PBMs to market combined Medigap and Part D plans. These MA contracts start with “benchmark” payments based on average costs of traditional Medicare services within a region. If the MA plan bids below the benchmark, it keeps a percentage of the difference, which may lower the premium, add profit or allow added bells and whistles. MA payments are boosted with benchmark “adjustments,” “risk adjustment” rebates when enrollees are supposedly sicker than average, and “quality” bonuses.
Accordingly, Medicare Advantage designed plans to attract and retain healthy people. They discouraged enrollment of sick, costly beneficiaries via drug formularies that limit treatments for expensive disorders and via narrow clinician networks. Although enrollees on MA plans are healthier, the average “risk scores” by which payments are calculated are inappropriately coded 20% higher than traditional Medicare. “Favorable selection” and risk score manipulation gives MA plans 6% more per enrollee than the cost incurred by traditional Medicare, although MA spends up to 25% less on care per enrollee.
MA insurers routinely “upcode” an illness’ severity to pad risk scores. What’s more, studies demonstrate that MA just makes things up. Investigative reporting from the Wall Street Journal found that MA plans fraudulently pocketed $50 billion for entirely invented diseases between 2018 and 2021. As far back as 2014, CMS efforts to claw back fraudulent overpayments were scuttled by “industry pressure.” Alas, CMS is a “captured agency” in which insurance executives shuttle through revolving doors between stints in CMS and the MA insurance plans that handsomely reward them. MA plans have accrued overpayments of $550 billion the past 15 years.
MedPAC, the agency that supervises Medicare, reports that MA plans were overpaid $88 billion in 2023 above what traditional Medicare would have expended for equal care for identical patients. Including fraudulent billing boosts overpayment estimates to as much as $140 billion per year. MA yields gross profit margins far exceeding that from other types of medical insurance, so insurers flocked to MA to reap public dollars. Profits by MA plans skyrocketed on our tax-fueled dollars, with UnitedHealthGroup quadrupling profit from $7.86 billion in 2013 to $32.4 billion in 2023. As Advantage ads fill your screens during open enrollment, realize that CMS allows MA insurers to spend billions of our taxes dollars on deceptive advertising campaigns that intentionally omit some vital facts.
Sure, healthy seniors are happy with low or absent MA insurance premiums. However, once seniors need care, recent studies demonstrate that denials, co-pays and co-insurances for skilled nursing, durable medical goods, chemotherapy, home visits and out-of-network treatment result in higher out-of-pocket costs than traditional Medicare. This is despite so-called MA “caps” on such costs. Care is hindered by denial or delay of Medicare-approved services and restrictions to narrow networks. Seniors with serious illness end up paying more, for less care, and, at that point, are trapped in MA plans due to absence of guaranteed issue of alternative, affordable Medigap plans. For clinicians and medical practices, the millions of wasted hours spent performing needless prior authorizations result in added moral and economic burden.
As to new benefits for Americans, the Congressional Budget Office estimates that it would cost $84 billion to cover dental, hearing and vision benefits to both traditional Medicare and Medicaid. Existing yearly overpayments to MA far exceed that, and can be better allocated to long-term home care and other services in traditional Medicare. Those dollars would actually go to needed medical care.
The stewardship of Medicare must be reclaimed from the financial interests of private equity and insurance conglomerates. Government can resume its essential role in updating and improving how Medicare serves the needs of Americans. CMS must eliminate “favorable selection” practices and redesign the benchmarks, risk adjustments and bonuses that are manipulated by MA plans. Improve and pass the bills in Congress that address denial and delays in care, and close the revolving door at CMS that serves industry rather than citizens. The Federal Trade Commission must be empowered to tackle insurance industry abuses and recoup huge losses from fraudulent billing.
If there is not the will to create efficient, universal health insurance, at least our Congressional leaders can allocate recovered savings to “level the playing field” and expand services in traditional Medicare, while securing the long-term stability of the Medicare Trust Fund.
Dr. Kenneth Dolkart is a geriatrician and an assistant professor at Dartmouth’s Geisel School of Medicine.
