This post was written by Maggie Mahar & Niko Karvounis
On Monday, the Bush Administration announced that next year payments to private insurers who offer Medicare to seniors will rise by 3.6 percent. This is a mistake. The last thing that the Medicare Advantage (MA) program needs is more money thrown at it. Indeed, MA has turned out to be a money-eating monster—in large part because the government gave it a blank check when the program was born, under the cover of darkness, in 2003.
It’s worth pausing to remember this breech birth. The Medicare Prescription Drug, Improvement, and Modernization Act (also known as the Medicare Modernization Act) came to the House for final approval at 3:30 a.m. on November 22, 2003. It was losing, 219-215, until the House Leadership, in a very unusual move, held the vote open for hours while the Leaders twisted arms. At 5:50 a.m. the legislation passed the House 220 to 215.
Representative Nick Smith later claimed that he was offered campaign funds for his son, who was running to replace him, in return for changing his vote from "nay" to "yea. " He subsequently recanted this statement. Nevertheless, the House Ethics Committee and the FBI launched investigations into whether members of the House had in fact offered Smith a bribe to vote for the measure.
In October 2004, the Committee issued its report, revealing that “Majority Leader Tom DeLay admitted that he offered to endorse Smith’s son Brad, who was running for Congress at the time, in exchange for Smith’s "yea" vote on the Medicare bill,” though the investigation couldn’t find out who offered Smith the money.
Following the House vote, on November 25, the legislation came to the
Senate for final consideration. Once again, it almost didn’t make it.
Senator Tom Daschle raised a budget point of order. Sixty votes were
necessary to override it, and for a few minutes, the vote was stuck:
58-39. It seemed that Daschle had a credible chance of blocking
passage—until Senators Lindsey Graham, Trentt Lott and Ron Wyden voted
in quick succession in favor to pass the vote 61-39. Thus Wyden, a
supporter of health care reform, helped save the insurance industry’s
pork.
If “pork” seems a little harsh, how about “excessive corporate
subsidies”? That’s the phrase the AFL-CIO, the American Federation of
State, County and Municipal Employees, Families USA, and the Medicare
Rights Center used in a letter they sent to congressional leadership this week protesting what the groups called a “waste of taxpayer dollars.”
From the beginning, MA was a giveaway to insurers. Although in theory
competition should make private sector insurance less costly than
traditional Medicare, when Congress passed the legislation it agreed to
pay for-profit insurers 12 percent more per beneficiary than regular
Medicare would spend to cover the same people.
Insurers claim that they are paid more because they offer seniors more
benefits than old-fashioned, government-sponsored Medicare, while
charging them less. In February, Kerry Weems, the acting administrator
of Center for Medicaid and Medicare Services (CMS) parroted this claim
when she told the New York Times that
“Medicare Advantage plans are offering an average of approximately
$1,100 in additional annual value to beneficiaries in terms of cost
savings and added benefits."
It is true that many MA plans often offer sweeteners like vision and
dental benefits, disease management programs, gym memberships and even
transportation assistance. But, as Congressional Budget Office (CBO)
Director Peter R. Orszag pointed out in testimony
before the Senate Finance Committee a year ago, “little information is
available on the degree to which the plans generate better health
outcomes than traditional Medicare.” In other words, does the disease
management work? We don’t know—and that, after all, should be the point
of any additional spending.
Insurers also claim that Medicare Advantage patients pay less out of
pocket than they would under traditional Medicare. This could be true
for the average, healthy beneficiary, but if you look closely, you will
find that many plans cut back on benefits that sicker seniors
desperately need. For example, in February the Government
Accountability Office (GAO) reported
that “19 percent of Medicare Advantage beneficiaries [are] in plans
that projected higher cost-sharing for home health services, and 16
percent of beneficiaries [are] in plans that projected higher
cost-sharing for inpatient services," meaning that a decent chunk of MA
enrollees are actually going to see higher out-of-pocket costs and
co-pays than they would under traditional Medicare.
And if a senior becomes seriously ill, he may well discover that while
he had been told that there was a $4,000 annual cap on out of pocket
payments, certain very pricey items are excluded from the cap. In
February, the Times revealed
that 29 percent of MA plans that have caps don’t include the cost of
some cancer drugs, 23 percent exclude the cost of some mental health
services and 21 percent don’t include home health care expenses. These,
of course, are the big ticket items that could bankrupt a senior—or
force her to sell her home.
Meanwhile, GAO says, the majority of Medicare Advantage policies offer
no cap on how much a beneficiary may wind up spending out of pocket. In
other words, the claim that MA is cheaper for Medicare beneficiaries
has a big fat asterisk next to it. So too does another possible
justification for the government’s investment in MA: that the money
thrown into MA funds leads to better coverage.
In February’s report, GAO noted that only a relatively small share of
the money that the government shells out for MA over the next four
years—11 percent—will go to extra benefits. Most of the rest will go to
reducing out-of-pocket spending and co-pays, which sounds good—until
you realize that this reduction will come at the expense of higher
premiums for the 35.3 million Medicare beneficiaries now enrolled in
traditional Medicare. Thus ultimately, as Martha Gold, a Senior Fellow
at Mathematic Policy Research, noted in a 2007 Health Affairs piece,
while "individual enrollees may gain, beneficiaries as a whole may be
harmed if higher payments add to the fiscal stress on Medicare, making
the program less viable in the long run."
The dynamics of MA "essentially allow[s] firms to ‘piggyback’ on
Medicare’s existing investment and policies,” Gold points out, while
doing “relatively little to improve care management."
Just how much is this costing us? Last year a CBO report
noted that payments to private health plans in the Medicare Advantage
program rose “from about $40 billion in 2004 to about $56 billion in
2006…[T]hose payments will increase to $75 billion in 2007 and $194
billion by 2017 and will total $1.5 trillion over the 2007–2017
period.” All in all, CBO notes, “the share of Medicare spending
for…Medicare Advantage plans will increase from 17 percent in 2006 to
27 percent in 2017.”
One reason the price is spiraling is that the most popular MA plans, a
private-fee-for-service (PFFS) plans, are significantly more expensive
than an MA HMO. Research from the Medicare Payment Advisory Commission
(MedPAC) shows that the government pays PFFS plans 119 percent of the
average cost per beneficiary in traditional Medicare.
Meanwhile, Washington just keeps on throwing money at the insurers.
Last year, in a testimony before Congress, Mark Miller, the Executive
Director of MedPAC, put it best when he said that “payment increases
[from the government to MA plans are] so large that plans no longer
need to be efficient to attract enrollees.” In other words, the
government’s corporate subsidies keep MA insurers fat, happy, and
completely unaccountable—and with no pressure to perform, they wind end
up costing more. It’s a vicious circle.
Finally, although some MA beneficiaries are unhappy, insurers are doing
a superb job of marketing MA and enrollment is sky-rocketing. The
number of people signing up for the for-profit private fee-for-service
plans—which are unique in that they don’t require people who join to
use a network of providers—has increased from 208,990 in 2005 to
1,327,826 in 2007, a more than six-fold increase, according to the Kaiser Family Foundation (KFF).
Broader enrollment in Medicare Advantage has followed a similar upward
trend. KFF reports that between 2003 and 2007, Medicare Advantage
enrollment climbed from 5.3 million to 8.7 million, and the number of
contracts government has with MA insurers rose from 285 to 602. The CBO
estimates that enrollment in MA will continue to soar over the next
decade, at a rate of about 7 percent. Over the same span, traditional
Medicare is expected to see growth of only 2.5 percent
With so much at stake, you’d think the government would keep close tabs
on MA in order to ensure a return on its massive investment. In theory,
that’s exactly what’s supposed to happen: the CMS is required, by law,
to audit the financial records of at least one-third of the MA plans
every year. The idea, of course, is to keep private insurers honest in
the face of the unprecedented business opportunity.
But this is the Bush Administration we’re talking about, and corporate
accountability has never been high on the agenda. Thus it may come as
no surprise that the government hasn’t followed through on its
oversight responsibilities. In July of last year the Government
Accountability Office (GAO) reported that CMS did not consistently meet
its one-third audit requirement from 2001-2005, and did not "ensure
that the audit process…provided information to assess the impact on
beneficiaries" during this period, even though a "2006 audit of 80
organizations found that 18 were overpaid prior to providing services"
and an earlier one in 2003 found that "CMS overpaid contractors between
$34 and $59 million." In other words, even with signs of overpayment,
the government didn’t make the effort to take a closer look.
Worse still, GAO reported
that CMS was planning to close out all audits "without pursuing
financial recoveries because the agency [believes that it] does not
have the legal authority to do so," a dubious claim that GAO found to
be flat out wrong when it examined the relevant statutes.
CMS’s reluctance to play hardball is doubly curious given that there is
ample evidence of misconduct on the part of MA insurers. Last May the New York Times reported
that “insurance agents, spurred in some cases by incentives like trips
to Las Vegas, have aggressively marketed…Medicare Advantage plans" at
the expense of elderly beneficiaries. The Times followed up on the
story in October,
with an audit of 91 reports that found that “tens of thousands of
Medicare recipients have been victims of deceptive sales tactics and
had claims improperly denied by private insurers that run the system’s
huge new drug benefit program and offer other private insurance options
encouraged by the Bush administration.”
Inappropriate activity included “the improper termination of coverage
for people with H.I.V. and AIDS, huge backlogs of claims and
complaints, and a failure to answer telephone calls from consumers,
doctors and drugstores.”
Things got so bad in 2007 that the seven insurers which comprise the
vast majority of MA’s PFFS plans—Humana, United Healthcare, Wellcare,
Universal American Financial Corporation, Coventry, Sterling, and Blue
Cross/Blue Shield of Tennessee—voluntarily suspended marketing of the
plans after thousands of complaints flooded CMS. According to Congressional Quarterly
(CQ), “CMS received 2,700 complaints between December 2006 and April
2007" related to PFFS plans. Often "seniors are misled about whether
their doctors are in a plan’s network or about how much they will have
to pay out-of-pocket".
Despite this troubling track record, there has been no real response
from the government, and little has changed on the MA front since last
year.
Two months ago, a Senate Finance Committee hearing took a hard look at
the dishonest marketing practices surrounding Medicare Advantage and
repeated the same concerns noted in ‘07. Michael McRaith, director of
the Illinois Division of Insurance, testified on behalf of the National
Association of Insurance Commissioners (NAIC) and noted that major
problems include “marketing and sales practices that pressure
beneficiaries to enroll into inappropriate or unsuitable plans" and “to
enroll into Medicare Advantage plans without fully understanding that
enrollment would lead to the loss of traditional Medicare."
The evidence that Medicare Advantage warrants close scrutiny (at the
very least) is overwhelming; yet instead of being put under the
microscope, the program is receiving a raise.
All in all, it’s clear that Medicare Advantage is not a program that
needs more blind government investment. It’s costly, mismanaged,
corrupt—and its growth comes at the expense of traditional Medicare,
which is already in a precarious fiscal situation. It’s hard to see
the Bush Administration’s commitment to increasing payment rates to
for-profit insurers next year as anything but the corporate welfare
that its critics claim. An honest appraisal of Medicare Advantage shows
that the program doesn’t deserve a fatter payday; it demands a serious
crackdown.
If the private market doesn’t provide long-term, effective and efficient care, why does the government have $50 billion to subsidize companies while claiming not to have the same $50 billion to pay for care directly?
If the goverment would give me such a sweet deal as a priary care doc, my profession might not be going down the tubes. It just continues to show the great faith our present leadership puts in the marketplace and big corporations to solve the present problem of the high cost of medical care. How ironic that the method they choose of solving the problem is to give health insurance companies more money than they now spend on the average medicare recipient. They obviously did not learn from the last round of Medicare HMOs that what private insurance has perfected to a tee is their ability to cherry pick healthy patients while leaving those with serious medical problems to be cared for by other payors. When will they learn that unless they set stringent rules with close monitoring that they cannot depend on private corporations to act in a socially responsible manner. Their loyalty is to their stockholders and their highly paid executives and not to the the ideal of what is right for our country and health care system as a whole.
While I, unfortunately, do not have precise data, insurers tell me that MA plans are especially popular among low income seniors. The reason is that the extra benefits and often lower out of pocket costs allow them to get by without buying a Medicare supplemental policy for $200-$250 per month which they cannot afford. Millions of seniors have these policies provided by a former employer or they can afford to buy them out of pocket, but poorer seniors can’t.
To the extent that higher payments to insurers to provide these plans mean that all seniors may pay a somewhat higher Part B premium than they otherwise would looks to me more like an exercise in solidarity than a ripoff and giveaway to insurers. Or, does solidarity only mean that the rich should pay a lot more than they do now? UnitedHealth Group is the #1 player in the MA market with Humana a close 2nd. Of United’s 1.4 million MA members, fewer than 100,000 are in the PFFS plans which receive the higher reimbursements, and most of those are in more sparsely populated areas. The vast majority of their members are in HMO plans.
I think it is important to note that in any given year, the healthiest 50% of seniors (about 21 million people) account for only 4% of Medicare’s costs. Standard Medicare is poorly designed with a low annual deductible of less than $150, a 20% copay for non-hospital services, and NO OUT OF POCKET MAXIMUM. If Medicare changed its standard plan to a higher deductible (perhaps $500) and a reasonable out of pocket maximum (maybe $2,000 – $2,500 per person), perhaps there wouldn’t be nearly as much need or demand for MA products, especially among low income seniors who may have some savings and own a home outright but a very low annual income.
Gregory, Keith and Barry–
Gregory –If the govt doesn’t have $50 billion to spend on healthcare, then why does it have $50 billion to subsidize corporations?
Because no one is bribing Congressmen to spend $50 billion on healthcare. But
there are deep pockets bribing our legislators to
provide corpoate welfare.
What I love about the story of how this legislation passed is that it tells you everything you need to know about just how corrupt this package was. .
I wrote this post because Alex Gibney, the documentary film maker who just won an Academy Award for his documentary “Taxi to the Dark Side” called me recently.
He’s now making a film about lobbying in Washington adn he wanted to ask me some questions about Medicare Advantage. (Big Pharma and the insurers spent a fortune on lobbyint getting this legislation through.
Pharma funded somethingi called United Seniors Association, a conservative direct-mail organization that had cut its teeth with frightening scare letters to senior citizens. The United Seniors Association board included, among other GOP political operatives, Jack Abramoff …
Abramoff had a direct connection to the passage of the Medicare bill that created Advantage.
This reminded me that I should look into how MA is doing. .
(Alex also made the film about Enron, The Smartest Guys in the room– and, I’m
very proud to say, his
production company is just finishing filming a one-hour documentary based on
my book “Money-Driven Medicine” It should air on television late this fall.
Keith you wrote: “It just continues to show the great faith our present leadership puts in the marketplace and big corporations to solve the present problem of the high cost of medical care. How ironic that the method they choose of solving the problem is to give health insurance companies more money than they now spend on the average medicare recipient. They obviously did not learn from the last round of Medicare HMOs that what private insurance has perfected to a tee is their ability to cherry pick healthy patients while leaving those with serious medical problems to be cared for by other payors. When will they learn that unless they set stringent rules with close monitoring that they cannot depend on private corporations to act in a socially responsible manner.”
Exactly. I’m hoping this will change. We’ll have to see who Americans elect to Congress.
Barry– I know that insurers like to talk about how “very happy” the poor are with their program. I wrote this post in order to counter some of the industry propaganda with real facts, and numbers on what
MA covers.
Insurers have marketed this program to the poor–while also doing their best to avoid really sick poor people.
Finally you write: “Standard Medicare is poorly designed with a low annual deductible of less than $150, a 20% copay for non-hospital services, and NO OUT OF POCKET MAXIMUM. If Medicare changed its standard plan to a higher deductible (perhaps $500) and a reasonable out of pocket maximum (maybe $2,000 – $2,500 per person). . .
Barry, if Medicare were designed as you suggest, many seniors could not afford it.
You seem to forget what we disgussed last week: Bureau of Labor statistics show that the poorerst 20 percent of all Americans live in households earning an average of $10,000 a year–and that includes social security checks, welfare payments, food stamps . . .etc. etc. It includes every penny that comes into the household to all of the people who live in that household.
On the next rung of a five-rung income ladder, the second poorest households earn an average of $20,000 a year. Again this is joint income, including all sources of income. They
spend a large chunk of their income on utilities–just keeping the lights and heat on.
How would you suggest they scrape together the $2,000 to $2500 per person out of pocket payment that you think they should make– or even the $500 per person deductible?
They just wouldn’t go to the doctor because they didn’t have $500 lying around.
Finally all of the reserach shows that when insurance has high deductible people are just as likely to skip needed treatment as they are to skip unnecessary treatment.
Kaiser’s CEO told me that Kaiser begin selling high-deductible policies, very reluctanty, well after for-profit insurers began promoting these products.
“Was it the right thing to do in terms of what’s good for health policy and trying to keep Americans healthy? he asked me. “No.
But we had to do it in order to stay in the game and compete with the for-profit insurers. Otherwise we couldn’t survive.
Over the last 20 years, for-profit insurers have driven many good not-for-profit insurers out of business by selling cheap very complicated poliices to people who don’t understand that, when they get really sick, they’ll find out that cancer drugs aren’t included in their out-of-pocket maximum, or that while the policy covers maternity, it does not cover complications following the birth of the child or . .. .
Gregory, Keith and Barry–
Gregory –If the govt doesn’t have $50 billion to spend on healthcare, then why does it have $50 billion to subsidize corporations?
Because no one is bribing Congressmen to spend $50 billion on healthcare. But
there are deep pockets bribing our legislators to
provide corpoate welfare.
What I love about the story of how this legislation passed is that it tells you everything you need to know about just how corrupt this package was. .
I wrote this post because Alex Gibney, the documentary film maker who just won an Academy Award for his documentary “Taxi to the Dark Side” called me recently.
He’s now making a film about lobbying in Washington adn he wanted to ask me some questions about Medicare Advantage. (Big Pharma and the insurers spent a fortune on lobbyint getting this legislation through.
Pharma funded somethingi called United Seniors Association, a conservative direct-mail organization that had cut its teeth with frightening scare letters to senior citizens. The United Seniors Association board included, among other GOP political operatives, Jack Abramoff …
Abramoff had a direct connection to the passage of the Medicare bill that created Advantage.
This reminded me that I should look into how MA is doing. .
(Alex also made the film about Enron, The Smartest Guys in the room– and, I’m
very proud to say, his
production company is just finishing filming a one-hour documentary based on
my book “Money-Driven Medicine” It should air on television late this fall.
Keith you wrote: “It just continues to show the great faith our present leadership puts in the marketplace and big corporations to solve the present problem of the high cost of medical care. How ironic that the method they choose of solving the problem is to give health insurance companies more money than they now spend on the average medicare recipient. They obviously did not learn from the last round of Medicare HMOs that what private insurance has perfected to a tee is their ability to cherry pick healthy patients while leaving those with serious medical problems to be cared for by other payors. When will they learn that unless they set stringent rules with close monitoring that they cannot depend on private corporations to act in a socially responsible manner.”
Exactly. I’m hoping this will change. We’ll have to see who Americans elect to Congress.
Barry– I know that insurers like to talk about how “very happy” the poor are with their program. I wrote this post in order to counter some of the industry propaganda with real facts, and numbers on what
MA covers.
Insurers have marketed this program to the poor–while also doing their best to avoid really sick poor people.
Finally you write: “Standard Medicare is poorly designed with a low annual deductible of less than $150, a 20% copay for non-hospital services, and NO OUT OF POCKET MAXIMUM. If Medicare changed its standard plan to a higher deductible (perhaps $500) and a reasonable out of pocket maximum (maybe $2,000 – $2,500 per person). . .
Barry, if Medicare were designed as you suggest, many seniors could not afford it.
You seem to forget what we disgussed last week: Bureau of Labor statistics show that the poorerst 20 percent of all Americans live in households earning an average of $10,000 a year–and that includes social security checks, welfare payments, food stamps . . .etc. etc. It includes every penny that comes into the household to all of the people who live in that household.
On the next rung of a five-rung income ladder, the second poorest households earn an average of $20,000 a year. Again this is joint income, including all sources of income. They
spend a large chunk of their income on utilities–just keeping the lights and heat on.
How would you suggest they scrape together the $2,000 to $2500 per person out of pocket payment that you think they should make– or even the $500 per person deductible?
They just wouldn’t go to the doctor because they didn’t have $500 lying around.
Finally all of the reserach shows that when insurance has high deductible people are just as likely to skip needed treatment as they are to skip unnecessary treatment.
Kaiser’s CEO told me that Kaiser begin selling high-deductible policies, very reluctanty, well after for-profit insurers began promoting these products.
“Was it the right thing to do in terms of what’s good for health policy and trying to keep Americans healthy? he asked me. “No.
But we had to do it in order to stay in the game and compete with the for-profit insurers. Otherwise we couldn’t survive.
Over the last 20 years, for-profit insurers have driven many good not-for-profit insurers out of business by selling cheap very complicated poliices to people who don’t understand that, when they get really sick, they’ll find out that cancer drugs aren’t included in their out-of-pocket maximum, or that while the policy covers maternity, it does not cover complications following the birth of the child or . .. .
“Barry, if Medicare were designed as you suggest, many seniors could not afford it.”
I’ve thought about this issue quite a lot. It seems that we should be able to come up with an approach that combines sensible insurance benefit design with a means tested program that would help the poorest pay their deductible and copays up to the out of pocket maximum in years when they actually incur such expenses.
We provide food stamps to help the poor buy food while the middle class pays market rates. We provide housing vouchers to help the poor afford housing while the middle class pays market rates. Colleges and universities charge very high tuition which the upper middle class and wealthy pay in full but the poor and middle class receive financial aid up to complete coverage of college costs for the poorest.
I have made the point before that income statistics can be misleading for the senior population because many own their home debt free, their children are grown and on their own, and, if they are retired, they don’t have job related expenses. So, the income needed to support a middle class lifestyle is far lower that what a young family needs to cover the cost of a home mortgage, feeding and educating children, and commuting to a job. If the poorest segment of the population needs help covering the cost of a higher Medicare deductible and copay liability up to a reasonable out of pocket maximum, let’s help them on a means tested basis. The broad middle class senior population, by contrast, should be able to handle the out of pocket cost of a more sensible Medicare program..
Every age cohort has one category of expenses that looms large in its budget. For the young, its buying and furnishing a home and starting a family. For the middle age population, its paying for higher education and saving for retirement. For the elderly, it’s often healthcare. I don’t think it is fair or reasonable to expect the young and middle age taxpayers to fund near full socialization of the elderly’s healthcare costs when a huge number of seniors can afford their share of the premium cost of a more sensibly designed Medicare Part B (and Part D) program.
Barry,
Again, I think you don’t realize how little money the average (middle-class) household has.
Median total joint income in households over 65 is $27,800 (latest data–as of 2006)
That $27,800 includes Social Security checks, pensions, welfare checks, food stamps, alimony checks, part-time wages, full-time wages and dividends capital gains and every other penny that comes through the door.
Again that’s joint income–of everyone in the household–before taxes.
As you know, this means that half of all households under 65 have an income that is less than $27,800.
And typically, a large number of households are clustered around the median.
These are the people who are truly “middle-class.”
They can’t afford a $3,000 deductible Barry. And at the end of the month, when they are waiting for the next SS check, they don’t have $75 or $50 lying around.
The fact they own their homes by the time they are 65( if they do–which is less and less common) doesn’t mean they have no housing expenses.
Typically, for people of this age and in this income bracket, utilities, property taxes homeowners insurance and necessary maintenance (the furnace needs to be replaced, somebody has to come shovel the snow, the porch steps need to be fixed before someone trips) are the items that take a huge chunk of their income.
Because their home is often older, they are likely to need more expensive repairs than a younger family– the roof is going, the bathroom has begun leaking into the kitchen below. If you’ve ever lived in an old house, you know what I mean. And as they get older, they can’t make the repairs themselves.
As they grow older, they can’t mow the lawn themselves, and can’t shovel the snow. They need more services.
Then they have to eat.
They must put gasoline in the car (most people in America live in places where there is so little public transportation that they must have a car.)
Repair the car.(Again, the car is older than the car a younger family would have, and needs more repairs.)
Pay for over-the-counter medications not covered by insurance and other health care needs not covered by insurance (dentist can be a big item–and you can’t ignore a toothache) plus eyeglasses, hearing aids, etc.
Food for pet. Veterinanrian for pet. (okay, maybe we could say the a pet is a luxury–but for people over 65, especially if they’re alone I would call it close to a necessity).
Travel expenses if they ever want to visit children or grandchildren. (Typicallly, grown children are too busy to come to them. Again, this is a borderline luxury/necessity.
And this assumes that they never go out to dinner; never go to a movie; never play golf or another sport that requires that you pay some fees; buy no presents for friends, grandchildren, etc., never go on a vacation, don’t have any hobbies that involve some expenses (photography, taking a course in something, whatever).
Meanwhile, here is median income for younger households:
25-34 49,614
35–44 60,405
45–54 64,874
55–64 54,592
65&over 27,800
Do you really feel that thse younger and more affluent people shouldn’t help the over-65 households pay for healthcare?
The govt and bureaucrats can not run anything well, especially when everything revolves around costs. Can you put a dollar amount on your health? Should you or your government? Who cares more about your health, The presidential candidates or yourself?
To quote Bill Clinton, To think that the govt can run healthcare is a “FAIRY TALE”.
Isn’t the VA healthcare system run by the government? If not, DoctorSH, then who is? They’re doing a much better job, recent scandals aside. They’re miles ahead on IT, for starters.
Maggie, how can the wealthier young ‘uns contribute to the costs of senior’s healthcare when we can’t afford our own?
Interestingly enough, us young un’s are already paying for senior’s care, the younger generations are filling the financial gaps for our elders, gaps we can’t afford. HR 676 proposes 4% payroll tax per employee, 4% employer, to fund a single payer system. Given your expertise on healthcare financing, Maggie, what’s your opinion of HR 676?
Thanks
“An honest appraisal of Medicare Advantage” would have mentioned that the program is wildly popular with minority and low-income seniors precisely because of the reduced out-of-pocket co-pays that upset you so much.
The program also increases primary care access for such patients because more physicians in underserved (particularly rural) areas can afford to accept Medicare Advantage than traditional Medicare.
In other words, the policy you advocate would reduce access and increase costs for the most vulnerable seniors, while providing cheaper benefits for middle class patients who can easily afford Medigap coverage.
Very progressive.
Maggie,
I didn’t suggest a $3,000 deductible. I suggested a $500 deductible, a 20% copay after that and 100% coverage of Part B services after the beneficiary spent $3,000 out of pocket. The current system has a $131 deductible (for 2007) and a 20% copay for Part B services with no out of pocket maximum. I think most of the lower income elderly would be better off with a higher deductible and a reasonable out of pocket maximum exposure than a low deductible and no out of pocket maximum. Such an approach would also significantly lower the cost of purchasing Medi-gap coverage which would increase the number of people who could afford to buy it.
With respect to the income distribution among the elderly population, we already have at least 6 million that are also eligible for Medicaid (dual eligible). That income cutoff could be increased. Also, as Lisa suggested, many elderly people receive financial help from family members while others live with children or other family members thereby avoiding housing costs altogether. As for chores like shoveling snow, neighbors often volunteer to do this for free.
Finally, I think it is important to note that even among the lower income subset of the elderly, millions are quite healthy and incur very little in healthcare costs. Even for those who take prescription drugs, according to IMS Health, 65% of all prescriptions are now generics, though they only account for 16% of the dollars spent on drugs. At the end of the day, however, the challenge is to drive the wasteful and excessive utilization out of the system. If we don’t, fewer and fewer of us will be able to afford health insurance whether we are elderly or not.
Barry —
You write: “Also, as Lisa suggested, many elderly people receive financial help from family members while others live with children or other family members thereby avoiding housing costs altogether.”
If you live with your grown children you don’t count as an under-65 household. All of the people in the group I wrote about in my response to your comment live in a household where someone over 65 if head of the household.
Low-income people do not usually have wealthy children. So their children cannot afford to give them much help.
And in our fragmented society, many of them don’t have children or close family.
As for neighbors shoveling the snow–I don’t know where you live, but when is the last time that you shoveled the snow for an elderly person in your neighborhood?
And whether you call the $3,000 an “out of pocket payment” or a “deductible” when you suggest that they would get “Part B services [only] after the beneficiary spent $3,000 out of pocket” you again ignore the fact that peopled with a joint income of $27,000 usually don’t have $3,000 lying around. They live from one social security check to the next.
Finally, the suggestion that they should go on Medicaid–after working and paying into Medicaire their entire lives–is unreasonable.
Do you know that, in order to go on Medicaid, you first have to spend down your own assets–which, depending on your state, can mean selling your home and spending that money before you can receive Medicaid? (Often, the only assets elderly people have is their home.) Emotionally, this is a very hard thing to do.
Maggie,
I think we must be talking past each other, but I’ll try one more time. Suppose there were no Part B deductible at all, as compared to $131 under the current standard Medicare (for 2007). Standard Medicare has a 20% co-pay for Part B services with no out of pocket maximum. How can my proposed $3,000 out of pocket spending cap be less affordable than an infinite cap? I’ll bet a considerable amount of money that if low income seniors (who don’t qualify for Medicaid) were offered a choice when they turn 65 between standard Medicare vs. a $500 deductible plus a 20% co-pay above that with 100% coverage once they’ve spent $3,000 out of pocket, they would choose the latter over the former. To the extent that Medicare Advantage plans offer the prospect of significantly lower out of pocket payments than standard Medicare, it’s no wonder that MA plans are extremely popular among low income seniors who cannot afford Medigap coverage for $200-$250 per month. I don’t understand why you think standard Medicare is such a great deal for low income seniors when, in addition to the lack of an out of pocket cap on Part B services, there is approximately a $1,000 deductible for each Part A hospitalization and a $4,000 plus exposure under Part D including the infamous doughnut hole.
As for shoveling snow, I’m 62 years old with cardiac issues. My cardiologist has ordered me to not shovel snow under any circumstances. During the last 10 or 15 years of my father’s life, he could not shovel his sidewalk, and neighbors routinely did it for him. He had no driveway and did not own a car or even know how to drive. I know that people who live in Manhattan rental apartments, condos and co-ops have paid staff to shovel snow which eliminates the need to either do it yourself or rely on volunteers, but help is available in the suburbs, though probably not everywhere and not all the time.
Catron over estimates the benefits of MA plans to rural areas. Most rural benes are in Private FFS Medicare plans, which don’t add value.
In fact costs per bene in PFFS plans are much higher than for benes in regular Medicare. MEDPAC has stated, “Given that Medicare spends 17 percent
more than it would if these beneficiaries had stayed in FFS and they do not manage care, enrollment growth in PFFS plans comes at an unacceptably high cost to Medicare.”
Steve H–
Thanks much. It’s always
much appreciated when people bring documented facts to the thread–
Hi Maggie,
I was just wondering if you have seen a report – from Oppenheimer and Company Inc Analysis, March 2008 – which shows the “Publicly Owned Health Plans’ Projected Profit by Segment for 2008”. I saw the chart in a publication called “Medicare Advantage News”, March 20, 2008 edition, published by Atlantic Information Services Inc. The Medicare Advantage segment profit (averaged over 13 companies) is 21.3%. These companies are not just making money on these plans; they are making massive profits at taxpayer expense.
Curt Naus–
I just saw your comment.
Thanks very much. I’m going to look for that report online. (In case I can’t find it, if you see this message, could you e-mail it to me at mahar@tcf.org? Or, if you only have hard copy, perhaps you could send me a copy. (If you e-mail me, I’ll give you an adress)
Again, much thanks for the information.