Of course, that's nonsense. Testifying before the Senate Finance Committee, Douglas Elmendorf, director of the nonpartisan Congressional Budget Office, admitted that, in fact, seniors in these private plans would see benefit cuts if Medicare decreased payments to the insurance companies. Actually, we don't need Elmendorf's testimony to know that: The extra services that Medicare HMOs and some other plans provide to seniors--including vision and dental benefits--cannot be provided if the plans receive less money.
On average, the government pays these plans about 114 percent of what traditional Medicare costs. Insurers' administrative costs and profits consume some of the extra money, but much of it is spent on benefits that are not provided by fee-for-service Medicare. In some high-cost areas, like Florida and New York, senior HMOs have long received exceptionally high payments because of the historical cost of providing care in those states. The benefits of those plans are correspondingly rich. If the Centers for Medicare and Medicaid Services (CMS) moves forward with the bidding approach that has been proposed, plans in Miami, New York, and Los Angeles will see their budgets set below the historical costs of traditional Medicare. Will they respond by slashing benefits? You bet.
The debate over Medicare Advantage reimbursement goes back to the enactment in 2003 of the Medicare Modernization Act, which not only created the Part D drug benefit but also provided the authority for broadening Medicare Advantage. The Democrats believed that the Republicans were trying to privatize Medicare, and now that they're in power, they want to reverse the movement toward privatization. They may succeed: if the Medicare plans offer fewer services, many enrollees may revert back to the government-run system, and some plans will drop out.
But the insurance companies aren't going down without a fight. Humana reportedly sent its Medicare Advantage members a mailer, now discontinued, that said, "if the proposed funding cut levels become law, millions of seniors and disabled individuals could lose many of the important benefits and services that make Medicare Advantage health plans so valuable." Humana encouraged seniors to contact their representatives in Congress.
This move infuriated Sen. Baucus, who launched an investigation of Humana. Meanwhile, CMS sent companies that sell Medicare Advantage and Part D drug plans a letter warning them not to try to sway their customers to take sides in the healthcare reform debate. It said that some companies were misleading seniors about the proposed reform legislation.
Republicans immediately pounced on this missive, maintaining that the insurers have the right of free speech and that the Administration should not try to prevent them from telling the public about their views.
I support President Obama's reform efforts, and I disagree with the "free speech" argument for allowing the wealthy and big corporations to fund any type or amount of political propaganda. Yet, in this particular case, the Administration is shooting itself in the foot by not leveling with the public about the tradeoffs involved in cutting payments to Medicare Advantage plans.