FLASHBACK -- 5 YEARS AGO CHRISTMAS EVE -- A classic never dies, does it??
"Twas the night before Christmas, when all through the STRS house
A forum for Ohio educators, sharing thoughts regarding their health care and pension system (STRS Ohio). Researcher John Curry manages a clearinghouse of related e-mails, articles, announcements, etc. His daily mailings include many items that do not make it to this blog. Contact John (email@example.com) if you wish to be on his e-mail list. Kathie Bracy: firstname.lastname@example.org.
Insurance companies would never pocket extra money on the backs of Medicare beneficiaries. Or would they?
According to a report released by the Government Accountability Office (GAO) last week, insurers that sell private plans to Medicare beneficiaries made a whopping $601.79 in profits per enrollee in 2006, a profit margin 65 percent higher than anticipated. Actual spending on non-medical expenses, such as administrative costs, was also substantially higher than projections, while spending on the delivery of care fell short of expected levels.
Since 2003, when the Medicare Modernization Act authorized substantial new funding for Medicare plans operated by private insurers, known as Medicare Advantage plans, a debate on whether these plans provide good value to both enrollees and taxpayers has been raging. These data offer new fuel to the fire in this debate.
Proponents of private Medicare plans have long argued that the "efficiency of the private market" would save taxpayer money while increasing access to care for beneficiaries. The GAO's report suggests that this assertion simply isn't true. Only 83 percent of Medicare Advantage plan revenues actually go to providing care. The remaining 17 percent of Medicare Advantage revenues go toward administrative costs, overhead and profits. In contrast, traditional Medicare accumulates no profits from its revenues and spends a mere 2 percent on administrative costs.
Rather than increase efficiency and access, Medicare Advantage has served to direct precious taxpayer dollars away from Medicare beneficiaries and into the pockets of insurers. Stronger oversight of the insurance industry is essential. When the federal government purchases goods and services, we expect accountability. Taxpayers and beneficiaries deserve to know that premium dollars are being spent in a way that maximizes value and promotes efficiency.
Last week at a press conference announcing Tom Daschle as the new Secretary of Health and Human Services, a journalist asked President-Elect Obama how he intended to find money to pay for health care reform legislation. In his answer, Obama indicated that regulation of Medicare Advantage insurers would be a necessary way to save money and improve quality.
We're also going to examine programs that I'm not sure are giving us a good bang for the buck. The Medicare Advantage program is one that I've already cited where we're spending billions of dollars subsidizing insurance companies for a program that doesn't appreciably improve the health of seniors under Medicare.
Some members of Congress have also talked about enacting "minimum medical loss standards," which would require health insurance companies to spend a certain percentage of premium dollars on medical care (as opposed to administrative costs or profits). Such standards would allow insurers to retain reasonable profits, while ensuring that taxpayer dollars are spent wisely.
Now that sounds like a deal that is fair to insurers, taxpayers, and beneficiaries.
From the Washington Post re. Medicare Advantage:
Medicare insurers' profits exceed expectations
By KEVIN FREKING
The Associated Press
Thursday, December 11, 2008; 4:40 AM
WASHINGTON -- Health insurance companies that serve the elderly and disabled in Medicare are realizing significantly higher profits than they anticipated, resulting in the companies getting $1.3 billion more than projected, congressional auditors say.
Under a program called Medicare Advantage, the federal government pays insurers for delivering Medicare benefits. The insurance companies' payments are based, in part, on their anticipated revenues and expenses. If the companies had been more accurate, they could have spent much of that $1.3 billion on enhanced health benefits or lower monthly premiums, and they still would have maintained their expected profit margin, the Government Accountability Office said in a report expected to be released Thursday.
The GAO studied the Medicare Advantage program for 2006, the most recent year for which figures were available.
Rep. Pete Stark, D-Calif., who requested the analysis, said the government spends more on beneficiaries when they're in Medicare Advantage than if they're in traditional Medicare, about 13 percent more on average.
"This puts to bed this idea the plans are offering tremendous extra benefits with the overpayments," said Stark, a frequent critic of the program. "The overpayments are going to profits."
The Associated Press obtained a copy of the correspondence from the GAO to Stark.
Stark, chairman of the House Ways and Means health subcommittee, said he will push for legislation next year that would lower the government's payments to insurers, an idea that President-elect Barack Obama backed on the campaign trail. But supporters of the Medicare Advantage program said participants are happy with their benefits, and they note that millions have enrolled in the program in recent years as a result.
Any attempts to scale back payments to private insurers would lead to benefit cuts or higher premiums for seniors in those plans, supporters of the program contend. About three-quarters of Medicare's 45 million beneficiaries are still enrolled in traditional Medicare, in which the government pays health care providers a set fee for particular services.
The GAO said that Medicare Advantage insurers generated $50 billion in revenue during 2006. On average, plans earned profits of 6.6 percent and they had projected to the federal government that they would earn profits of 4.1 percent.
The insurance plans also spent less covering medical expenses than anticipated, with 83.3 percent of revenue going to medical expenses. They had projected that nearly 87 percent of revenue would go to expenses.
In responding to the report, federal officials said the insurers' estimates for expenses were within a standard range, given the difficulty in forecasting medical trends and spending. They also stressed that Congress set up the payment structure for Medicare Advantage plans to make sure beneficiaries had wide access to the program.
"The goal of the payment structure, as mandated by Congress, was to ensure broader access to MA plans, particularly for lower-income, minority and rural beneficiaries," said Jeff Nelligan, spokesman for the Centers for Medicare and Medicaid Services.
On the Net:
Government Accountability Office:http://www.gao.gov/