Cut Medicare Subsidies
Health insurance companies have started a campaign to protect the government payments they get for operating private Medicare plans. Anybody who wants to see the U.S. rein in its bloated and inefficient health-care system, and keep the Affordable Care Act affordable, should hope they fail.
The program at issue here is Medicare Advantage, which pays private insurers to provide Medicare health benefits. The program started in 1982 with a reasonable premise: If private insurers could operate more cheaply than the federal government, both taxpayers and enrollees would win.
That experiment didn’t get much of a chance to work. Congress eventually bowed to pressure from insurers to increase rates. By 2009, Medicare Advantage payments per enrollee were 14 percent higher than traditional Medicare.
The Affordable Care Act, signed the next year, is designed to cut those subsidies, starting in 2012 and ramping up over time, to bring Medicare Advantage payments roughly in line with the cost of the regular program and save an estimated $136 billion over 10 years. Now insurers are waging a public campaign to keep those payments where they are, warning that people will lose some of the additional benefits, such as dental and vision care, that make Medicare Advantage plans more attractive -- and more expensive for taxpayers.
Insurers have avoided making their campaign about Obamacare; they claim the federal government can offset the law’s cuts to Medicare Advantage plans by increasing other types of payments those plans receive. From an accounting point of view, that might not affect Obamacare’s funding. But as a practical matter, all federal health-care spending comes from the same place -- taxpayers. So offsetting the law’s cuts requires finding additional funds elsewhere, reducing other spending or adding to the deficit.
If this fight were waged on the merits, insurers wouldn’t have a prayer. The Medicare Advantage program was supposed to save money; instead, it costs more than the original program. And now the huge savings from rolling back those extra payments are needed to help pay the cost of expanding insurance under Obamacare (by which insurance companies benefit).
Insurers, however, have reason to hope this campaign won’t be decided on the merits. Democrats are reeling from a series of Obamacare debacles, including the botched rollout of the federal website and President Barack Obama’s foolish promise that people could keep their insurance plans. Insurers may have calculated that the administration doesn’t want any more headaches -- especially from a program that gives senior citizens extra benefits, and especially in an election year.
But, more than ever, the federal government needs to impose a dose of frugality on the health-care sector, even at a political cost. If the White House decides this fight isn’t worth having, despite having the better argument, future administrations will have an even harder time making further cuts in Medicare down the road -- cuts that both Democrats and Republicans agree are necessary.
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