Monday, August 24, 2009

Medicare Disadvantage

Posted By on Mon, Aug 24, 2009 at 2:33 PM

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Today's City Paper cover story on Nashville-based HealthSpring shows how the firm's core business model -- owning and operating Medicare Advantage insurance plans -- is vulnerable to health care reform that could cut or eliminate federal subsidies for those plans. Although CP writer Walker Duncan's piece highlights an interesting local example of the tension between for-profit insurance and health care cost control, it underplays the larger policy controversy surrounding Medicare Advantage plans.

The story describes the subsidies that keep Advantage plans in business but neglects to emphasize that these plans, and the companies (like HealthSpring) that peddle and profit from them, contribute to the government's health care financing woes by taking taxpayer money to provide Medicare benefits at higher costs than necessary. A new analysis of Medicare financing by the respected Kaiser Family Foundation calls the upside of Medicare Advantage plans "a matter of dispute" but concludes that "it is undisputed that Medicare Advantage payments have added to the cost of Medicare borne by the government." Although the AARP doesn't support doing away with Advantage plans entirely, the organization's head does agree that Medicare Advantage insurers "are being paid too much."

The CP story finds HealthSpring CEO Herb Fritch fretting that reform "could put the whole Medicate Advantage industry in peril." That sounds like a fine idea. As The New York Times aptly editorialized a couple of years ago, "If private health plans are supposedly so great at delivering high-quality care while holding down costs, why does the government have to keep subsidizing them so lavishly to participate in the Medicare program?" Good question.

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