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Corporate Welfare in the Medicare Program


Fri, Dec 5th, 2008
Posted in Commentary

How would you like to have a health care insurance plan that allows you to help pay for your neighbors' healthcare insurance plans? That includes neighbors who have six figure incomes. Welcome to the world of Congressmen who succumb to the blandishments of the insurance industry or who still believe private industry can always do things better than government.

The plan that you need for this is standard Medicare and your neighbor needs to have a Medicare Advantage Plan.

Medicare Advantage plans have been around, in some form or other, since the seventies, but up until George Bush gained the Presidency and the Republicans controlled Congress, they have generally been a bust.

These plans were originally sold as a way to control costs because everyone knows private enterprise is so much more efficient than the government (think General Motors, AIG, Lehman Brothers, well you get the idea). Originally these private insurance plans were paid 95% of the traditional Medicare costs on a county by county basis for each enrollee. Almost all plans were what were called, euphemistically, Health Maintenance Organizations (HMO).

Both patients and healthcare providers quickly tired of the red tape and limitations of HMO's. HMO's quickly found they could not provide coverage to match Medicare and still make any profit. Patient, doctor, and HMO have parted company by mutual agreement.

The insurance industry lobbyists' soon stepped in to change the reason for having these things in the first place. They convinced the Congress to authorize increased payments and more lax over sight to boost the number of private plans and private companies involved. They turned the program entirely on its head.

Now we have HMOs, PPOs, Special Needs Plans, and Private Fee for Service Plans. Less than 20% of all Medicare enrollees are members of such plans.

Pay attention now. The catch is the other 80% pay for, on average, about $1200 per year extra for these folks to be on these plans. They pay about $108 more per year for their own traditional Medicare and the Medicare fund is out the rest. Conspiracy theorists believe this is part of conservative Grover Norquists plan to "starve the beast" by bankrupting Medicare as soon as possible.

Of all the plans listed above PPOs (preferred provider organizations) are the most expensive at 119% of traditional Medicare. Fortunately they are also the plans with the lowest patient population.

The Private Fee For Service plans now receive 117% of the traditional Medicare amount. Since they now account for 22% of the Medicare Advantage Plan enrollees, this totals almost a third of the excess payments. Just this one plan will have 2.5 billion dollars in overpayments in 2008 and more in 2009.

All Medicare Advantage plans will receive 8.5 billion dollars excess in 2008 and more in 2009. The New York Times estimated the subsidies paid to these plans will be in excess of 50 billion dollars from 2009 to 2012. This corporate welfare to the insurance industry continues year after year. If we allow it to continue it will make the auto industry bailout look like pocket change.

The insurance industry has had nearly 40 years to make good on their claim that they can provide this service more efficiently and economically than "government". They have failed miserably. The only difference between the insurance industry and the financial sector and auto industry is their method of robbing the peoples' treasury. The insurance people just send their lobbyists in rather than appear at a congressional hearing.

All over-payments to these plans must stop. The insurance companies must be paid the same amount traditional Medicare pays out for each recipient. No more than that. If they can then compete, fine. All those fine free market capitalists should be okay with head to head competition.

A few caveats need apply. In order for insurance companies to compete, they must take all applicants just as Medicare does. Insurance companies cannot drop a patient/subscriber who becomes ill or develops a chronic disease. They must provide the same coverage as Medicare. They cannot raise premiums on a subscriber because of age or conditions. They must pay providers as quickly as Medicare or pay interest, just as Medicare does. Coverage must extend geographically comparable to Medicare.

These billions are not going to save Medicare or reduce the deficit by themselves. The payments are just a single example that I happen to know about because of my interest in healthcare. There are probably another hundred such programs and overpayments to consider.

There are reasons other than financial for Congress to act and stop these inequalities. This is a government program that initially was to be uniformly applied to all citizens. It still should be. Changing the payment will not prevent those more financially fortunate from buying supplemental insurance to cover frills. The basic health needs of all will still be on a level playing field.

I am writing to Tim Walz and Amy Klobuchar to support any bill that will remove this corporate pork. I hope you will also.

Dr. Robert Sauer, a retired physician, lives in Preston. He can be reached at r.sauer@mchsi.com

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