Democrats may be feeling better about the politics of the Affordable Care Act, but the legislation is complex enough that political dangers lurk around every corner, and constant vigilance is required to forestall the next attack. So the administration has announced that the cuts to Medicare Advantage that were scheduled to take place starting next year will not go forward; instead, the program will actually get an increase in payments.
The conflict over Medicare Advantage provides a revealing microcosm of not just health care in general but the broad divide between the parties, on both policy and politics.
First, some background. Conservatives fought against Medicare’s creation in 1965, and always believed that as a big-government, single-payer insurance program, it was doomed by its very nature to provide terrible service at inflated prices. Yet the program is not just efficient (Medicare spends far less on non-medical costs, i.e. bureaucracy, than private insurers), it’s spectacularly popular with its beneficiaries. So every election season, Republicans find themselves accusing opponents of being insufficiently protective of a program that embodies everything they despise about government.
Between elections, they’ve often tried to find ways to privatize the program, if not completely, than in little ways here and there. One of these was Medicare Advantage, which has been around in some form and under different names for a few decades, but took off in the late 1990s; today, over a quarter of Medicare beneficiaries are enrolled in an MA plan. A private insurance company, rather than the federal government, administers Medicare benefits. The argument in creating and expanding the program was that because the private sector does everything better than government, insurance companies will naturally provide better service and save money if they administer the benefits.
But it didn’t turn out that way. In fact, Medicare Advantage has always cost more than traditional Medicare, meaning taxpayers are subsidizing insurance companies to do the same thing the government can do for less. Insurers argue that the government subsidies they get are passed along to beneficiaries in the form of added benefits (they always mention gym memberships), but evidence suggests that most of it is just padding the insurance companies’ bottom line. So the Affordable Care Act included cuts to Medicare Advantage, to scale back the taxpayer subsidy of the insurers.
The insurers knew, however, that passing a law isn’t the end of the story. So they’ve been waging a campaign to get the cuts delayed or reversed, complete with lobbying and TV ads, and that campaign is now bearing fruit. The administration had proposed at 1.9 percent cut to the program in 2015, but now they’re actually going to increase it by .4 percent.
I’m not defending the administration’s reversal. I’m sure officials will come up with a justification (“strengthening the program” is the standard one), but the truth is that this is about politics. Democrats in both houses who are vulnerable in this year’s elections joined with the insurance companies to pressure the administration, because they could already see those ads in the fall: “Senator X did nothing while the Obama administration cut your Medicare!” In a political campaign, you aren’t going to get far trying to explain the details of why it would be smart policy. So the administration gave in.
That’s politics, of course — if you expect your leaders to court political danger to make the right policy choice, you’re going to be disappointed most of the time. And the specter of a threat to Medicare is more often something Democrats use against Republicans, to great effect. But when a program is popular enough, everybody gets the chance to demagogue it sooner or later.