Over the past few days Republican leaders and advocacy groups have pummeled the administration over an announced cut of 3.55 percent in Medicare Advantage. In a letter signed by a batch of GOP senators to HHS Secretary Kathleen Sebelius, they complain that the change will necessitate significant cuts in benefits and/or cost increases. This follows rounds of furious statements from House GOP leaders. (Separately it was announced that “65 percent of the small firms are expected to experience increases in their premium rates while the remaining 35 percent are anticipated to have rate reductions . . . . This results in roughly 11 million individuals whose premiums are estimated to be higher as a result of the ACA and about 6 million individuals who are estimated to have lower premiums.”)
American Enterprise Institute’s Scott Gottlieb explains that it could get worse:
Get ready for more cuts to private Medicare plans, and more fired doctors, as insurers are forced to cheapen provider networks, and benefits.
That’s the upshot from the announcement by the Centers for Medicare and Medicaid Services that 2015 Medicare Advantage rates will be cut as much as a whopping 8%, once new reductions get baked into the program’s baseline.
Some of the best analysis of the new rate adjustments comes courtesy of managed care analysts at Credit Suisse. In a report tonight, they cobble together the different adjustments to arrive at the 8% figure. With this being an election year, and 15 million seniors (about 29% of all Medicare beneficiaries) getting their care from the program, there’s a chance that some of these cuts will get reduced. The Obama Administration has until April 7th to publish the final numbers.
After playing the Mediscare game to the hilt, Democrats, deserve a taste of their own medicine for breaking a Medicare promise they could not keep. But Republicans should shy away from the notion that cuts in Medicare per se are disastrous; instead they should focus on reform of the entire Medicare system.
In fact, what is needed is an overhaul of fee for service medicine. James Capretta makes a persuasive case that the entire system should shift to a Medicare Advantage-style arrangement in which we “would abandon efforts to prop up Medicare’s outdated fee-for-service insurance system with significant new money and instead focus any new resources on reversing the deep cuts planned in the coming years for the Medicare Advantage (MA) program — the private insurance component of Medicare.” He observes, “Today, 27 percent of Medicare’s beneficiaries are enrolled in MA plans; about one out of two new program enrollees picks an MA plan for coverage. These plans have total flexibility to devise alternative models for paying physicians without the need for new legislation from Congress. But instead of building on this model, the Obama administration wants to shrink it because MA plans threaten the government’s total control over the Medicare program.”
It is ironic that the Affordable Care Act should be essentially a mechanism for destroying private insurance market competition. We’re luring people from employer-backed plans on to insurers (“unlocking” workers from work), expanding the Medicaid rolls and eliminating seniors’ choices by squeezing Medicare Advantage. This is precisely the opposite of what one must do to rein in costs, which was the goal of the act. Eliminating private insurance competition forces an uptick in the health-care sector that is either entirely government-run or run like a utility (benefits are mandated, costs are regulated). As costs balloon, the alternatives will be to raise taxes and/or squeeze providers (limiting availability of services).
The latest round of Medicare Advantage cuts highlight the need for comprehensive Republican alternatives to Obamacare. It is not enough simply to highlight the cuts in Medicare Advantage necessitated by Obamacare. The reason there are so many “bad news” stories on cost, availability, adverse selection and more is that the fundamental premise of Obamacare is wrong.
Republicans need to address all aspects of the health-care market with Medicaid and Medicare reform (both should allow health-care purchase of their choice via a nonrefundable credit in which they can put any leftover amounts in a health-care savings account) and a patient-centered health care for everyone else. In all cases, the goal should be to enhance competition, assist consumers to make wise medical choices that fit individual needs (e.g. don’t force young people to overbuy insurance) and resist incentives to stay on public-supported health care. The number of people adversely affected by Obamacare (“losers”) is growing exponentially for a health-care statute billed as having no losers. (Keep your doctor! Reduce your costs! Work less!) The administration is hoping no one notices, at least until the midterms are in the rear view mirror.