Stop Corporate Welfare Programs

Dear Friends and Colleagues:
Attached an interesting editorial from yesterdays New York Times focusing on the issue of government subsidies for health insurance companies offering Medicare Advantage plans.

What is the problem?
About a fifth of elderly Americans now belong to private Medicare Advantage plans, which — thanks to government subsidies — often charge less or offer more than traditional Medicare. The government pays private plans 12 percent more, on average, than the same services would cost in the traditional Medicare fee-for-service program. The private plans use some of this money to make themselves more attractive to beneficiaries — by reducing premiums or adding benefits not covered by basic Medicare — and siphon off the rest to add to profits and help cover the plans’ high administrative costs ( and boost their CEO salaries)

What are the results?

The biggest subsidies — averaging 19 percent above cost — go to private fee-for-service plans, which are the fastest-growing part of the Medicare Advantage program. Those companies receive $54 Billion over five years resulting in an average premium increase of $2 to pay for those subsidies.

"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?"

What Should Be Done?

* Eliminate the subsidies
* Offer traditional Medicare plans with lower premiums and less adminstrtaive overhead
* Force private companies to compete with traditional Medicare plans

The proponents of market based health care services often forget that more then 50% of each dollar spent spent for health care services is provided by the government NOT INCLUDED the tax subsidies for employer-based health insurance.
Instead of calling for market based health care (which even conservatives do not support) , we should hold our government accountable on how it spends our health care dollars and eliminate corporate welfare programs (i.e subsidies).
Yours

Bernd


====================================================================================

April 21, 2007
Editorial
The Medicare Privatization Scam

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?

About a fifth of elderly Americans now belong to private Medicare Advantage plans, which — thanks to government subsidies — often charge less or offer more than traditional Medicare. As Congress struggles to find savings that could offset the costs of other important health programs, it should take a long and hard look at those subsidies.

The authoritative Medicare Payment Advisory Commission estimates that the government pays private plans 12 percent more, on average, than the same services would cost in the traditional Medicare fee-for-service program. The private plans use some of this money to make themselves more attractive to beneficiaries — by reducing premiums or adding benefits not covered by basic Medicare — and siphon off the rest to add to profits and help cover the plans’ high administrative costs.

Although the insurance industry insists that the subsidies are much lower and are warranted by the benefits provided, Thomas Scully, who headed the Medicare program for the Bush administration until 2003, told reporters recently that the subsidies were too large and ought to be reduced by Congress.

The largest private enrollment is in health maintenance organizations, which typically deliver care a bit more cheaply than standard Medicare and should not need their 10 percent subsidies, on average, to compete. The biggest subsidies — averaging 19 percent above cost — go to private fee-for-service plans, which are the fastest-growing part of the Medicare Advantage program. Unlike the H.M.O.’s, which at least manage a patient’s care and bargain hard with doctors and hospitals, these plans ride on the coattails of standard Medicare, typically providing access to the same doctors and paying them at the same rates. Thanks to the big subsidies they get, such plans are often a good deal for beneficiaries, charging less for the same benefits or adding benefits without raising prices.

The main losers are the beneficiaries in the standard Medicare program, whose monthly premiums are roughly $2 higher to help pay for the subsidies, and the taxpayers who pick up part of the tab. The subsidies also erode the long-term solvency of Medicare, which needs to rein in costs, not increase them with handouts to insurance companies.

When the Democrats first won control of Congress, it seemed possible that they might eliminate the subsidies — saving some $54 billion over five years — to finance a $50 billion expansion of a health insurance program for low-income children. But the insurance industry has mounted a furious lobbying campaign to head off any cuts.

Congress ought to eliminate the subsidies completely unless it is willing to subsidize the same benefits — at enormous cost — for the far greater number of people enrolled in standard Medicare. It is time to level the playing field and force private plans to really compete with traditional Medicare.