News & Events

Democrats seek cuts in Medicare Advantage

Citing perks, GOP says Obama misled

By Lisa Wangsness, Globe Staff  |  September 24, 2009

More than 10 million seniors enrolled in an enhanced, private version of Medicare known as Medicare Advantage – including 175,000 in Massachusetts – could see their plans shrink or be replaced with traditional coverage under the health care overhaul plans proposed by Democrats in Congress.

Democrats want to cut Medicare Advantage by more than $120 billion over 10 years. It could leave seniors with fewer boutique Medicare options offered through private insurance companies or with private plans that offer fewer of the extra benefits such plans provide.

Republicans have seized on Medicare Advantage cuts to accuse President Obama of fudging the truth with his oft-repeated pledge that seniors’ Medicare benefits will not be reduced. Under the health care overhaul proposals as written, traditional Medicare would still be open to all Americans age 65 and over, and the standard benefits would not change.

Private insurers can afford to offer extras under Medicare Advantage – such as lower premiums and coverage for eyeglasses and gym memberships – because the federal government pays them about 14 percent more per patient than Medicare typically spends.

Many health policy specialists say that, with Medicare nearing bankruptcy and millions of Americans going without any insurance at all, the United States can hardly afford to offer a pricier Medicare version that is growing more popular.

“The [Medicare Advantage] beneficiaries have gotten a very good deal from these overpayments. These are good services,’’ said Robert Berenson, a health policy specialist at the Urban Institute. “But it’s a very inefficient way to give people extra benefits.’’

The $120 billion cut to Medicare Advantage is part of spending reductions in Medicare totaling $460 billion to $540 billion over 10 years that have been proposed by Democrats. The cuts would fall on the government reimbursement rates for a broad variety of providers such as hospitals and home health agencies, which could probably absorb them without affecting the services elderly Americans receive, many specialists said in interviews.

Though some industry groups complain the spending reductions are too severe, adjustments could be made if problems arose because they would be phased in gradually. Most are aimed at making the programs more efficient.

“We think the proposals actually will improve access and quality,’’ John Rother, a leading lobbyist for the AARP, the large lobbying organization for senior citizens, said in an e-mail.

But Republicans have seized on Medicare spending reductions as a political bludgeon aimed at the health care overhaul.

Seniors are a key constituency, and “scaring seniors’’ with attack ads is a perennial campaign tactic for both parties.

Polls show that Republicans, who began decrying the Democrats’ Medicare proposals last summer, have already helped turn seniors against the president’s health care overhaul.

That is despite the GOP’s own proposals to cut Medicare by 14 percent over seven years in the mid-1990s, said health economist Len Nichols of the New America Foundation, a Washington research group.

The White House is scrambling to fight back. Yesterday it released a seven-page report titled “Health Insurance and Medicare: Making Medicare Stronger for Seniors’’ that emphasizes the upside of a health overhaul: major prescription drug discounts for seniors, free preventive services such as mammograms and colonosopies, and investments in higher quality care.

James Roosevelt Jr., chief executive of Tufts Health Plan, a Massachusetts plan with 83,000 Medicare Advantage subscribers, said the effect of the Medicare Advantage cuts will depend on how they are made.

The House Democrats’ proposal might not dramatically change Tufts’s offerings, he said. But the Senate version would be “quite devastating to what is available to our Medicare Advantage members,’’ he said.

Most of the rest of the Democrats’ Medicare spending reductions involve asking providers to accept a slower-than-expected rate of growth in payments over the next decade.

Some, such as payments to home health care agencies, were previously recommended by the Medicare Payment Assessment Commission.

Stuart Guterman, assistant vice president for the Commonwealth Fund’s payment system reform program, said, “This policy is saying something that providers ought to be able to do.’’

Some specialists worry seniors could be harmed indirectly. Gail Wilensky, who ran Medicare under President George H.W. Bush, notes that many nursing homes depend on getting overpaid by Medicare to offset the stingy payments states provide for Medicaid patients.

Curtailing those overpayments could strain those fragile institutions, she said.

But health policy specialists said the cuts should be considered in the context of a larger problem: Medicare is on the verge of going broke.

“We can think that the status quo means everybody has everything they have now, but that is all in danger if we don’t do anything,’’ Guterman said.