For years, Democrats have accused Republicans of wanting to slash entitlements such as Medicare and Social Security, but it is the Biden Democrats who actually cut benefits. Worse, they do it in ways that effectively cost taxpayers more.
The Biden administration is poised to squeeze Medicare Advantage plans yet again, but it should reconsider. Its proposal, due to be finalized by month’s end, continues the “worst of both worlds” approach of giving fewer choices to patients while indirectly but inevitably hastening Medicare’s insolvency.
Medicare’s permutations can be bewildering, so let’s simplify. In ordinary Medicare, the government pays a set fee to doctors for each covered medical service. Options, though, are limited, and many patients are unhappy with the quality and breadth of care. That’s why more than half of Medicare patients choose Medicare Advantage, which, within limits, allows them to get benefits with varying fee schedules through government-regulated private insurance markets. Of the 45% still in traditional fee-for-service Medicare, a significant number supplement coverage by paying out of pocket for something called Medigap, which covers costs for which Medicare doesn’t pay.
In sum, people who want something better than basic Medicare choose either Medigap or Medicare Advantage. It’s illegal to do both. The former keeps most basic services as a completely government-run system. Medicare Advantage gives the freedom of the private market, within certain parameters, for the entirety of coverage, not just for several specially added options. Predictably but unwisely, Biden and the Democrats want more government control while despising market freedoms.
Hence, they keep squeezing Medicare Advantage. As they do, they squeeze benefits.
Here’s how.
For Medicare Advantage, the Centers for Medicare & Medicaid Services pays insurers a flat fee subsidy per enrollee. Biden’s rule for the second straight year in a three-year plan, if this rule is adopted by April 1, would reduce the subsidy by 0.16%. Last year, the cut was 1.12%. This is even as costs rise by 3.1% in the overall economy and 7% in relevant healthcare sectors. This is one of numerous ways the administration is drawing reins steadily tighter around Medicare Advantage while not applying similar standards to regular Medicare and Medigap.
By cutting front-end subsidies as costs rise, Biden forces insurers to pass some of those costs to patients or to cut benefits. Smaller insurers and nonprofit plans, unlike big guys such as Humana and United Healthcare, cannot easily absorb such losses at the margins. Health policy expert Avik Roy of the Foundation for Research on Equal Opportunity noted on March 1 that “United and Humana have increased their market share from 33% in 2010 to 47% today,” and he said the Biden rule would hasten this detrimental consolidation. Thus, big government favors big business over smaller ones that might fit patients’ individual needs better.
This is typical of Democratic health policy but is misguided. As the Washington Examiner’s Tim Carney explained this week, the Obamacare overhaul, which passed when Biden was vice president, resulted, largely by design, in “driving more business into the hands of fewer and fewer insurers.” Result: “Obamacare means consumers have fewer choices.”
Likewise, here. Despite Democrats’ constant claim that they stand up for the poor and minorities, their attack on Medicare Advantage does just the opposite. Again citing Roy, “Disadvantaged populations disproportionately enroll in Medicare Advantage. While 55% of seniors overall enroll in private MA plans, 65% of black enrollees do, along with 69% of Latinos.”
As the Biden Democrats essentially encourage patients to avoid Medicare Advantage in favor of regular Medicare and Medigap, taxpayers pay more in the long run. The Congressional Budget Office, notes Roy, “estimates that simply requiring Medigap plans and the traditional Medicare program to conform to the standards imposed on Medicare Advantage would save $122 billion over a decade.” Yet, Biden is pushing seniors into those costly Medigap options.
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Markets are nimble in ways government planners are not. Biden’s plans pretend to achieve tiny savings from the right hand now at the cost of more taxpayer expenses from the left hand later with a diminution in choices and, probably, long-term quality as well.
Medicare Advantage should be expanded, not stymied. Biden’s CMS should not proceed with its phantom price cut, which, by real reckonings, is a slash in benefits.