Some legislators want deeper cuts than White House has already proposed.

Commercial insurers may have been assured a role in healthcare for the foreseeable future, but they have taken one major hit. Medicare Advantage programs have become the first victims in the battle over healthcare reform.

Whatever form healthcare reform takes, if more Americans get coverage, it’s going to cost money. One estimate puts the price tag at $1.5 trillion over 10 years to cover the currently uninsured. Everyone’s looking for costs to cut, and Medicare Advantage programs are the earliest targets.

The White House in February outlined provisions that would raise revenues for a health-reserve fund through changes to tax rules and Medicare payments. The most significant Medicare provision drastically cut payments to private insurers through the Medicare Advantage program, by creating a competitive bidding system to make Medicare Advantage payments more comparable to payments through the government’s traditional Medicare fee-for-service program. That provision is slated to save $175 billion over 10 years, the Wall Street Journal reported.

In Medicare Advantage, private insurers such as Humana, WellPoint, and UnitedHealth administer programs that offer more benefits at higher costs than the regular government health plan for the elderly. Medicare Advantage has rapidly grown in popularity and become a significant profit center for commercial insurers. 

Pressure on MA Rises

But subsidies in the Medicare Advantage system are too high and cannot be justified, White House Budget Director Peter Orszag told attendees at the America’s Health Insurance Plans’ National Policy Forum on March 10 in Washington, D.C., A.M. Best reported.

Some lawmakers think they can squeeze more savings out of MA. In a speech sponsored by the National Coalition on Health Care, a Washington-based nonprofit group that calls itself non-partisan, Rep. Charles B. Rangel (D-N.Y.) described MA as a political boondoggle and said the White House’s budget doesn’t cut deep enough, Bloomberg reported.