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Medicare Advantage Keeps Feeling the Heat in Washington

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.


The cuts will lead to higher premiums and reduced care for Medicare users, Industry spokesmen say. Private Medicare plans cost more because they provide more benefits, including vision and dental care and lower out-of-pocket costs, said Robert Zirkelbach, a spokesman for America’s Health Insurance Plans.

Jun 9, 2009, 10:05

Kinder, Gentler Strategy Pays Off for Insurance Industry

Health lans play nice, win a seat at healthcare-reform bargaining table.


Until recently, you may not have seen a “Harry and Louise” ad that slams efforts to reform U.S. healthcare. Interested parties have been hard at work behind the scenes, though, to sway legislators as they contemplate sweeping changes this summer.


UnitedHealth Group Inc., the nation’s largest managed care company, spent $1.5 million to lobby the federal government in the first quarter, according to a recent disclosure form, the Associated Press reported. Hartford, Conn.-based Aetna Inc. spent $809,793 on lobbying in the first quarter. And Philadelphia-based Cigna Corp. spent $450,000, according to the Boston Globe.


Insurers are right to worry. President Barack Obama, as a young state senator, once told union members he favored single-payer universal healthcare. That would mean the end of commercial health insurance. Although now, Obama says, “We don’t want a huge disruption as we go into healthcare reform where suddenly we’re trying to completely reinvent one-sixth of the economy,” he has proposed a Medicare-like public insurer that would compete with private insurers to cover currently uninsured Americans, GateHouse News Service reported.


Insurers Take a Fresh Tack


The insurance industry, represented by America’s Health Insurance Plans, is taking a different tack in 2009 than in the mid-1990s. Led by President and CEO Karen Ignagni, a Democrat and one-time union official, insurers are taking a lead role in the debate over healthcare reform.


In December, before Obama took office, AHIP proposed its own version of reform that would keep private insurers alive and well. That plan would:

  • Set up a public-private advisory group to recommend cost-cutting measures to Congress;
  • Create portable health plans that wouldn’t be subject to varying state laws;
  • Give tax credits to people who spend a large percentage of their income on out-of-pocket health care expenses;
  • Guarantee coverage for people with pre-existing medical conditions; and
  • Extend Medicaid coverage to all uninsured Americans who live in poverty.

Compare that to 1994, when the health-insurance lobby paid for an ad campaign that featured a couple at their kitchen table contemplating a healthcare system run by government bureaucrats and lamenting, “They choose, we lose.” The campaign devastated the Clinton Administration’s effort to reform healthcare.


Now, spending on pro-reform ads is running 8-to-1 ahead of opposition messages, the Atlanta Journal-Constitution reported.


Wall Street Rewards Efforts


The stock market appears to like the industry’s approach; health-insurance stocks soared above broader indexes earlier in early May. Aetna Inc. and Cigna Corp. led large private health insurers that saw their stocks climb. In contrast, the Standard and Poor’s 500 index fell nearly 2 percent over the same period, the Associated Press reported.


Analysts told AP that investors have hope that private insurers won’t have to compete against a government-run plan structured like Medicaid or Medicare.


Obama and many Democrats favor such a plan, which would compete with private insurers to enroll middle-class workers and their families. But a government-run plan has drawn Republican opposition, and insurers have said it would hurt them.


“At some point over the next month or two, it will become evident that a government-run plan is not a likely outcome this year,” Oppenheimer analyst Carl McDonald told AP.


Democrats also have said bluntly in recent weeks that a single-payer plan, or a government-run program for everyone, was not practical or politically feasible.


Here Come the Attacks


But as Congress takes a breather to gauge constituents’ opinions on healthcare reform, a group has launched a national attack-ad campaign against Obama's plans, Fox News reported.

Conservatives for Patients' Rights, founded by multimillionaire investor and former hospital chief executive Rick Scott, began this week airing a 30-minute infomercial on some cable networks warning Americans of a health care takeover.


Scott, who was ousted by his own board of directors in 1997 amid the nation’s biggest healthcare fraud scandal, is using $5 million of his own money and up to $15 million more from supporters to push his campaign, The Washington Post reported.


Scott is using the same firm that produced the “Swift Boat” attacks that wounded Sen. John Kerry (D-Mass.) in the 2004 presidential election.

Jun 9, 2009, 09:53