Medicare Advantage plans were created in 2003 under George W. Bush and a Republican majority in both houses of Congress to privatize Medicare: it allowed seniors to choose a private insurance company to manage their Medicare benefits instead of the traditional public Medicare plan. The law was written to intentionally overpay Medicare Advantage plans. It allows them to cherry pick enrollees in parts of the country with the highest reimbursement rates, and Medicare Advantage plans have often used this overpayment to offer more extensive benefits and lure seniors away from public Medicare. This is not exactly what you would call an open market with a level playing field! The number of seniors enrolled in privatized, Medicare Advantage plans has ballooned to 28% of all enrollees in 2008, and insurance companies that provide Medicare Advantage coverage have been paid on average 14% more than it costs our public Medicare plan to cover the same people (see source here).
Sounds like a lucrative business – so why would Harvard Pilgrim be jumping ship in Massachusetts? The answer is national health reform. It was a priority of Democrats to start reducing those overpayments to private insurance companies, for the simple reason that the country cannot afford them. This proposal, you may remember, elicited nationwide fear-mongering that Obama was attempting to slash benefits for seniors. Even with death-panels and granny-killing, the new national health reform will freeze Medicare Advantage reimbursement rates in 2011 and slowly begin eliminating the 14% overpayment in the following years.
This suddenly puts in perspective Harvard Pilgrim’s decision: ‘”We became concerned by the long-term viability of Medicare Advantage programs in general,” said Lynn Bowman, vice president of customer service at Harvard Pilgrim.’ In short, Harvard Pilgrim does not believe it can compete with traditional Medicare on an even playing field, and is getting out of the business.
Traditional Medicare is not a single payer insurance plan for seniors. The efficiency of a single payer system comes from providers – hospitals, doctors offices, nursing homes, etc – dealing with only one payer. That one payer is also able to plan and budget across the health care system. Medicare can not do any of these things and it, like the private insurance system, faces unsustainable cost growth. However as a public insurance program, Medicare is much more efficient than a private insurance company, spends less on overhead expenses, and is able to set lower but equitable rates for providers.
Today’s article tells us an interesting story about the incredible waste of our private insurance system, and the growing role it plays as an unnecessary middle man that drives up our costs. Hopefully we will be able to reclaim Medicare in the following years as an efficiently managed public service for seniors, not a profit center for health entrepreneurs, and pave the way for Medicare for All.
See Mass-Care’s website for more information.
HPHC under Charlie Baker had higher administrative costs than the average for the state. He’s campaigning on his background at HPHC and he was ineffective at reducing costs when he ran the show.
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p>As a comparison Medicare administrative costs are 2%.
If Medicare is such a clusterf*** and has 2% administration fees, what does that make the guy who has 11%? Just wondering.
Come on John, don’t run away.
drug coverage. You don’t seriously believe that people 65
and older are now going to be voting democrat in November, or do you? I recommend that you read the main editorial in today’s Herald to get a different take from the Globe’s.
it’s not free. Instead the small amount of people who uses these plans, they instead purchase a medi-gap plan that HPHC and other privates offer that includes prescription coverage. So I have no idea what you are talking about.
HPHC and alike only spent 14% of the extra month thrown at them by the government. Privates get 114 to Medicare’s 100, so you would think that even though their administrative costs are higher they could thow in a few extras in the plan. But they actually pocket 86% of if for themselves. From our pockets to Charlie Baker’s wallet. We are basically ending the scam and HPHC is getting out, plain and simple.
My emphasis added…
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p>Squeezing these insurance companies will have effects like this so get used to seeing them.
it’s just that we don’t pay 14% more for private insurers for the same coverage. If your administrative costs are 2% and it’s near the teens for the privates they NEED to additional 14% to beat Medicare. So you think it’s a good idea to pay private insurers 14% MORE to do the same thing? You need to make some sense in your argument.