OPINION: taking advantage of Medicare Advantage

Introduction

Facing government cuts to one of their cash cows—private Medicare plans—health insurance companies have launched a multi-pronged campaign, financed by the customer premiums, to persuade Congress to keep the cuts from going into effect next month.

The industry’s big PR and lobbying group, America’s Health Insurance Plans, is deploying the tactics I described in Deadly Spin to scare seniors into believing that if the federal government stops overpaying insurers that offer Medicare Advantage plans (the private alternative to the traditional government-run Medicare program) seniors will “pay more, get less and lose choices.”

“U.S. Health Insurers Launch TV War Over Medicare Advantage Cuts,” read the headline of a Reuters story last week when AHIP’s ads started running.

At issue is a 2.3 percent cut in payments to Medicare Advantage plans by the Centers for Medicare and Medicaid Services (CMS) that are scheduled to go into effect on April 1.

The industry’s campaign, of course, conveniently leaves out the fact that the government has been overpaying private insurers for years and that the cuts being proposed starting next month are part of a broader effort to put a stop to those overpayments.

Members of Congress inserted a provision in the Affordable Care Act to reduce the overpayments by $200 billion over the next several years. The 2.3 percent cut would be in addition to that.

It makes little sense for the government to overpay private insurers in the first place, but that is exactly what’s been going on for several years. During the administration of George W. Bush, which supported the privatization of the Medicare program, Congress passed legislation to provide incentives to insurers to offer private plans to compete with traditional Medicare. This enabled the plans to offer richer benefits than traditional Medicare at little or no additional cost to beneficiaries while also making a tidy profit.

It’s little wonder that the number of people enrolled in Medicare Advantage plans has increased rapidly. About one of every five Medicare beneficiaries are now enrolled in private plans. When the government enables you to offer plans with vision and dental benefits, lower copayments and discounts on gym memberships, all at no additional cost, you’re going to be able to lure a lot of seniors from traditional Medicare.

An agent for Humana Inc., one of the biggest Medicare Advantage companies, told me a few years ago that, thanks to the sweet deal insurers have been getting from the government, his job of enrolling healthy seniors in Humana plans was “like shooting fish in a barrel.”

AHIP’s campaign to kill the cuts includes intense lobbying on Capitol Hill as well as other tactics to influence public opinion, like paying for a survey to bolster its case that seniors are happy with their MA plans.

AHIP hired a polling firm to survey 800 seniors, half of whom were enrolled in MA plans and half in traditional Medicare. The result, according to AHIP: “Seniors in Medicare Advantage are as satisfied with their plans as seniors in traditional Medicare.”

AHIP clearly hopes no one pays close attention to the survey. If you do, you’ll see that people enrolled in traditional Medicare were actually more satisfied with their coverage (92 percent satisfied/very satisfied with 5 percent unsatisfied) than people in MA plans (90 percent satisfied/very satisfied with 7 percent unsatisfied).

AHIP did not disclose the full results of the survey or the methodology used by the polling firm, North Star Opinions, used. I asked for it, but no one has gotten back to me.

AHIP’s CEO, Karen Ignagni, has been quoted as saying that the MA program will go into a “tailspin” if the proposed cuts go into effect. She predicted that many people enrolled in MA plans will see their premiums go up and their benefits reduced and that many of them will actually be dropped by their MA insurers. That’s because some —if not many— of the private insurers will desert the market if the profit margins decrease on their MA business.

I can attest that that could indeed happen. Cigna, one of the companies I used to work for, used to operate private Medicare plans in several markets but left all but one several years ago, affecting more than 100,000 seniors, after the government adjusted payments to insurers. Aetna and a number of others insurers dumped thousands more. Shareholders were not happy that the business would be less profitable than before.

AHIP may have a hard time convincing the current Congress to take pity on insurers. Last week the Government Accountability Office released a report estimating that CMS overpaid private insurers between $3.2 billion and $5.1 billion from 2010-2012. Chances are, though, that far more people will see AHIP’s TV campaign than an obscure GAO report. And people won’t even know that insurers are behind the campaign. That’s because AHIP is using one of its front groups, the Coalition for Medicare Choices, as the sponsor of the campaign.

Insurers don’t want you to know they’re spending your money to mislead you in order to protect profits. Can’t blame them for that.