Pay no attention to those insurance lobbyists behind the Medicare curtain!

Introduction

If you go to 601 Pennsylvania Avenue, N.W., Suite 500, in Washington, D.C. in search of what you’ve been told is the address of a grass roots organization concerned about “cuts” to Medicare, you will likely be surprised what you find there.

You will indeed find an organization that is lobbying hard to keep federal dollars flowing, but it is anything but grass roots.

Ads supposedly sponsored by the Coalition for Medicare Choices started appearing last week on buses and subway trains and on Washington TV stations warning that seniors will face higher costs, fewer benefits and a loss of provider choice if Congress and the Obama Administration don’t take action to keep planned rate cuts from going into effect.

The ads are part of what POLITICO described as “the new seven-figure campaign … that is the group’s biggest mobilization to date for Medicare Advantage,” the alternative to traditional Medicare that is operated by private insurance companies.

The real sponsor of the ads is the real tenant of 601 Pennsylvania Avenue., N.W., Suite 500: America’s Health Insurance Plans, which is one of the best-funded and influential lobbying and PR outfits in the nation’s capital.

As I noted last week, several insurance companies make a boatload of money by participating in the Medicare Advantage program. The Government Accountability Office noted in a recent report that the federal government spent about $135 billion on the Medicare Advantage program in 2012 alone. And much of that was in the form of overpayments that the government has been sending to private insurers for years.

Brian Biles, professor of health policy at George Washington University, explained in testimony before the Senate Committee on Aging last Wednesday that Medicare has paid private plans more than the costs of traditional Medicare since 1997 when Congress authorized extra payments to entice private plans to operate in rural areas. Six years later, those extra payments were extended to just about all private Medicare plans.

Biles testified that those extra payments to Medicare Advantage plans nationwide averaged 13 percent — or $1,100 per enrollee — in 2009. The Congressional Budget Office projected that year that the excess payments would total more than $150 billion over ten years.

As lawmakers were debating health care reform in 2009, they inserted a provision in what became the Affordable Care Act to get rid of those overpayments. Alarmed, AHIP has been hard at work ever since trying to figure out how to keep the Centers for Medicare and Medicaid Services (CMS) from carrying out that provision of the law.

And for good reason. Insurers like UnitedHealth and Humana with a substantial number of Medicare Advantage enrollees are able to convert those excess payments into hefty profits. Financial analysts at Goldman Sachs estimated a few years ago that 66 percent of the net income at Humana, where I used to work, came from its Medicare Advantage business.

Not all of that money goes to profits, however. Some of it is used to add benefits like dental and vision and gym memberships, which many seniors enrolled in the plans do indeed value. But another big chunk of the extra payments goes to advertising and sales activities—and to AHIP to finance the group’s lobbying and PR campaigns.

The Coalition for Medicare Choices current campaign is heavy on intimidation, all of it directed toward members of Congress. Under the headline, “Seniors are Watching,” is this warning:

“In 2010, Seniors saw Washington cut Medicare Advantage funding by $200 billion, causing rate cuts that already hurts them. Now more rate cuts are looming. Rate cuts that would mean higher costs, lost benefits and lost provider choices for seniors. As next year’s Medicare Advantage rates are being set, seniors are watching more closely than ever. They don’t want to see any more rate cuts. More than 1.5 million seniors are ready to defend the Medicare Advantage coverage they like and want to keep. They know from experience that seeing is believing.”

That reference to “coverage they like and want to keep” is, of course, a not-so-subtle reference to President Obama’s ill-advised assurance that “if you like your health care plan, you can keep it.”

And there was this thinly veiled threat in the POLITICO story from “an insurance industry source familiar with the campaign:”

“If CMS doesn’t keep Medicare Advantage payment rates flat next year, it is going to create a huge political problem for members of Congress this fall when they have to face millions of angry seniors who just found out they are losing benefits and choices they were promised they could keep.”

Translation: AHIP will be behind those huge political problems during the re-election campaigns this fall.