Medicare Advantage works. Why is President Biden attacking It?

Popular and effective, the Medicare Advantage (MA) program has become the preferred way to receive health benefits for more than half of the 64 million elderly and disabled Americans who rely on Medicare for their health insurance coverage.

Unfortunately, the Biden Administration now wants to shut the door on this modern, market-based alternative to traditional Medicare. Administration officials and their allies in Congress are alarmed MA is making centralized, government-run health care look bad. So, they’re attacking it.

What is Medicare Advantage?

Medicare Advantage is an option within Medicare that offers beneficiaries a wide range of private health insurance plans that often include benefits not available with traditional Medicare, like vision, dental, and gym memberships. While traditional Medicare is run by a bureaucracy, MA uses free-market forces under government rules and safeguards.

In traditional Medicare, you can go to any doctor or hospital that accepts Medicare, and Medicare will pay for the service, according to a fee schedule set by the bureaucracy.

In MA, by contrast, Medicare pays private competing health plans to deliver the Medicare package of benefits, and the plans negotiate with doctors and hospitals to determine how much the plan will pay for each item or service. MA plans employ preferred-provider networks. That limits patients’ choice of doctors but also gives them lower out-of-pocket costs and, in many cases, extra benefits.

Seniors who like their traditional Medicare can keep it. But if they need or want something better, MA gives them a choice. Those who choose MA get to choose between an array of competing health insurance plans for the coverage that’s best for them. As mentioned, MA plans must provide all the standard Medicare benefits, but they also provide additional benefits unavailable in traditional Medicare, such as low, simple premiums and copays, and, importantly, a cap on total out-of-pocket expenses. And while dental, hearing, and vision benefits are not covered by traditional Medicare, most MA plans offer them, typically at no or low additional cost.

Better for patients

Uniquely, MA plans are the only ones in America who get paid more when they sign up and treat people with chronic medical conditions. Instead of avoiding sick people, like most health insurance companies do, MA plans compete to enroll them, and to detect hidden illnesses early.

Isn’t it how health care should work?

Additionally:

  • MA plans beat traditional Medicare on numerous quality and health outcomes measures.
  • MA is chosen by the majority of low-income and minority enrollees, due to its affordability.
  • MA enjoys a 94 percent consumer satisfaction rating.
  • The average premium for an MA plan is $18 a month (not a typo).

How can MA plans do all this? They’re efficient. They have to be. Unlike the bureaucracy, they have to please their customers.

Seniors are voting with their feet in favor of MA because it works.

Biden’s war on choice

In 2023 and 2024 the Medicare agency unilaterally cut payments to MA plans by billions of dollars across the board. If Biden’s war on MA continues, plans will be forced to shrink benefits, raise premiums, or both. Some may be forced to pull out of the program altogether, leaving seniors in parts of the country with just one choice: traditional Medicare.

We’ve been down this road before. In the late 1990s, to save money, Congress reduced payment rates to Medicare Advantage (then called “Medicare+Choice”) plans, across the board. Enrollment plummeted as plans began exiting the program, leaving whole areas of the country bare. Congress then reversed the cuts.

Another word for “no options” is “monopoly”  

Driving MA out of existence would leave seniors stuck in a monopoly, government-run health care program.

It’s true traditional Medicare lets seniors go to any doctor they want. That’s good. But sadly, the program’s monopoly status tends to diminish the benefits of unlimited doctor choice. A small but rapidly growing number of doctors refuse to see new Medicare patients because, for many services, the bureaucracy has imposed price caps so low that they don’t cover the actual cost of providing care. That’s what happens with monopolies.

Designed by politicians in the 1960s, Medicare has become out of date, wasteful, and more fraud-prone than most private health insurance products. According to Medicare data, traditional Medicare’s estimated improper payment rate (7.4%) is higher than that of MA (6%). And as we’ve seen, traditional Medicare fails to protect seniors from going bankrupt due to medical bills — the basic purpose of health insurance.

Reforms are needed — the right ones  

Some critics say Medicare Advantage plans are overpaid, and that the playing field is unfairly tilted in their favor, against traditional Medicare. That’s debatable. Some experts think the opposite is true: that MA costs taxpayers less than traditional Medicare, on an apples-to-apples basis. Unfortunately, there’s a lack of consensus about how to compare the apples. The two options’ complexity and significant structural differences make clear, reliable comparisons challenging.

What’s not debatable is that both versions of Medicare could definitely stand to be reformed. Both MA and traditional Medicare should be improved to:

  1. Eliminate waste, protect the Medicare trust fund, minimize market distortions, and make health care more affordable for patients and taxpayers alike.
  2. Ensure that both options (MA and traditional Medicare) compete on a level playing field — so seniors are in the driver’s seat, not bureaucrats.
  3. Pay plans and providers in ways that, as nearly as possible, reflect the true costs of delivering good medical care (and not more).

How should we do this?

  • For traditional Medicare, we should replace today’s top-down, bureaucratically determined provider payment rates with rates that reflect free-market prices. In some cases, these will be higher than today’s rates and in some cases they’ll be lower.
  • For Medicare Advantage, we should adjust plan payments to cut out waste and promote efficient competition — that is, we should incentivize the plans to deliver good patient outcomes with profit margins that are kept slim through competition. And we should police the plans to make sure they don’t deny valid claims — a common problem with insurers.

We should avoid “reforms” that unduly reduce choices or shrink access to trusted doctors and needed therapies.

The problem with the Biden meat-ax approach is its crudity. Chopping all plans equally across the board imposes a disproportionate burden on the efficient ones, potentially driving them out and leaving their enrollees high and dry. Why punish the good guys?

An example of a sensible, targeted reform would be to cap MA plan payment “benchmarks” (the amount they bid against) at 100 percent of what it would cost traditional Medicare to deliver the same package of benefits in the same geographic area. Believe it or not, Medicare does not do this. It some parts of the country, it pays plans more than 100 percent. Not only is that wasteful, but it also favors inefficient plans. Imposing a 100% cap would favor efficient ones.

For other sensible ways we could reform MA, see the Paragon Health Institute’s recent report, Improving Medicare through Medicare Advantage.

Prescription: more personalized options

Why is President Biden attacking Medicare Advantage? Because it works. And because it’s popular. And that’s making the bureaucracy look bad.

The goal of health reforms — for all Americans — should be to empower patients, not bureaucracies, whether public or private.

Health care is for patients. And it’s deeply personal. Instead of a “government option,” Americans need a Personal Option: hassle-free health care we can afford. A Personal Option means removing government barriers so every American can enjoy better access to trusted doctors, price transparency with certainty, and prescription drugs at lower prices. It means making it easier for people to choose the health plan that’s best for them.

And for the majority of seniors, that choice is Medicare Advantage.

To learn more, visit personaloption.com.

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