Medicare Greed


Many of the private health insurance plans for older Americans are siphoning off the top of Medicare's already "overstretched budget."

"Medicare is the only arena in which HMOs have gone head-to-head with conventional FFS Medicare, and it has lost miserably. When paid equally, HMOs refused to play. Now they are getting 17% more than FFS, and for what? For intrusive meddling in the doctor/patient relationship! The Medicare "Advantage" goes to no one but the executives and shareholders of the HMOs. The plan was created and maintained by nothing but greed and ideology."

- Fredrick R., MD, PhD, JD

Many of the private health insurance plans that now represent one fifth of the government-sponsored programs for older Americans—the “Medicare Advantage” (MA) plans—are siphoning off the top of Medicare's already “overstretched budget.” Promoted in the ‘80s and ‘90s “in the belief that they could reduce costs and improve care through better management,” their networks of doctors and managed care methods were effective and efficient for a while, but “policy changes that were championed by the Bush administration and a Republican-controlled Congress led to exactly the opposite outcome.”

Moreover, Medicare provides equitable access and delivers all the targeted services “more cheaply and more efficiently the MAs by paying hospitals and doctors directly…. Congress was right - for reasons of equity and of fiscal sanity - to pass a bill that would at least begin to remove some of the subsidies.”

The specifics are that Medicare pays a 13 percent premium effecting a 17% overpayment to private plans (compared to what they’d pay for the same services in fee for service [FFS] Medicare). “The only explanation [for why this has happened] is Republicans' ideological compulsion to provide a private option… .[As] it stands now, the beneficiaries in traditional Medicare are paying higher premiums to subsidize benefits for the minority in private plans, and the taxpayers are chipping in to boot.

- “Medicare's Bias” Editorial, New York Times: July 14, 2008.

Below, some more reader responses:

From: Robert (Exec Dir., large E. coast physician practice group)

Sent: Monday, July 14, 2008 3:29 PM

It is not just the 13% and 17% more than they get, the plans are using deemers to bind physicians to par with these plans, with rates at 75% or 83% of Medicare - nice margins of 24% - 38% before they "manage care."

When I did Medicare Managed care we were paid 95% of the cost in that region and had to make the margins by being more efficient, and we paid the physicians the Medicare rates.

From: Fredrick

Sent: Mon 7/14/2008 7:45 PM

Robert: re: “We were paid 95% of the cost” Right - that's the way it started. They used the lower price to sucker Congress in. Nobody (in Congress at least) thought to ask, at the time, how a company could get paid less, give more services, and take money out for profit besides.

Now we have the obvious answer - they can't!

But we have to realize that this isn't a situation peculiar to Medicare. No HMO, anywhere, can give better service, make a profit, and require less money to do it than FFS.

I think the reason many congress critters went along is that they wanted to throttle back the amount of money that doctors made, but they were unwilling to face the political cost to their campaigns. So, HMOs were the appointed enforcers. They HAVE managed to cut doctors' take, but none of that money stayed in federal coffers - it went to the enforcers, and ultimately cost the government even more!

Basically, HMOs are just a massive patronage system for the cronies of the in-gang.

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