Paying for Health Reform
By John Goodman NCPA
Texas Insider Report: DALLAS Texas Michael Cannon (Cato) took me to task the other day for expressing too much sympathy for Medicare Advantage members who are getting rolled by the new health law. He was complaining about my editorial last week in The Wall Street Journal.
The gist of the editorial follows and my exchange with Michael leads the comment section below.
Also in the comments below Ive reproduced John Rothers (AARP) response to me from The Wall Street Journal Letters to the Editor" section and Devon Herricks (NCPA) response to John.
The cost of the new health overhaul will be quite high for some. By 2017 thousands of people in Dallas Houston and San Antonio will be paying more than $5000 a year to make ObamaCare possible according to a study by Robert Book (Heritage Foundation) and James Capretta (Ethics and Public Policy Center). For some New York City dwellers the figure will exceed $6000. Unfortunate residents of Ascension Louisiana will pay more than $9000!
Who are these people? Are they the rich and the comfortable the folks presidential candidate Barack Obama told us could afford to pay for health reform? Are they people who have excessively profited during a recession that has caused hardships for so many? Are they the ones who gained the most from the Bush tax cuts?
None of the above. The people getting hit with these very expensive tabs live in predominately low-income households. They are disproportionately minorities. They have trouble paying their own medical bills.
These are the enrollees in Medicare Advantage plans health plans operated by private insurers (Cigna Aetna United Health etc.) that provide extra
benefits to the elderly and the disabled on top of standard Medicare coverage.
The price they will pay for health reform will be a double whammy: less spending on Medicare coupled with reduced subsidies for their Medicare Advantage plans. In many areas Medicare Advantage enrollees will lose about one-third or more of their health insurance benefits.
Despite its popularity conventional Medicare is actually a lousy health insurance plan. It doesnt cover most drugs and it leaves beneficiaries exposed to thousands of dollars in potential out-of-pocket expenses. To protect themselves most seniors get medigap insurance (either from an employer or purchased directly) and buy drug coverage (Medicare Part D) as well.
Many low-income seniors however have trouble paying three premiums to three plans and all too often they find a decent medigap plan unaffordable. For these retirees (about one in every four Medicare beneficiaries) Medicare Advantage plans have been a Godsend. They have been able to enroll in comprehensive health plans that resemble the coverage many nonseniors have often with no extra premium.
The hostility of the White House and many Congressional Democrats toward these health plans is hard to explain. Ostensibly they do everything President Obama says he wants to accomplish with health reform.
- They provide subsidized coverage to low- and moderate-income people who could otherwise not afford it.
- They have no pre-existing condition limitations and some plans actually specialize in attracting and caring for patients with multiple illnesses.
- They provide an annual choice of plans.
- They even compete against a public plan (Medicare).
On measures of quality and efficiency they also score well. According to a study by AHIP (a trade group that represents Medicare Advantage insurers):
- Medicare Advantage enrollees had 33 more doctor visits (presumably representing more primary care) yet experienced 18 fewer hospital days and 10 fewer hospital admissions than conventional Medicare patients.
- They had 27 fewer emergency room visits 13 fewer avoidable admissions and 42 fewer readmissions.
Other studies report similarly impressive results.
This is not to say that the Medicare Advantage programs could not be improved. Right now almost all the enrollees are in HMOs. Very few have a Health Savings Account plan. And there is no practical way for the chronically ill to manage their own budgets the way the Medicaid disabled can in the pilot programs that have been in force for a decade.
Some complain that the government has been paying MA plans about 13 more than what would have been spent under conventional Medicare. This is partly explained by the influence of members of Congress who represent rural areas and that would not otherwise be able to support these plans. In any event these overpayments" allow members to get about $825 in extra benefits each year including lower out-of-pocket payments and better coverage for drugs preventive care and chronic disease care.
According to a report by the Medicare Office of the Actuary about 7.4 million people who would have been enrolled in Medicare Advantage plans in 2017 will lose their coverage completely. Those who are able to retain their coverage will lose significant benefits.
These cuts are financing lavish subsidies for health insurance for young people at about the same income level as the seniors who are being penalized. Moreover seniors will have to settle for skimpy coverage so that young people can have much better coverage.
To those economic libertarians who view this as an entitlement wash dont be mislead. Many of the seniors losing their health plans will enroll in taxpayer-funded Medicaid in addition to Medicare and the rest will be on the Capitol steps in the near future asking to have their benefits reinstated.
