The authors of Obamacare purport to pay for the expansion of health care coverage to uninsured Americans in part by reducing payments to the Medicare Advantage program by some $145 billion over the next 10 years. But a new study by the Heritage Foundation finds that a big chunk of those savings is illusory. The program cuts will push millions of Americans onto the Medicaid rolls, reduce prescription drug benefits for millions more, and exacerbate problems caused by the fragmented delivery of health care.
Traditional Medicare coverage pays for only 60% of retiree health care expenses on average, so those who can afford the premiums subscribe to supplementary Medigap insurance. But that option is not affordable to many lower-income Americans. Medicare Advantage was designed to help fill that coverage gap.
But the budget cuts will force roughly 7.4 million enrollees out of Medicare advantage by 2017, and the rest will suffer a diminishment in the value of their health care coverage, according to a paper published earlier this month, "Reductions in Medicare Advantage Payments: The Impact on Seniors by Region," Robert A. Book and James C. Capretta with the Heritage Foundation.
The Obama administration described the cuts as a way to claw back unconscionable profits from the greedy insurance companies that provide Medicare Advantage coverage. But, in fact, the program provides benefits to lower-income Americans comparable to those of many private health care plans.
Many Medicare Advantage enrollees are also eligible for Medicaid. Book and Capretta explain the impact of Obamacare on these "dual eligibles":
When dual-eligible beneficiaries lose their MA (Medicare Advantage) plans, many will sign up with Medicaid and thus increase both federal and state Medicaid costs. The size of this increase could be staggering. ... An estimated 472,000 dual eligibles will lose their MA plans, increasing Medicaid costs by $924 million.
Many Medicare Advantage policies also provide prescription drug benefits. As a rule, the cost of providing those benefits is cheaper than it is under the alternative, the Medicare Part D prescription drug program. Assuming that 7.4 million enrollees shift to the conventional Medicare model at a cost of $206 per beneficiary, the authors state, Medicare Part D could increase spending by more than $1.5 billion annually.
Add the two effects together, and you get roughly $2.5 billion a year in extra costs. Extrapolated over 10 years, that adds up to $25 billion -- a significant percentage of the alleged savings.
But there is one more impact that is difficult to put a number on. As the report notes, the mass migration of millions of enrollees out of Medicare Advantage and into the traditional fee-for-service model, write Book and Capretta, would "exacerbate the well-known problems associated with fragmentation of care and could undermine the viability of integrated health systems that service both Medicare beneficiaries and other patients."
A May study by America's Health Insurance Plans found that risk-adjusted readmission rates were 27% to 29% lower in Medicare Advantage programs than traditional, Medicare-funded fee-for-service programs.
As President Obama fervently argued while stumping for the legislation, extending health care coverage to the uninsured would partly pay for itself by providing better access to physicians and better coordinated care for an estimated 34 million Americans. What he did not say is that improved medical care for those 34 million in the workforce would come at the expense of less consistent, more fragmentary care for Medicare Advantage's 7.4 million retirees.
The mainstream media outlets with the resources to conduct in-depth reporting explored none of these trade-offs during the debate over Obamacare. They accepted at face value the president's characterization of Medicare Advantage as a hand-out to big insurance companies. Only now that the country has had six months to digest the multi-faceted law are we beginning to understand the magnitude of the fraud that has been perpetrated.