by Jennifer O. and Jonathan Krall
The ever-expanding privatization of Medicare should be of concern to Alexandrians who have Medicare. Alexandrians over age 50 cited aging-related health concerns as one of the community’s top health issues. More than a third of residents worry about paying rent or mortgage. Low-cost healthcare is even more important for low-income seniors and people living with disabilities. The more we learned about the privatization of Medicare, the more alarmed we became. Fortunately, there is hope. Growing nationwide support for universal healthcare suggests to us that Medicare should be expanded not exploited.
Requested action: Alexandrians can join the action by signing our petition: please tell City Council to pass a Medicare for All Resolution for Alexandria.
Let’s begin with the basics. Medicare is a federal health insurance program that covers Americans over age 65 and people with disabilities. Medicare Part A (hospitalization) and Part B (doctor visits) are funded by payroll taxes, deductibles and, in the case of Part B, fees (Part B covers only 80% of costs). Part D (prescriptions) is offered only through Medicare-affiliated private insurers at an additional expense.
Our concern, based on the evidence, is with the Medicare Advantage (Part C) plans. Medicare Advantage is a private insurance replacement for Parts A and B, many also include Part D. The U.S. Senate Committee on Finance recently detailed the pervasive complaints within the private marketing of Medicare Advantage and Part D plans. Complaints have more than doubled between 2020 and 2021 and include widespread false and misleading information:
- “Seniors shopping at their local grocery store are approached by insurance agents and asked to switch their Medicare coverage or MA plan.”
- “Insurance agents selling new MA plans tell seniors that their doctors are covered by the new plans. Seniors who switch plans find out months later that their doctor is actually out-of-network, and they have to pay out-of-pocket to visit their doctor.”
- “Seniors receive mailers that look like official business from a Federal agency, yet the mailer is a marketing prompt from an MA plan or its agent or broker.”
- “An insurance agent calls seniors 20 times a day, attempting to convince them to switch their Medicare coverage.”
- “Widespread television advertisements with celebrities claim that seniors are missing out on benefits, including higher Social Security payments, in order to prompt seniors to call MA plan agent or broker hotlines.”
False and misleading health plan information can lead to a decrease in care due to out-of-network providers. This is an additional unbearable expense for low-income seniors and people with disabilities.
As we explored further, we found that this is a growing problem. In the next two years, enrollment in Medicare Advantage (Part C) is expected to surpass traditional Medicare, with a 30% increase seen over the last 15 years. According to the Medicare Payment Advisory Committee, the agency that provides Congress with analysis and policy advice on the Medicare program, “private plans in the aggregate have never produced savings for Medicare, due to the policies governing payment rates to MA [Medicare Advantage] plans;” private health plans on average bid 15% less (are expected to provide 15% lower cost to the government) than traditional Medicare but actually cost 4% more than traditional Medicare. For example in 2020, higher diagnosis coding accounted for an additional $12 billion in profit (at the expense of the federal government and individuals) to private Medicare Advantage plans.
The fantasy that market efficiencies will simultaneously generate profits and lower costs has not worked well for the public. Under Biden, the Centers for Medicare and Medicaid Services (CMS), which regulates these programs, has been trying to claw back some of the $12 billion in diagnostic-coding charges mentioned above. The for-profit insurance industry has been fighting back with misleading claims about “cuts to Medicare Advantage.” One misleading article conflates the number of Virginians on Medicare Advantage with the number of people somehow negatively impacted by reduced profits.
It gets worse. Working hand in hand with the CMS, the Center for Medicare and Medicaid Innovation appears to be putting profits ahead of people. Under Trump, privatization became even more predatory. Instead of carefully regulating these for-profit Medicare Advantage plans, the federal government is expanding both plans and profits. The Trump era expansion of Medicare privatization is particularly alarming. At the end of the Trump era, Direct Contracting Entities (DCE) or Global and Professional Direct Contracting (GPDC) models in the Innovation Center allowed private companies, including private equity firms, to participate in Medicare to “improve” care while limiting government costs (but not necessarily lowering costs to patients). These changes are already happening. In Spring 2021, insurance companies and private equity-backed corporations were enrolled in these models. These models can include risk sharing incentives, where up to 40% of unused funds are kept as stakeholder profit.
One might hope that things would improve under Biden, but no. Instead of reining in privatization, Biden repackaged DCEs as ACO Reach, which stands for accountable care organizations realizing equity, access, and community health. ACO Reach is viewed as a significant threat to Medicare. Stated “positives” to ACO Reach (more monitoring and additional physician and patient representatives in governance) are not expected to outweigh this significant threat. Negatives include allowing virtually any legal entity to be an ACO and the auto-enrolling of those in traditional Medicare. ACO Reach programs do not require congressional approval like all other models in the Innovation Center.
Medicare-privatization profit incentives have already motivated the overbilling and misleading information that plagues Medicare Advantage. These incentives are amplified by these newer ACO Reach models. Because the Medicare trust is projected to be insolvent in 2026 with total Medicare spending expected to double between 2020 and 2030, Medicare should not be paying the exorbitant “administrative” costs of for-profit healthcare plans. These funds should instead be directed to our community’s most vulnerable populations of low-income seniors and people living with disabilities. Traditional Medicare, with low administrative costs, should be our future.
For more information on Alexandria’s effort to pass the Medicare for All Resolution please see https://linktr.ee/AlexandriaM4A.