Medicare Part D Revisited

Medicare D revisited - 6/09/08

Several weeks ago, we talked about the Medicare Part D drug benefit plan. I explained that, while the program helps subsidize the costs of your medications, the skyrocketing prices have undercut the program's value. And to make matters worse, Congress could have built in protections to slow the price increases, but failed to do so.

Many of you called your federal legislators to complain, and some of them told you that you, and I, are wrong. Let me assure you, we're right. It's sad that some of our elected officials don't understand what's going on.

Today I want to discuss another threat to Medicare, and I'll explain how that threat can be easily resolved.

Generally, there are two options you have under Medicare. First, there's traditional Medicare. You probably understand how that works. You go to the doctor or hospital of your choice, and Medicare pays most or all of the costs, subject to copays and deductibles.

And now there's a second option, Medicare Advantage Plans. These plans are offered by private insurance companies.

Here's the problem. The Medicare program lavishly overpays these private insurance companies. According to the Medicare Payment Advisory Commission, this year private insurers will be paid 113% of the cost of providing the same beneficiaries with coverage under traditional Medicare.

Let me put this another way. I'll make it simple. For the people who have gone into private Medicare Advantage Plans, Medicare is paying $16 billion more per year than if those same people had stayed in traditional Medicare.

Now, traditional Medicare is a good program, and beneficiaries have been very happy with the scope and coverage. So why are we paying $16 billion per year more to private insurance companies for these same people to leave traditional Medicare?

And if you're looking for savings in the Medicare program, big savings, look no further than these overpayments to private insurance companies. If Congress were simply to pay these private Medicare plans at the same rates as traditional Medicare, the savings to Medicare would be 149 billion dollars, from 2009 to 2017. 149 billion dollars! That's a huge savings. And don't let anyone tell you that this isn't true. These numbers come directly from the United States Congressional Budget Office.

Now, don't get me wrong. Medicare does have financial challenges, because health care costs in general are going up. We need to look at ways to address these challenges. But we don't have the luxury of overpaying private insurance companies in an effort to privatize the Medicare program. It's time to cut back on the excessive subsidies to the private insurance industry under the Medicare Advantage Program.