The Obama administration caved to election-year pressure last week by reversing proposed spending cuts to the popular Medicare Advantage program. It may have been smart politics, with Republicans such as Gov. Rick Scott recklessly scaring seniors and Democrats in Washington such as U.S. Sen. Bill Nelson joining the call to avoid the cut. But it is shortsighted public policy to again replace a modest proposed spending cut with a small increase in payments to private health insurers in a program that should be more cost-efficient.
There is no question that Medicare Advantage, which refers to the managed care plans offered by private insurers, is popular with seniors. About 30 percent of all Medicare recipients nationwide, or almost 16 million Americans, are in one of the private plans — including about 1.4 million Floridians. Medicare Advantage customers are generally satisfied with their choice of doctors, like their plan and take advantage of perks that are not available in traditional Medicare such as free gym memberships and prescription glasses. But those perks are essentially being subsidized by taxpayers and other Medicare recipients, and their popularity is no reason to keep putting off plans to further rein in those subsidies.
There has been some progress toward cost parity with traditional Medicare. Five years ago, the federal government paid Medicare Advantage plans 14 percent more than it spent to treat people on traditional Medicare. The 2010 Affordable Care Act aimed to reduce those subsidies, and the disparity was cut to 7 percent in 2012 and to 4 percent last year. But heavy lobbying by health insurers and pressure from members of both political parties have stalled the efforts.
What was supposed to be a 2.3 percent cut for Medicare Advantage plans in 2014 became a 3.3 percent increase. Now the Obama administration has retreated from a proposed 1.9 percent cut for the private plans in 2015 to a 0.4 percent increase, although insurers claim other changes still will result in cuts of about 6 percent. Remember that the insurance industry's previous dire warnings about reduced benefits, fewer plan choices, widespread huge premium increases and declines in customers have not come to pass.
Yet in Florida last week, Scott continued to scare seniors by warning them of the dangers of cuts in federal spending on Medicare Advantage plans even after the Obama administration reversed itself and called for a slight increase in spending. Earlier this month, the governor also relied on outdated estimates to inflate potential premium increases. In Washington, Republicans criticize Democrats for the Affordable Care Act's aim to slow Medicare spending. But the 2015 budget written by Republicans and approved by the House last week includes the same projected savings.
The bottom line: More cost savings can be squeezed out of Medicare and Medicare Advantage in particular, and those savings should not be sacrificed because of scare tactics and election-year posturing.