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Deforming Medicare into a Competitive Bidding System (interlude)

Okay, so part 3 will just have to wait another day or two... this popularity of Medicare Advantage is related, actually.

From the article that lambert links to:

In New York, Medicare Advantage is even more popular, particularly in New York City, where more than one-third of eligible seniors in Brooklyn, Queens and the Bronx are signed up.

Catherine Horran, 85, is one of some 900,000 New York State seniors now enrolled in Medicare Advantage. She decided to try it when she retired, because it meant she could stick with her old insurance company, Health Insurance Plan of Greater New York — a subsidiary of the city’s second largest Medicare Advantage insurance provider, EmblemHealth Inc. She has been a happy Medicare Advantage customer ever since.

Well, why wouldn't she be?

First, insurance is regulated at the state level, with some states doing a better job of than others. I haven't been keeping up in recent years, and I couldn't find any links that seemed relevant, but New York used to at least have the reputation of looking out for the consumer and keeping a tight leash on the industry.

Someday, I'm going to get around to posting on this article, but until then, a lot of the research I was doing for that sure has come in handy for this, including learning a bit about HIP and EmblemHealth.

Here's a blurb about HIP (Health Insurance Plan of Greater New York):

New York, New York is home to HIP, short for the Health Insurance Plan of Greater New York (HIP), a non profit HMO started in the 1940s to offer affordable health care to New York City. HIP has grown to provide health care coverage to over 1 million policy holders which makes it the largest HMO in the New York metro area as well as New York state's biggest Medicare provider.

and a blurb about Group Health Incorporated (GHI):

New York, New York has been home to Group Health Incorporated (GHI) since 1937. This non-profit health insurance provider covers 2.5 million policy holders in New York State.

and this bit about EmblemHealth from Wikipedia:

EmblemHealth is a health maintenance organization and health insurance company based in New York City. It was formed in 2006 by the merger of Group Health Incorporated (GHI) and HIP Health Plan of New York to become one for-profit company.

In the early days of nonprofit insurance companies and HMOs (like back in the 1930s and 1940s), there really were some good ones, that really were formed to benefit their members, the ones that were mutual insurance companies, anyway.

But in the Rush To Financialize Everything that has been building over the past few decades, long-time companies that had excellent reputations for making good products or providing excellent service have been bought up, or bought out, or hollowed out, or mergered-and-acquisitioned to death, with their new vampire squid overlords counting on the decades-old reputations of these companies to hide the fact that they were now putting out crap. Sometimes it's years before consumers realize what has happened to their favorite brands: wait... my old washing machine lasted 40 years but now i've got to replace this one after only 15 years?!

It will be interesting, in a looking-at-train-wrecks kind of way, to see if Catherine Horran's once-reliable insurance company lets her down a few short years from now.

Okay, New York state is special, and that insurance company is special, but why are Medicare Advantage plans in general gaining in popularity?

For some answers to that we can go back to the Medicare Prescription Drug, Improvement, and Modernization Act of 2003. Yes, Medicare Advantage is a Bush-era creation, or more accurately, a re-creation of the earlier effort to privatize Medicare. That incarnation was officially christened Medicare+Choice and popularly known as Medicare Part C. The same 2003 "modernization" law also brought us Medicare Part D, prescription drug insurance.

Wikipedia has the TL;DR version of how, and why, the MMA came into being, but you really should read this 2005 report when you have time. An excerpt:

Medicare is a fee-for-service insurance program in which the federal government serves as an insurance agent for the nation’s retired population (Oberlander 2003). Medicare Part A, financed through payroll tax contributions, covers hospital care for seniors. Medicare Part B is a voluntary program that pays for doctors’ visits and outpatient services; nearly 98 percent of those eligible take up this benefit, and currently monthly premiums on seniors cover 25 percent of costs, with general revenues paying the rest. Complex cost-sharing arrangements characterize the program, with annual deductibles and co-payments for hospital visits and doctors’ visits on top of the monthly premiums for Part B. There is no cap on out-of-pocket expenses for beneficiaries, and all together, beneficiaries are liable for about half the cost of acute care (Moon 2001). Also, Medicare was not designed to cover all needs, as most long-term care and prescription drugs were excluded from coverage.

Complex cost-sharing arrangements? No cap on out-of-pocket expenses? No long-term care? No prescription drugs?

Who wouldn't want to buy whatever private insurance fixed that? And what Republican and/or plutocrat wouldn't want old people to come to see "the market" as saving them from "the government"?

With MMA, seniors got SOME help with prescriptions and cost-sharing and runaway out-of-pocket expenses, while various plutocratic entities got a LOT of federal money handed to them on a silver platter, and a Republican administration got to look like the guys in white hats. Win-win-win!

Of course, what this required was "the government" offering big bribes to "the market" to get "the market" to give seniors a little help. Another excerpt from the same report:

To satisfy more conservative elements in the party, Republican leaders sought to wrap the new benefit together with a structural overhaul of Medicare that would inject more market competition into the program. However, moderate and rural state Republicans blocked two of these market-supporting measures as they opposed limiting drug benefits to those in managed care plans as well as the drive to create direct competition between traditional Medicare and private plans. At the same time, under pressure from business interests, Republicans refused to allow drug price controls or importation from abroad and also had to promise subsidies to nearly every private entity involved in elder health: to private health plans to induce them to readopt the (unprofitable) senior clients they had been dropping; to insurance companies to create drug-only policies; to employers to continue retiree health coverage; to rural hospitals and doctors; and so on.

So, this bribe bill was signed into law December 2003 and by 2006, a for-profit entity had snapped up two well-known, decades-old, nonprofit health insurance/care organizations. Hmmm.... whatcha wanna bet this kind of thing happened all over the country and not just in New York City?

As for watching the train wreck, Obamacare makes some cuts in those bribes to the insurance companies, but then hands back most of it as "bonuses" instead, at least for the first few years (thus guaranteeing that private insurance, and Medicare Advantage, will still be well-fed for a few more years and will likely still drop a lot of crumbs for the old people for a few more years). From lambert's link:

So far, despite alarms from critics of the Affordable Care Act, plans and patients report few cutbacks in their services. This is in part because the reductions to medical providers’ payments are in their initial stages. But it also is likely due to a huge bonus-payment initiative that is funneling billions of federal dollars right back into the private insurers’ hands.

The Affordable Care Act authorized a bonus payment to high-quality plans as a pay-for-performance measure tying extra money to quality patient outcomes and satisfaction. Any plan that rated between a 4 and 5 in the agency’s star rating system would get rewarded. But late in 2010, the Centers for Medicare and Medicaid Services authorized a near doubling of bonus repayments, expanding most of the $8 billion in rewards to plans that scored between 3 and 4.

James Cosgrove, health care team director for the U.S. Government Accountability Office, said that the program will offset about three quarters of the cuts to Medicare Advantage plans in 2012 and about a third of the cuts over the program’s three-year lifetime.

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