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Medicare vs. Medicare Advantage: The controlled experiment that shows why public option sucks

For the so-called "public option" (or "plan") to work, the insurance companies must be tightly and successfully regulated, as its advocates will admit. This is true for several reasons: First, so they don't sell junk insurance to the people who will be forced to buy it via the mandate; so they don't deny coverage to those who have paid their premiums via scams like rescission; so they don't cherrypick those who are less likely to need insurance, throwing the rest of the burden on taxpayers; and finally, so they "play fair"* as contractors, when they manage and administer the "public plan" (or "option") for the government.**

Will tightly regulating the insurance companies work? Fortunately, we have a controlled experiment we can look at that compares single payer and the privatized approach directly: Medicare, and Medicare Part D. Don McCann writes at PNHP:

What’s beautiful about the Medicare Advantage program is that it has provided us with a real-life laboratory experiment which allows us to compare the functioning of highly-regulated private insurance plans as contrasted with the functioning of a public insurance program: traditional Medicare. The results are in, though that would be tough to ascertain if you simply observe the response of Congress.

What have we learned? The private plans take away the choice of health care providers that the traditional public program offers. The private plans insert intrusive interventions between the patient and the physician – interventions that are not found in the public plans. Private plans divert more resources to excessive, wasteful administrative services while increasing the administrative burden on the health care providers and on the public stewards who must provide oversight of our tax dollars that are diverted to this industry. Private plans also provide more entry points for the criminal element to cheat the taxpayers, patients, and providers. And for this we are paying far more of our tax dollars than we do in the traditional Medicare program for comparable levels of care. ... Our Medicare Advantage experiment has demonstrated that it is the private plans that must be jettisoned, and it is Medicare that must be granted to everyone after modest, appropriate reengineering so that it works even better than it does now.

ABC describes a crackdown, and then writes:

But customers and advocate groups say the plans' confusing nature still leaves room for pitches bordering on the deceptive, and abuses still crop up.

Seniors report being pressured with unsolicited phone calls or home visits that are clearly prohibited. Some have signed up for plans that didn't include their longtime doctors or hit them with unexpected costs, things they learn weeks later.

"I think the real issue is that people are not getting what they thought they would be getting," said Vicki Gottlich, senior policy attorney for the Connecticut-based Center for Medicare Advocacy.

Medicare Advantage plans are privately run versions of the government's Medicare program, which provides health coverage for the elderly and disabled. The government subsidizes these plans, and the industry has developed what can be a mind-numbing array of them.

Get that? We're subsidizing them, and they still keep trying to scam us anyhow! And when we clamp down on the old scams, they just think up new ones!

CMS learns every year about areas that need more vigilance, said Timothy Hill, deputy director for the Center for Drug and Health Plan Choice. He noted that sales agents used to operate in a "wild, wild West" environment where they could maximize commissions however they wanted, but that's changed.

"There's 10 million people and hundreds of plans," he said. "You're always going to have issues. "We just hope they're not as acute as we had seen over time."

And of course, they' re still in the business of denying care:

MIAMI -- Cecile Sangiamo liked her health insurance - until she needed to use it.

The 72-year-old Clearwater, Fla., resident had been on the federally subsidized, privately run Medicare Advantage policy through WellCare Inc. for about three years when she started having pain that made it hard to walk.

Her doctor's referral to an orthopedic specialist was denied by the insurer. Her out-of-pocket costs were higher than she was initially told. And when Sangiamo needed surgery, she said, WellCare offered some unexpected medical advice.

"Take pills and use a walker," Sangiamo remembered being told by the insurer, which declined to comment on the case. "I wanted to say, 'I'll take the walker and bang you in the head with it.'"

Seniors have flocked by the millions to Medicare Advantage, privately run plans offered as an alternative to traditional, government-run Medicare. Programs that promise lower premiums or other perks have combined with heavy marketing from insurance companies to make the programs double in size in the last six years to nearly 11 million members and growing.

But critics say that Sangiamo's case is all too common and that the plans put profits above care and denials of service are routine.

Profits at the insurers offering Medicare Advantage have far outpaced expectations, and their expenses to treat clients have been far lower than projected.

Their profits, of course, include our subsidies -- just like the banksters!

"There are so many hoops to run through, there are so many rules, it's just mind-boggling," said Mary Johnson, policy analyst for The Senior Citizens League, a nonpartisan, 1.2-million-member group. "Woe is you if you have any kind of chronic problem, and woe is you if you're ever hospitalized."

Why do we want to repeat Medicare Part D for the entire health care system?

NOTE * Not likely.

NOTE ** It's the insurance company's fiduciary responsibility to maximize their profits. Therefore, they have every incentive for rescission, cherrypicking, scams generally, and every incentive to fuck up the contracts for the "public option" (or "plan") if doing so nets out positive for their bottom line.

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DWCG's picture
Submitted by DWCG on

We already ban pre-existing conditions, just google the term along with HIPAA! Why are we trying to outlaw something that is already illegal? Because you can't get a fair game when the refs (Congress) are paid-off.

Now I do believe single-payer is a tough hill to climb, not because of Big PhRMA and Big Insurance, but because of the millions of Americans who actually believe that their private insurance is great and will take care of things when they get really sick. I think the best we can hope for in these circumstances is Medicare for Anyone Who Wants It.

Don't set up a new bureaucracy, simply apply all the principles of Hacker's ORIGINAL version of the public option (and then some) to Medicare. I've always asked, why have a public option that's "like Medicare" instead of simply having a public option that IS Medicare?

End the subsidies for private insurance (including Medicare Advantage) and let anyone or business buy-into Medicare with a simple to calculate premium that is a percentage of payroll split by employer-employee for those that enroll. (Estimates for single-payer peak at 7%, so maybe somewhere around there or more likely slightly higher). Even Wal-Mart, which offers crappy junk insurance spends an average of $3,500/yr per employee for health insurance. At 7% of payroll with a 3.5% employer split that cost goes down to $700/yr per employee....employees that would get better, cheaper and more accessible health care. I'd want to set up a camera to capture the stampede of corporations and businesses that dump the parasites to buy into Medicare. You see Wal-Mart shareholders are much less susceptible to the B.S. that switching to the government plan would result in grandma being sent to a death panel (heck even if it did they'd still make the switch.)

So I say fight corporate greed with corporate greed.

a little night musing's picture
Submitted by a little night ... on

We already ban pre-existing conditions, just google the term along with HIPAA!

HIPAA does not ban exclusions based on pre-existing conditions, except for employer-provided plans when they change insurers. See here.

Effective regulation of insurers might help, but claiming, erroneously, that we already have it, will not.

I'm increasingly convinced that it's single-payer or nothing. Just because no one seems to know what's on offer with the other, sucky, planz.

Edited to add:

People seem just not to know what's on offer. I'm totally scared by the prez's new speech.

Turlock