Democrats’ Taxing Health Care Promises

July’s Democratic presidential debates left seasoned health policy professionals confused, struggling to understand both the candidates’ policies and the differences among them. But working families should find Democrats’ health care debate taxing for another reason. For all their vows that Americans can obtain unlimited “free” health care while only “the rich” will pay, the major candidates are writing out checks that will end up on middle class families’ tab.

In this debate, Bernie Sanders wins credit for candor, in the sense that he has dissembled less than his opponents. Admitting that his single-payer plan will require tax hikes, in April Sanders proposed a 4% income tax, along with a 7.5% payroll tax, among other revenue increases to fund his system.

Unfortunately for Sanders, however, the Committee for a Responsible Federal Budget believes the tax increases he has proposed to date will pay for only about half of the more than $30 trillion cost of his single-payer scheme. In that, the organization echoes experience from Sanders’ home state of Vermont. In 2014, Gov. Peter Shumlin abandoned efforts to enact a state-based single payer system, because the accompanying tax increases created “a risk of an economic shock.” Shumlin said single payer in Vermont would have required a 9.5% income tax, and an 11.5% payroll tax—far higher levels than Sanders has proposed.

While Sanders admits that the middle class will pay more taxes to fund single payer, both he and Elizabeth Warren argue that families will save overall, because the program would eliminate premiums, deductibles, and other forms of cost-sharing. Unfortunately, studies from across the political spectrum—from the conservative Heartland Institute to former Clinton Administration official Kenneth Thorpe—disagree.

In 2016, Thorpe concluded that 71% of households would pay more under a Sanders plan fully funded by tax increases. Low-income households would get hit even worse, with 85% of families on Medicaid paying more. Since then, Sanders has only increased the generosity of his single-payer proposal, meaning taxes on the middle class could rise even more than Thorpe originally estimated.

Perhaps to elide the tax landmines, Kamala Harris’ plan breaks with Warren and Sanders, delaying the move to a single payer system for a decade. She claims the delay “will lower the overall cost of the program”—but only until the program phases in fully. At that point, her pledge not to raise taxes on families making under $100,000 will prove unsustainable. But if Harris has her way, a 10-year delay until full implementation of single-payer could punt the tax problem to her successor.

As for Joe Biden, he has tried to portray himself as protecting middle class families from the tax hikes he calls inevitable under the other major contenders’ plans. But Biden has two problems.

First, Biden supports restoring Obamacare’s individual mandate penalty, which Republicans eliminated in 2017. The Supreme Court in 2012 dubbed the mandate a tax—and that tax happens to hit the middle class hard. The most recent IRS data show that in 2016, of the $3.6 billion in mandate penalties paid by American households, nearly 63% came from households with incomes of under $50,000, and more than 88% came from households with incomes below $100,000.

Second, as the Wall Street Journal reported back in July, Biden over the past two years deliberately utilized tax loopholes to avoid paying Obamacare taxes. By classifying more than $13 million in proceeds from books and speeches as profits from his corporations, rather than wage income, Joe and Jill Biden circumvented nearly $500,000 in self-employment taxes—taxes that fund Obamacare and Medicare.

Biden’s behavior, which multiple experts interviewed by the Journal called legally questionable, belies both his “Middle Class Joe” reputation and his support for Obamacare. Apparently, Biden supports Obamacare only if someone else will pay for it. But if a one-percenter like Joe Biden finds paying for the Affordable Care Act unaffordable for him, then whom would Biden hit to pay the $750 billion price tag of his Obamacare expansion efforts? Why, the middle class, of course.

Biden’s unwillingness to pay the taxes associated with an Obamacare law he purportedly wants to protect epitomizes Margaret Thatcher’s axiom that socialists eventually run out of other people’s money. At the rate he and his fellow candidates are racking up costly health care promises, that moment seems very near at hand.

This post was originally published at The Daily Wire.

The CBO Report on Single Payer Isn’t the One We Deserve to See

On Wednesday, the Congressional Budget Office (CBO) released a 30-page report analyzing a single-payer health insurance plan. While the publication explained some policy considerations behind such a massive change to America’s health care market, it included precious few specifics about such a change—like what it would cost.

Sen. Bernie Sanders (I-VT), perhaps single payer’s biggest supporter, serves as the ranking member of the Senate Budget Committee. If he asked the budget scorekeepers to analyze his legislation in full to determine what it would cost, and how to go about paying for the spending, CBO would give it high-priority treatment.

But to the best of this observer’s knowledge, that hasn’t happened. Might that be because the senator does not want to know—or, more specifically, does not want the public to know—the dirty secrets behind his proposed health-care takeover?

Hypothetical Scenarios

The CBO report examined single payer as an academic policy exercise, running through various options for establishing and operating such a mechanism. In the span of roughly thirty pages, the report used the word “would” 245 times and “could” 209 times, outlining various hypothetical scenarios.

That said, CBO did highlight several potential implications of a single-payer system for both the demand and supply of care. For instance, “free” health care could lead to major increases in demand that the government system could not meet:

An expansion of insurance coverage under a single-payer system would increase the demand for care and put pressure on the available supply of care. People who are currently uninsured would receive coverage, and some people who are currently insured could receive additional benefits under the single-payer system, depending on its design. Whether the supply of providers would be adequate to meet the greater demand would depend on various components of the system, such as provider payment rates. If the number of providers was not sufficient to meet demand, patients might face increased wait times and reduced access to care.

The report noted that in the United Kingdom, a system of global budgets—a concept included in the House’s single-payer legislation—has led to massive strains on the health-care system. Because payments to hospitals have not kept up with inflation, hospitals have had to reduce the available supply of care, leading to annual “winter crises” within the National Health Service:

In England, the global budget is allocated to approximately 200 local organizations that are responsible for paying for health care. Since 2010, the global budget in England has grown by about 1 percent annually in real (inflation-adjusted) terms, compared with an average real growth of about 4 percent previously. The relatively slow growth in the global budget since 2010 has created severe financial strains on the health care system. Provider payment rates have been reduced, many providers have incurred financial deficits, and wait times for receiving care have increased.

While cutting payments to hospitals could cause pain in the short term, CBO noted that reducing reimbursement levels could also have consequences in the long term, dissuading people from taking up medicine to permanently reduce the capacity of America’s health-care market:

Changes in provider payment rates under the single-payer system could have longer-term effects on the supply of providers. If the average provider payment rate under a single-payer system was significantly lower than it currently is, fewer people might decide to enter the medical profession in the future. The number of hospitals and other health care facilities might also decline as a result of closures, and there might be less investment in new and existing facilities. That decline could lead to a shortage of providers, longer wait times, and changes in the quality of care, especially if patient demand increased substantially because many previously uninsured people received coverage and if previously insured people received more generous benefits.

That said, because the report did not analyze a specific legislative proposal, its proverbial “On the one hand, on the other hand” approach generates a distinctly muted tone.

Tax Increases Ahead

To give some perspective, the report spent a whopping two pages discussing “How Would a Single Payer System Be Financed?” (Seriously.) This raises the obvious question: If single-payer advocates think their bill would improve the lives of ordinary Americans, because the middle class would save so much money by not having to pay insurance premiums, wouldn’t they want the Congressional Budget Office to fully analyze how much money people would save?

During his Fox News town hall debate last month, Sanders claimed a large show of support from blue-collar residents of Bethlehem, Pennsylvania for single payer. The ostensible support might have something to do with Sanders’ claim during the town hall that “the overwhelming majority of people are going to end up paying less for health care because they’re not paying premiums, co-payments, and deductibles.”

Where have we heard that kind of rhetoric before? Oh yeah—I remember:

At least one analysis has already discounted the accuracy of Sanders’ claims about people paying less. In scrutinizing Sanders’ 2016 presidential campaign plan, Emory University economist Kenneth Thorpe concluded that the plan had a $10 trillion—yes, that’s $10 trillion—hole in its financing mechanism.

Filling that hole with tax increases meant that 71 percent of households would pay more under single payer than under the status quo, because taxes would have to go up by an average of 20 percentage points. Worse yet, 85 percent of Medicaid households—that is, people with the lowest incomes—would pay more, because a single-payer system would have to rely on regressive payroll taxes, which hit the poor hardest, to fund socialized medicine.

Put Up or Shut Up, Bernie

If Sanders really wants to prove the accuracy of his statement at the Fox News town hall, he should 1) ask CBO to score his bill, 2) release specific tax increases to pay for the spending in the bill, and 3) ask CBO to analyze the number of households that would pay more, and pay less, under the bill and all its funding mechanisms.

That said, I’m not holding my breath. A full, public, and honest accounting of single payer, and how to pay for it, would expose the game of three-card monty that underpins Sanders’ rhetoric. But conservatives should keep pushing for Sanders to request that score from CBO—better yet, they should request it themselves.

This post was originally published at The Federalist.

Obamacare: Bad for Seniors

Millions Lose Their Current Coverage. The Congressional Budget Office (CBO) estimated that the health care takeover[i] will cut a total of $202.3 billion from Medicare Advantage (MA) plans.[ii] These plans deliver a range of health care options to nearly 11 million seniors,[iii] almost one-quarter of those enrolled in the Medicare program. According to the non-partisan Medicare actuaries, these cuts will “reduce MA rebates to plans and thereby result in less generous benefit packages;” enrollment is also projected to decline at least 33 percent by 2015.[iv]

According to former Clinton Administration official Ken Thorpe, while every senior had access to a Medicare Advantage plan in 2007, millions of seniors did not have a choice of plans in 1999[v]—and the significant cuts mean that the President’s promise of “if you like your current plan, you can keep it” will ring hollow for many Medicare Advantage beneficiaries.

Reduced Access—Or Higher Premiums. In order to keep to the President’s promise of a deficit-neutral bill, the health care takeover excludes language providing adjustments to the Medicare formula that governs physician reimbursement levels. As a result, physicians will receive a 21 percent cut in payment levels beginning in April 2010 and further reductions thereafter. While the President’s budget proposes to address the payment issue, it does not propose to pay for the $371 billion cost for these changes.[vi] As a result, if the President’s proposals become law, seniors would pay one-quarter of the corresponding increase in physician spending through higher Part B premiums—nearly $100 billion worth.

Medicare Part D Premium Increases. The health care takeover would eventually eliminate the Part D coverage gap, or “doughnut hole.” However, CBO has previously stated that filling in the “doughnut hole” immediately would cause a 50 percent spike in average Part D premiums when compared to current law projections.[vii] These higher costs will be passed on to American seniors.

Does Not Address Medicare’s Long-Term Solvency. Although the legislation includes more than $500 billion in Medicare savings provisions, the Administration’s own actuaries have confirmed that the bill will increase overall health spending—exacerbating the long-term trends that have placed the Medicare program in financial peril.[viii] Moreover, the bill contains an unprecedented expansion of the Medicare payroll tax—not to save Medicare, but to fund new entitlements—a measure that the CBO stated “would not enhance the ability of the government to pay for future Medicare benefits.”[ix]

Opens the Door to Government Rationing. The health care takeover establishes a new board of unelected bureaucrats empowered to make binding recommendations on cost reductions within Medicare. Patients may be concerned that the bill could insert bureaucrats between patients and doctors, particularly given President Obama’s comments that there needs to be a “difficult democratic conversation” about what the President views as excessive spending on end-of-life care.[x]

 

[i] Senate-passed bill (H.R. 3590) text available at http://www.opencongress.org/bill/111-h3590/text; reconciliation bill (H.R. 4872) text available at http://www.opencongress.org/bill/111-h4872/text.

[ii] Congressional Budget Office analysis of H.R. 4872 in concert with H.R. 3590, March 20, 2010, http://cbo.gov/ftpdocs/113xx/doc11379/Manager%27sAmendmenttoReconciliationProposal.pdf.

[iii] CMS Office of the Actuary, “Brief Summaries of Medicare and Medicaid,” November 2009, http://www.cms.hhs.gov/MedicareProgramRatesStats/downloads/MedicareMedicaidSummaries2009.pdf, p. 7.

[iv] CMS Office of the Actuary, Estimated Financial Effects of H.R. 3590 as passed the Senate, January 8, 2010, http://www.politico.com/static/PPM130_oact_memorandum_on_senate_bill_as_passed_01-08-09.html.

[v] Ken Thorpe and Adam Atherly, “The Impact of Reduced Medicare Advantage Funding on Beneficiaries,” April 2007, http://www.bcbs.com/issues/medicare/background/Medicare-Advantage.pdf.

[vi] President’s Fiscal Year 2011 Budget Submission to Congress, February 2010, http://www.whitehouse.gov/omb/budget/fy2011/assets/budget.pdf, Table S-7, p. 162.

[vii] Congressional Budget Office, Budget Options Volume 1: Health Care, December 2008, http://www.cbo.gov/ftpdocs/99xx/doc9925/12-18-HealthOptions.pdf, Option 89, pp. 176-77.

[viii] Last year, the Medicare trustees found that the program faces 75-year unfunded liabilities of $37.8 trillion. See report at http://www.cms.hhs.gov/ReportsTrustFunds/downloads/tr2009.pdf.

[ix] Congressional Budget Office, Letter to Honorable Jeff Sessions, January 22, 2010, http://www.cbo.gov/ftpdocs/110xx/doc11005/01-22-HI_Fund.pdf.

[x] David Leonhardt, “After the Great Recession,” New York Times April 28, 2009, http://www.nytimes.com/2009/05/03/magazine/03Obama-t.html.

Obamacare: Bad for Rural America

Medicare Advantage Cuts. The Congressional Budget Office (CBO) estimated[i] that provisions in the health care takeover[ii] will cut a total of $202.3 billion from Medicare Advantage plans that provide a range of health care options to seniors. These harmful cuts could result in Medicare Advantage plans moving out of rural areas, limiting beneficiary choice and causing millions of seniors to lose their current coverage and the extra benefits Medicare Advantage plans provide.

According to former Clinton Administration official Ken Thorpe, while every senior in rural areas had access to a Medicare Advantage plan in 2007, only one in four rural beneficiaries had a choice of plans in 1999[iii]—and the significant cuts could return rural seniors to the days when the only option is a one-size-fits-all government plan.

Rural Hospitals Could Suffer. CBO estimates that the health care takeover will result in $22.1 billion in cuts in Medicare disproportionate share hospital (DSH) payments and an additional $18.5 billion in Medicaid DSH reductions.[iv] These reductions could inflict more significant harm on rural hospitals in States where Medicaid programs cover a low percentage of costs to care for the uninsured, as well as States where DSH payment levels are already below the national average.

Impact on Imaging Facilities. According to CBO, the health care takeover will save $2.3 billion by increasing the presumed utilization rate for certain imaging equipment from 50 percent to 75 percent.[v] Particularly for rural hospitals and clinics where imaging equipment might be used much less frequently than the legislation presumes, these savings could have a disproportionate impact on access to services.

Tax Increases. The health care takeover raises the Medicare payroll tax by a total of $210.2 billion—leveling new taxes on many family farms and other small businesses that serve as the engine of new job creation.[vi] Combined with additional taxes of up to $2,000 per full-time employee for firms that cannot afford to pay for their workers’ health plan premiums, these tax increases on small businesses represent a “double whammy” on American job growth in an already struggling economy.

Medicare Reductions. The health care takeover establishes a new board of unelected bureaucrats empowered to make binding recommendations on cost reductions within Medicare. There is nothing to prohibit this board of federal bureaucrats from reducing—or even eliminating entirely—any temporary payment increases for rural providers, given its authority to re-write Medicare law and regulations in a way that will curb federal costs. For these reasons, CBO notes that these and other Medicare reductions “might be difficult to sustain over time,” and could “reduce access to care or diminish the quality of care” for patients.[vii]

 

[i] Congressional Budget Office analysis of H.R. 4872, March 20, 2010, http://cbo.gov/ftpdocs/113xx/doc11379/Manager%27sAmendmenttoReconciliationProposal.pdf.

[ii] Senate-passed bill (H.R. 3590) text available at http://www.opencongress.org/bill/111-h3590/text; reconciliation bill (H.R. 4872) text available at http://www.opencongress.org/bill/111-h4872/text.

[iii] Ken Thorpe and Adam Atherly, “The Impact of Reduced Medicare Advantage Funding on Beneficiaries,” April 2007, http://www.bcbs.com/issues/medicare/background/Medicare-Advantage.pdf.

[iv] CBO analysis of H.R. 4872.

[v] Ibid.

[vi] Joint Committee on Taxation analysis of substitute amendment to H.R. 4872 in concert with H.R. 3590, March 18, 2010, http://jct.gov/publications.html?func=startdown&id=3671.

[vii] Congressional Budget Office analysis of H.R. 3590, December 19, 2009, http://cbo.gov/ftpdocs/108xx/doc10868/12-19-Reid_Letter_Managers_Correction_Noted.pdf.

Speaker Pelosi’s Health Care Takeover: Bad for Seniors

The Republican Conference has compiled a list of provisions in the Pelosi health care bill that would harm American seniors:

Millions Lose Their Current Coverage. The Congressional Budget Office (CBO) has estimated that provisions in H.R. 3962 would lead to a total of $170 billion in cuts being taken from Medicare Advantage plans that provide a choice of health care options to seniors. These harmful and arbitrary cuts could result in Medicare Advantage plans dropping out of the program, harming beneficiary choice and causing 3 million seniors to lose their current coverage; millions more seniors could see premiums rise or additional benefits curtailed. According to former Clinton Administration official Ken Thorpe, while every senior had access to a Medicare Advantage plan in 2007, millions of seniors did not have a choice of plans in 1999—and the significant cuts in the Democrat bill mean that the promise of “If you like your current plan, you can keep it” would likely ring hollow for many Medicare Advantage beneficiaries.

Reduced Access—Or Higher Premiums. In order to keep to the President’s promise of a deficit-neutral bill, H.R. 3962 excludes language providing adjustments to the Medicare formula that governs physician reimbursement levels. As a result, physicians would receive a 21 percent cut in payment levels beginning in January, and further reductions thereafter. While Democrats have introduced separate stand-alone legislation (H.R. 3961) to address the payment issue, the more than $200 billion cost of that bill is not offset with other spending reductions, so seniors would pay one-quarter of the corresponding increase in physician spending through higher Part B premiums—as much as $70 billion worth.

Part D Premium Increases. The bill would begin a phased-in process of filling in the Part D coverage gap, or “doughnut hole.” However, CBO has previously stated that filling in the “doughnut hole” immediately would cause a 50 percent spike in average Part D premiums when compared to current law projections—and these higher costs would be passed on to American seniors.

Does Not Address Medicare’s Long-Term Solvency. Although the legislation includes more than $400 billion in Medicare savings provisions, the Administration’s own actuaries have confirmed that the bill would increase overall health spending—exacerbating the long-term trends that have placed the Medicare program in financial peril.

Opens the Door to Government Rationing. Democrats have repeatedly refused to eliminate cost grounds as a factor in coverage decisions, and H.R. 3962 includes no such limitations on making reimbursement decisions on cost grounds. Therefore, providers may be concerned that the bill could lead to delay or denial of life-saving treatments for seniors, particularly given President Obama’s own comments on this issue: “The chronically ill and those toward the end of their lives are accounting for potentially 80 percent of the total health care bill out here….There is going to have to be a very difficult democratic conversation that takes place.”

End-of-Life Counseling. Provisions in H.R. 3962 would expand the definition of Medicare physician services to include consultations regarding end-of-life decision-making. This provision could result in government-paid consultations encouraging assisted suicide or other forms of euthanasia.

Speaker Pelosi’s Health Care Takeover: Bad for Rural America

The Republican Conference has compiled a list of provisions in the Pelosi health care bill that would harm rural American patients, providers, and businesses:

Government-Run Health Care. Many Democrats—including President Obama—are insisting upon the inclusion of a so-called “public option” as part of a health care bill. However, H.R. 3962 would promote “choice” by creating a government-run health plan in an attempt to undercut Americans’ existing health coverage. The non-partisan Lewin Group has found that the government-run plan in H.R. 3962 would result in as many as 114 million individuals losing their current insurance. As a result, a government-run plan would likely lead to federal bureaucrats, not patients and doctors, making important decisions about Americans’ health care treatment options.

Medicare Advantage Cuts. The Congressional Budget Office (CBO) has estimated that provisions in H.R. 3962 would lead to a total of $170 billion in cuts being taken from Medicare Advantage plans that provide a range of health care options to seniors. These harmful and arbitrary cuts could result in Medicare Advantage plans moving out of rural areas, harming beneficiary choice and causing millions of seniors to lose their current coverage. According to former Clinton Administration official Ken Thorpe, while every senior in rural areas had access to a Medicare Advantage plan in 2007, only one in four rural beneficiaries had a choice of plans in 1999—and the significant cuts in the Democrat legislation could return rural seniors to the days when the only option is a one-size-fits-all government plan.

Disproportionate Share Hospitals. CBO estimates that H.R. 3962 would result in $10.3 billion in reductions in Medicare disproportionate share hospital (DSH) payments, and an additional $10 billion in Medicaid DSH reductions. These reductions could inflict more significant harm on rural hospitals in States whose Medicaid programs cover a low percentage of costs to care for the uninsured, as well as States whose DSH payment levels are already below the national average.

Impact on Imaging Facilities. According to CBO, H.R. 3962 would save $3 billion by increasing the presumed utilization rate for certain imaging equipment from 50 percent to 75 percent. Particularly for hospitals and clinics where utilization of imaging equipment might already be much lower than 50 percent, these savings could have a disproportionate impact on services to rural Americans.

Tax Increases. The provisions in H.R. 3962 imposing nearly half a trillion dollars of “surtaxes” on “high-income” filers would raise taxes for many American households—including family farms and other small businesses, who may report income in excess of the “surtax” threshold limits, even though their net personal income could be sharply below those levels. Combined with additional taxes on firms with payrolls of as little as $500,000 who cannot afford to pay for their workers’ health plan premiums, these tax increases on small businesses would represent a “double whammy” on the engine of American job growth.

Medicare Reductions. While Sections 1157 and 1158 provide $8 billion in additional federal funds to address geographic disparities in reimbursement levels as recommended by an Institute of Medicine study; however, “hold harmless” provisions ensuring rural areas will only receive additional payments, and cannot have their payments decreased, apply only until 2014. Moreover, H.R. 3692 requires a new payment methodology developed by federal bureaucrats beginning in 2015, and the Obama Administration has also explored various proposals to allow a board of federal bureaucrats to make binding recommendations on cost reductions within Medicare. There is nothing in these proposals that would prohibit the respective boards of bureaucrats from reducing—or even eliminating entirely—any temporary payment increases for rural providers.

Question and Answer: “Competitive Bidding” in Medicare Advantage

In light of President Obama’s plan for “competitive bidding” within Medicare Advantage (MA), we have compiled a document providing background on the issue.

Does the President’s proposal create competitive bidding within Medicare?

No.  The proposal requires MA plans to bid against each other—but not traditional Medicare will not be required to be competitive.

Does the President’s proposal create a “level playing field” for MA plans to compete against traditional Medicare?

No.  Current law provides a significant bias in favor of traditional Medicare, including its role as the “default” setting for seniors—patients must affirmatively enroll in an MA plan, while those taking no action will receive government-run insurance through traditional Medicare.  Some Members may question why those purportedly interested in a “level playing field” have not proposed changing the current policy of auto-enrolling beneficiaries in traditional Medicare—particularly when it comes to those MA plans with costs below traditional Medicare spending.  Some Members may also view the double standards set by the Obama budget as further evidence to oppose a nationalized health plan, because Democrats will never create a truly level playing field for MA plans to compete against government-run Medicare.

Do seniors participating in Medicare Advantage plans receive extra benefits?

Yes.  Current law requires most MA plans to provide beneficiaries lower premiums, extra benefits, or reduced cost-sharing.  A May 2008 Government Accountability Office report found that MA beneficiaries saved an average of $804 per year in reduced cost-sharing and premiums by enrolling in Medicare Advantage.  Plans also use their rebates to provide extra benefits not covered by traditional Medicare, such as dental, vision, and hearing coverage.

Is a comparison between MA plan spending and traditional Medicare costs appropriate?

No.  Most Members believe that Medicare does not appropriately price all physician and hospital services—and Democrats’ recent actions demonstrate they do not support Medicare’s current pricing structure.  For instance, the “stimulus” bill placed a moratorium on proposed changes to hospice reimbursement, and legislation last July delayed a scheduled reduction in physician reimbursement levels—while providing for a 21% cut in January 2010.  If Members believe that physicians should not receive a 21% pay cut next January, then they may believe that traditional Medicare’s pricing mechanisms serve as an inappropriate benchmark to judge MA plan spending.

Isn’t traditional Medicare more efficient than Medicare Advantage plans?

No.  While some Democrats claim traditional Medicare’s administrative costs run as low as 3%, these costs exclude building maintenance, staff salaries, and collection of premiums that are borne by other federal agencies.  Traditional Medicare also suffers from fraud and abuse—a January Government Accountability Office report found that estimates of $10.4 billion in improper payments annually could actually understate the level of Medicare fraud—due to a lack of adequate administrative oversight.

Conversely, MA plans provide additional disease management and chronic care initiatives that traditional Medicare does not.  As Ezekiel Emanuel of the National Institutes of Health wrote in November, “Some administrative costs are not only necessary but beneficial.  Following heart attack or cancer patients to see which interventions work best is an administrative costs, but it’s also invaluable if you want to improve care.”

Do low-income seniors and minorities disproportionately benefit from Medicare Advantage?

Yes.  A 2007 study conducted by Ken Thorpe—a former Clinton Administration official—found that more than half of the millions of seniors who would lose MA coverage as a result of proposed cuts would have incomes between $10,000 and $30,000.  The same study included findings that minorities make up 27% of MA enrollment, compared with only 20% in traditional Medicare.  For these reasons, the National Association for the Advancement of Colored People and the League of United Latin American Citizens have previously opposed Democrat-led efforts to cut MA payments.[1]

Do all seniors benefit from the competition Medicare Advantage plans create?

Yes.  According to the Medicare Payment Advisory Commission, MA plans with a prescription drug benefit bid $11 per month less for prescription drug coverage than stand-alone Part D plans.  Because bids from both stand-alone plans and MA plans are averaged together to determine federal spending on the prescription drug benefit, MA plans’ lower bids have helped result in Part D spending much lower than originally projected.

[1] “Minority Groups Oppose Proposed Reduction in Funds for Medicare Advantage Plans,” Kaiser Daily Health Policy Report March 16, 2007 (Washington, DC: Henry J. Kaiser Family Foundation), available online at http://www.kaisernetwork.org/daily_reports/rep_index.cfm?DR_ID=43645 (accessed February 21, 2009).