The House Energy and Commerce Subcommittee on Oversight and Investigations held a hearing this week to examine predatory practices in Medicare Advantage plans.  Under the Medicare program, beneficiaries may opt to receive care through private Medicare Advantage plans instead of the traditional fee-for-service Medicare program.  The Congressional Budget Office (CBO) finds that Medicare is paying these private plans 12 percent more to treat comparable beneficiaries than it would in the traditional Medicare program.  The overpayments in the Medicare Advantage plans have resulted in adding $24 to the Part B premiums of seniors in traditional Medicare, and have shortened the life of the Medicare Hospital Insurance Trust Fund by two years.
The hearing uncovered growing abuses by unscrupulous agents in private companies marketing Medicare Advantage plans to unsuspecting seniors who are convinced to enroll in a plan they may not understand and that may be inappropriate for their situation.  Agents often receive bonuses and gifts based on their ability to increase enrollment in their company’s plans.  Marketing abuses include agents misrepresenting their association with Medicare, using scare tactics and tricking seniors into unknowingly signing application documents.  Currently, 8.5 million beneficiaries, or 19 percent of the Medicare population, are enrolled in Medicare Advantage plans.  As long as companies can pad profits through high subsidies and continue to engage in deceptive market practices, enrollment will increase in Medicare Advantage programs.  Some would go as far as to argue that this ultimately could lead to privatization of the Medicare program.

The debate over Medicare Advantage plans has come into focus in the context of the reauthorization of the State Children’s Health Insurance Program (SCHIP).  SCHIP is a program that provides affordable health care with a robust benefit package for low-income children and families unable to afford health insurance but not poor enough to be eligible for coverage under Medicaid.  In order to expand coverage to more children, advocates and many in Congress support increasing the federal government’s investment in SCHIP by $50 billion over the next 5 years.  The rules adopted by Congress this year require that spending increases in mandatory programs like SCHIP be paid for (offset) by comparable reductions in spending or increases in revenue.  CBO estimates that eliminating overpayments in Medicare Advantage would save $54 billion between 2009-2013, enough to offset $50 billion in new funding for SCHIP.

Many would argue that reducing or eliminating overpayments to private insurance companies in the Medicare Advantage plans is an excellent offset for increasing resources to the SCHIP program.   For advocates the choice is clear.  Funding windfalls for insurance companies that place traditional Medicare at a competitive disadvantage is not just a low priority; it is downright undesirable.  The nation’s interests are far better served by directing these funds to increase access to health care coverage for more children.

Both the House and Senate are expected to mark up SCHIP reauthorization bills in July.

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