Medicare health plans' unfair advantage

Medicare Advantage plans should not be getting subsidies while physicians face massive payment cuts.

Editorial. June 11, 2007.

Congress has a major Medicare payment policy choice to make. Physicians face reimbursement cuts estimated at 10% next year and about 40% over the next decade. Meanwhile, the program is paying health plans, on average, 12% more than it spends on beneficiaries in its traditional fee-for-service system.

Lawmakers must decide whether physicians get adequate payment updates or whether private health plans continue to receive large Medicare subsidies. The evidence points to a clear answer. Congress should put Medicare Advantage, the program's private health plan component, on equal footing with regular Medicare. Failure to do so would have serious repercussions.

If continued, plan overpayments, worth $922 per beneficiary, will further strain program finances. Medicare Advantage enrollment will grow from 19% of Medicare's 42 million beneficiaries to 26% in 2017, the Congressional Budget Office predicts. Private fee-for-service plans are expected to drive the growth. This is especially troubling because these plans, on average, are paid 19% more than Medicare spends on traditional fee-for-service patients.

The hefty overpayments for Medicare Advantage plans means that any increase in enrollment will boost Medicare spending. The subsidy's elimination would save the federal government $65 billion over five years.

There is also the basic issue of fairness. Why should an industry that serves only 19% of the Medicare population get subsidies, while doctors, who care for all Medicare patients, get hit with a 10% cut next year?