Maine People's Alliance - Costs of Privatized Medicare Press Release

Wasteful spending nothing more than a handout to big insurance companies at the expense of Maine taxpayers and beneficiaries

BANGOR—A privatized Medicare plan involving nearly 20 percent of all Medicare beneficiaries is costing seniors and other Maine taxpayers millions of dollars in corporate handouts and threatening Medicare’s ability to care for its 47 million beneficiaries, according to an analysis released today by the Maine People’s Alliance, Maine House Majority Whip Sean Faircloth and Americans United for Change. The analysis, prepared by US Action Education Fund for release by MPA and Americans United for Change, details how Medicare Advantage hurts Maine Medicare beneficiaries and other Maine taxpayers.

“When President Bush tried to privatize Social Security in 2005, we worked in a nation-wide coalition to defeat that scheme,” said Orono resident Milt Hilary, a member of the Maine People’s Alliance board of directors. “Now that President Bush is quietly trying to privatize Medicare, Maine’s congressional delegation needs to ensure that our public health care funds go toward people’s health care, not into health industry CEOs’ wallets.”

Passage of the Bush Administration-backed Medicare Modernization Act by the last Congress in 2003 substantially increased subsidies to private insurance companies that provide private Medicare plans and has accelerated the privatization of the Medicare system. These private insurers were supposed to introduce competition into the Medicare system and reduce costs.

Instead of reducing costs, the so-called Medicare Advantage plan means the federal government, on average, is paying private plans significantly more than it costs to treat people on traditional Medicare. The Medicare Payment Advisory Commission (MedPAC), a non-partisan organization created by Congress to advise it on Medicare issues, and the Congressional Budget Office both estimate that nationwide, Medicare Advantage plans are paid on average 12 percent more per person than it would cost to provide the same care to a beneficiary in traditional Medicare.

As a major battle looms in Congress over the future of the Medicare Advantage program, Maine Medicare advocates are joining a nationwide campaign called ‘Stop Medicare Privatization.’ To draw public attention to the issue, Maine advocates released a new study by the US Action Education Fund.

“This study provides conclusive evidence that the so called Medicare Advantage is infecting Medicare with the worst problems of the American health insurance system,” said George Christie, field organizer for Americans United for Change. “Taxpayers are paying billions of dollars to maintain these overpayments while seniors and others in Maine are paying millions more in inflated Medicare premiums. Congress should eliminate subsidies for ‘Medicare Advantage’ plans before overpayments destroy the one big American health insurance success story,” said Christie.

Titled The Public Cost of Privatized Medicare: How Medicare Advantage is hurting Medicare beneficiaries and other Maine taxpayers, the US Action Education Fund study reveals that Medicare Advantage costs each of the 4,864 Maine people enrolled on average an extra $1,628 per year, 24.3% more than care costs in traditional Medicare. Based on January 2007 enrollment in MA plans, this amounts to an overpayment of $6 million to private plans for Maine alone.

A portion of the overpayments to private plans must be passed along to MA beneficiaries, in the form of either added benefits and/or reduced premiums or cost sharing. But MA companies also retain a substantial and unspecified share of the overpayment for agent commissions, marketing, and profits – costs which the traditional Medicare program does not incur.

The overpayments to MA plans also cost the majority of Medicare beneficiaries who remain in traditional Medicare. Subsidies to plans increase the cost of the Medicare Part B premium that most beneficiaries pay. Each beneficiary in traditional Medicare pays $24 more in Part B premiums each year to finance overpayments to MA plans.

While most of Maine’s Medicare beneficiaries remain in traditional Medicare, they also pay higher Part B premiums to subsidize private Medicare plans – to the tune of $24 per person per year. This $24 per person adds up quickly. Roughly 143,000 Maine seniors and people with disabilities are paying a total of more than $3.4 million in additional Part B premiums to subsidize private Medicare plans.

“Congress has the opportunity to both fix the subsidies that are privatizing Medicare, and improve health care for low-income children and seniors. Congress is considering significant increases in funding for the SCHIP and Medicaid programs. These increases could go a long way in covering most of the 9 million uninsured children in this country,” said Ben Chin, MPA’s federal issue community organizer.

“We urge Senators Snowe and Collins to consider several sources of funding for SCHIP and Medicaid, including equalizing the reimbursement rate for MA plans with that of traditional fee-for-service Medicare. The $160 billion that Medicare can save by equalizing payments would go a long way toward funding these essential programs,” said Chin.

Maine Council of Senior Citizens/Association of Retired Americans president John Carr also pointed out that overpayments to Medicare Advantage plans threatens the solvency of the Medicare Trust Fund. Medicare actuaries report that the overpayments are advancing the date that the Medicare Hospital Insurance Trust Fund will become insolvent by two years. “As the Bush administration continues to sound alarm bells about the Trust Fund, they ought to start by ending these egregious subsidies to the insurance industry,” said Carr.

“The outrageous waste and abuse in the Medicare Advantage program is part of our larger, misguided privatization of Medicare. There is no justification for wasting our precious resources to subsidize private companies to provide Medicare insurance that can be provided more cheaply and efficiently by traditional Medicare,” concluded Maine House Majority Whip Sean Faircloth.