1996: Tucson Medicare Advantage plans were a model for Medicare’s futureby Denise Early on Apr. 26, 2012, under Health
Since 2006, Medicare Advantage plans have been overpaid, according to government studies. The Affordable Care Act requires Advantage plan payment cuts over several years. But now we learn that Medicare is paying bonuses to Advantage plans to the tune of $8.6 billion. What’s the deal with Medicare Advantage?
If you google “Medicare Tucson 1996″ you will find an article in the New York Times titled, “Tucson H.M.O.’s May Offer Model for Medicare’s Future”. According to the March 26, 1996 article:
“Tucson’s health maintenance organizations offer free hospital stays, free annual physical exams, free X-rays, free mammograms, free laboratory tests, $26 eyeglasses, $5 and $10 doctors’ appointments, free rides to get to them and this year’s newest offering: $7 for a three-month supply of any of 300 prescription drugs”.
Those early versions of Medicare Advantage were very popular, and 42 percent of Medicare beneficiaries in Pima County were enrolled in them. This was six times the national average because Medicare HMOs were a new concept. The article said the success of Tucson’s Medicare H.M.O.’s was “a test case for ways to cut fat from the health care system and curb the rise in Medicare spending”. According to the article, a study sponsored by the insurance industry said:
“ If H.M.O.’s nationwide raised their enrollment of Medicare patients, now 7 percent, to 40 percent, or close to the Tucson level, …. all Medicare spending would drop by 21 percent”.
In 1996 Medicare Advantage plans saved money for Medicare.
Back in 1996, Medicare HMO plans were paid per enrollee 95% of what Medicare paid on average for Medicare beneficiaries. That meant a 5% savings for Medicare because the HMO took the money and the risk for each person enrolled with them. But since the Bush administration changed the payment rules, Medicare Advantage plans have been paid 10 – 15% more than what Medicare spends on the average Medicare beneficiary. At a time when we are hearing that Medicare will go broke in 12 years, how can this excess spending be justified?
The additional spending cannot be justified, but… as we all know, once benefits and programs have been given to people, it is political suicide to take them away. Medicare Advantage plans are very popular, especially in politically important places like Florida, Pennsylvania, New York, California, and Arizona. So, although the Affordable Care Act calls for cutting billions of dollars from Medicare Advantage payments, the likelihood of Medicare Advantage going away is very low – in my opinion.