A commenter on this site told me to look up “Obama’s $8.3 billion slush fund”, so I googled it. Lo and behold, there are lots of stories in the news with those words in the title.  Fox News, the New York Post, the Washington Examiner, and numerous other websites are slamming the Obama administration for a program that rewards Medicare Advantage plans for being average, and encourages them to improve the quality of their services to seniors.

The “slush fund” is a bonus program connected to the star ratings for Medicare Advantage plans. The ratings go from one to five stars and are based on more than 30 criteria such as: member complaints; members leaving the plan; surveys of members and their satisfaction with the plan; telephone customer service; managing chronic illnesses of members; how many members get screening tests and flu shots.

I wrote abut this program last fall:

In 2012, the star ratings will be very important because Medicare will pay bonuses to Advantage plans that get three or more stars. Five-star plans will be able to enroll new members all year long.  Unfortunately, Arizona doesn’t have any 5-star plans.

Fortunately for Arizona, 3-star and 3.5-star plans will get bonuses, because Medicare looked around and saw that most Advantage plans fall into this “average” range. The bonus rules were changed in order to keep the vast majority of Medicare Advantage plans in business. All Advantage plans are working hard to make improvements, with a goal of obtaining a 5-star rating  (and higher bonus payments from Medicare). This is a good thing for people enrolled in Advantage plans.

So, those fiscally responsible Republicans are now clamoring for this program to be discontinued – although they say that, without these additional funds, 12 million people enrolled in Medicare Advantage plans across the country would face big changes to their Medicare coverage.

I have written previously that this program is politically motivated and here’s why:

The Affordable Care Act requires payment cuts to Medicare Advantage plans because they have been overpaid for years.  These cuts are being phased in over several years so Advantage plan management can adapt to them.

I figure the Obama Administration realized they could not afford to kill off Medicare Advantage plans because 25% of Medicare beneficiaries are enrolled in these plans, and enrollment is much much higher in some key locations such as Miami, Philadelphia, New York… and even Phoenix and Tucson. (See more details in my post from last year.) So they decided, “if we can’t kill Medicare Advantage, let’s try to make it better”. But the $8.6 billion being spent to encourage Medicare Advantage plans to provide better service to their enrollees is contrary to the cost saving requirements that are part of the Affordable Care Act.

Obama opponents say the bonus payments are a waste of Medicare money and a payoff to hold onto seniors’ votes in November. They may be correct. But others might say this is an investment in making Medicare Advantage plans better.

Medicare Advantage enrollment keeps rising, and the biggest insurance companies in the country are spending billions of dollars buying Medicare Advantage companies. I wrote  last year about Medicare Advantage as a good investment.

So what do these insurance companies know that the rest of us don’t?

I have a feeling they know that Medicare Advantage is here to stay.  And the future of Medicare may be these private plans. Medicare is being privatized slowly but surely, especially in big urban areas like Miami, New York, Phoenix, Los Angeles, Las Vegas, and many cities and their suburbs.

FYI:

Wellpoint bought CareMore for $800 million last year.

Cigna Corp agreed to buy HealthSpring Inc for $3.8 billion.

UnitedHealth Group Inc acquired  XLHealth Corp this year for an “undisclosed amount”.

In Maricopa County, 44% of Medicare beneficiaries are enrolled in Medicare Advantage plans.  There are 21 Medicare Advantage plans available in Maricopa county that include Part D drug coverage. The plans listed below have the largest number of enrollees or are growing their numbers.  The plans listed below are all HMO network plans.

Pacificare is the big kahuna in Maricopa County and is run by UnitedHealthcare. The plan is better known as AARP Medicare Complete, and this plan has been around for a very long time.

Cigna‘s plan gets 4.5 stars out of 5 on the Medicare.gov rating system.  If Cigna can get 5 to stars, it will be allowed to enroll new members throughout the year rather than just during the Open Enrollment Period of October 15th – December 7th.

Banner Medisun also gets 4.5 out of 5 stars from the Medicare.gov rating system.

Health Net is holding onto its enrollment numbers, despite having a monthly premium.

Humana is growing at a good pace.  Humana also has several PPO plans, which are not listed above.

SCAN, which grew rapidly over the previous three years, did not increase its enrollment numbers in 2011.

CareMore is in its second year in Phoenix and is growing rapidly – but lags far behind the other players.

Medicare Advantage enrollment data can be found at http://www.cms.gov/MCRAdvPartDEnrolData/

Insurance companies that run Medicare Advantage plans were overpaid by as much as $3.1 billion in 2010, according to a report by the Government Accountability Office.

Medicare Advantage plans receive payments from Medicare for each person enrolled with them.  In Arizona, the payments start at around $800 per month per person. Medicare Advantage plans also receive additional payments for members who have health problems and cost the plan more money.  This is called “risk adjustment”.  Apparently there were some miscalculations (by the government or by the plans?) and so Medicare paid out billions of dollars in overpayments to Advantage plans in 2010.

A Bloomberg news report on the overpayments included the following paragraph:

Medicare Advantage patients often receive superior care to those in traditional Medicare, so “conclusions about whether the MA payment system appropriately pays plans should therefore not be based on GAO’s analysis,” said Robert Zirkelbach, a spokesman for America’s Health Insurance Plans, a Washington trade group, in an e-mail.

A false statement:

“Medicare Advantage patients often receive superior care to those in traditional Medicare, ….”

Where did that line originate? Was it the reporter or the spokesperson for the insurance trade group? There may be a few Advantage plans that provide “superior care”, but not many – and that statement is false and misleading.

Most Medicare Advantage plans are just insurance companies that pay bills.  They don’t offer any “superior care”, they just pay the doctors, hospitals, labs and other providers.  Advantage plans are known as “coordinated care plans”, but this is mainly because they have a defined network of providers and their members must get a referral from their primary care physician.  In fact, Advantage plans routinely refuse tests and services ordered by doctors because a panel of experts employed by the plan have deemed the service to be unnecessary – decisions doctors can and do dispute.

According to the Bloomberg article:

Enrollment in Advantage plans was about 11 million people in 2010, or about 24 percent of total Medicare beneficiaries, according to the Kaiser Family Foundation, a nonprofit research group in Menlo Park, California. The U.S. paid about $114 billion to Advantage plans in 2010, according to the GAO. Medicare cost an estimated $525 billion, according to the Centers for Medicare and Medicaid Services.

In Arizona, enrollment in Medicare Advantage is quite high among people covered by Medicare:  Maricopa County: 44%; Pima County: 45; Pinal county: 49%