Medicare Advantage Is a For-Profit Scam.
Medicare Advantage is a massive, trillion-dollar rip-off, of the federal government and of taxpayers, and of many of the people buying the so-called Advantage plans. (Photo: Win McNamee/Getty Images)
The simple solution to the Medicare Advantage problem is to kill off the program. It was just a Trojan horse to privatize Medicare, and its presence will make Medicare for All even harder to implement.
Over 100 Democratic lawmakers last week introduced legislation to lower the Medicare eligibility age to 60. There is one small problem that needs fixing, though: so-called "Medicare Advantage."
This week my new book, The Hidden History of American Healthcare: Why Sickness Bankrupts You and Makes Others Insanely Rich is officially available in bookstores nationwide and online. Here's a chapter excerpt I think you'll find interesting, particularly after all those awful TV ads with former football and sitcom stars we've had to endure the past few years…
The "Advantage" War against Medicare
Medicare Advantage is a massive, trillion-dollar rip-off, of the federal government and of taxpayers, and of many of the people buying the so-called Advantage plans.
It's also one of the most effective ways that insurance companies could try to kill Medicare For All, since about a third of all people who think they're on Medicare are actually on these privatized plans instead.
Nearly from its beginning, Medicare has allowed private companies to offer plans that essentially compete with it, but they were an obscure corner of the market and didn't really take off until the Bush administration and Republicans in Congress rolled out the Medicare Modernization Act of 2003. This was the GOP's (and a few corporatist Democrats') big chance to finally privatize Medicare, albeit one bite at a time.
That law created a brand known as Medicare Advantage under the Medicare Part C provision, and a year later it phased in what are known as risk-adjusted large-batch payments to insurance companies offering Advantage plans.
Medicare Advantage plans are not Medicare. They're private health insurance most often offered by the big for-profit insurance companies (although some nonprofits participate, particularly the larger HMOs), and the rules they must live by are considerably looser than those for Medicare.
Even more consequential, they don't get reimbursed directly on a person-by-person, procedure-by-procedure basis. Instead, every year, Advantage providers submit a summary to the federal government of the aggregate risk score of all their customers and, practically speaking, are paid in a massive lump sum.
The higher their risk score, the larger the payment. A plan with mostly very ill people in it will get much larger reimbursements than a plan with mostly healthy people. After all, the former will be costly to keep alive and healthy, while the latter won't cost much at all.
Profit-seeking insurance companies, being the predators that they are, have found a number of ways to raise their risk scores without raising their expenses. The classical strategies of tying people to in-network providers, denying procedures routinely during first-pass authorization attempts, and having very high out-of-pocket caps are carried over from regular health insurance systems to keep costs low and profits high.
But with Medicare Advantage, the big insurance companies have invented a whole new way to rip us all off while padding their bottom lines.
For example, many Medicare Advantage plans promote an annual home visit by a nurse or physician's assistant as a "benefit" of the plan. What the companies are doing, though, is trying to upcode their customers to make them seem sicker than they are to increase their overall Medicare reimbursement risk score.
"Heart failure," for example, can be a severe and expensive condition to treat . . . or a barely perceptible tic on an EKG that represents little or no threat to a person for years or even decades. Depression is similarly variable; if it lasts less than two weeks, there's no reimbursement; if it lasts longer than two weeks, it's called a "major depressive episode" and rapidly jacks up a risk score.
The home health visits are designed more to look for illnesses or codings that can increase risk scores than to find conditions that require medical intervention. They're so profitable that an entire industry has sprung up of companies that send nurses out on behalf of the smaller insurance companies.
In summer 2014, the Center for Public Integrity (CPI) published an in-depth investigative report titled Why Medicare Advantage Costs Taxpayers Billions More Than It Should.
They found, among other things, that one of the most common scams companies were running involved that very scoring of their customers as being sicker than they actually were, so that their reimbursements were way above the cost of caring for those people.
As of this writing, my friend Sam still hasn't seen a doctor. This is the state of healthcare in America as it's been sliced and diced by the multibillion-dollar insurance industry.
Meanwhile, every fall, Americans are inundated with hundreds of millions of dollars' worth of TV, direct mail, and internet advertising for Medicare Advantage plans. And where does the money come from to pay for that advertising?
It comes from the same place that provided over $1 billion in wealth to the former CEO of United Healthcare, and over $100 million a month in compensation to senior executives in the largest health insurance companies: denying claims while collecting risk adjustment claims from your tax dollars and mine.
The simple solution to the Medicare Advantage problem is to kill off the program. It was just a Trojan horse to privatize Medicare, and its presence will make Medicare for All even harder to implement. At the same time, the 20 percent hole that the GOP insisted on for skin in the game with real Medicare needs to go, too.
A comprehensive Medicare for All program will eliminate both of these problems.