Marie Cocco: Ignoring the Medicare Fiasco

Posted on Dec 5, 2006

By Marie Cocco

WASHINGTON—The Medicare prescription drug benefit was designed only tangentially to provide medicine to the elderly. Its distinction is that it stands as a totem to the Republican Party’s uncontrollable urge to use tax money to prop up its corporate backers, in this case the managed-care health insurance industry.

    Democrats who take control of Congress next month pledge a nip-and-tuck fix to what they consider the program’s most outrageous giveaway: preventing Medicare from negotiating directly with drug makers to obtain deep discounts. The benefits of this Democratic campaign promise were that it was easy for voters to understand and provided a convenient way to achieve party unity.

    But the ugly truth is that even if the Medicare drug bill were completely revamped, the overhaul would not reverse the billions in giveaways now flowing from Medicare to the managed-care industry through other routes outside the drug program.

    The lavishness of this project at privatizing Medicare is exposed, once again, in a new study by the Commonwealth Fund, a nonpartisan think tank that studies health policy. It found that Medicare overpays private managed-care medical plans so substantially that it costs taxpayers $922 more per patient to have them get coverage through corporate insurers such as Humana and UnitedHealth Group compared with traditional, government-run Medicare. 

    “Every plan in every county in the nation was paid more in 2005 than its enrollees would have been expected to cost if they had been enrolled in traditional, fee-for-service Medicare,” the study concludes. That’s 12.4 percent more, per patient, than traditional Medicare—$5.2 billion last year alone. Over five years, the study estimates excess payments would amount to $30 billion. None of it would be recovered by fixing the drug benefit.

    The overpayments are not accidental. They are built into a host of complicated reimbursement schemes designed deliberately by Congress and the administration. Among the more outrageous payouts is the government’s practice of paying twice to reimburse hospitals for the cost of educating medical students. Medicare pays teaching hospitals directly for its patients who are enrolled in managed care, then it pays for the same patients a second time by including money for them in a comprehensive formula through which it pays managed-care plans.

    Another inglorious practice involves the way the government tries (and fails) to recoup money from managed-care plans that enroll fairly healthy—and least costly—patients. Having known for more than a decade that Medicare was overpaying for these younger, healthy patients, successive administrations have tried to adjust reimbursements to account for the lower risk. But the adjustments are phased in slowly. And here is the real kicker: Even when one plan—call it Healthy Senior Plus—loses some reimbursements because of risk adjustment, the money isn’t recouped by taxpayers or even used to defray other costs in Medicare. It is redistributed only among managed-care plans. Last year, this practice raised payments for each and every managed-care plan by 4 percent.

    The contrivances the Commonwealth Fund studied do not even include those outrages written into the prescription drug legislation. Never before has a Medicare benefit been available only through private insurers, without an option of coverage directly from the government. Yet even this boon was insufficient for congressional Republicans. They included in the drug measure a $10-billion payment to entice preferred provider organizations to participate in Medicare. The Commonwealth Fund did not include this money in its estimate of overpayments.

    One of the study’s authors, Stuart Guterman, says the excess money sloshing through managed-care coffers makes it impossible to tell how cost effective they are. “If they’re able to provide care more efficiently, that’s great,” says Guterman, director of the Commonwealth Fund’s program on Medicare’s future. “But it’s going to be hard to tell whether they can, if you overpay them by $5.2 billion.”

    But wasn’t this the promise? It certainly was since the Republicans took over Congress in 1994. We were told that the managed-care industry would wring the waste out of the healthcare system in general and Medicare in particular to deliver the same—or better—care at lower cost. The intent, as Newt Gingrich famously said, was for government-run Medicare to “wither on the vine.” To achieve this end, Republicans funneled billions to the industry and sent taxpayers the bill.

    It is unlikely that Democrats will dismantle this rigged contraption, or even try. Their agenda is modest, aimed simultaneously at doing enough to please voters without doing so much that inside-the-beltway chatterers accuse them of overreaching. But the next time you hear a lawmaker complain about “runaway” Medicare spending, just remember who is running to the bank.
   
    Marie Cocco’s e-mail address is mariecocco@washpost.com.

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