Insurance Companies Are Trying Desperately to Stop Medicare Expansion in the
Budget Reconciliation
Julia Rock
Jacobin
Insurance Companies Are Trying Desperately to Stop Medicare Expansion in the
Budget Reconciliation
Customers get information from a reception desk at a a UnitedHealthcare
store in the Queens borough of New York. (photo: Getty)
20 October 21
The health insurance industry is spending big to halt efforts to expand
Medicare benefits - and running false ads claiming Kyrsten Sinema and Joe
Manchin are protecting seniors rather than privatizing Medicare.
As Medicare Advantage continues to drive profits for the nation's major
health insurance companies, the industry is lobbying against a provision in
the reconciliation bill that could save the government nearly $150 billion
over the next decade on a much-needed expansion of the country's Medicare
program and prevent even more money from being funneled to private health
insurance companies.
Medicare Advantage - the privatized version of the national health insurance
program for people over the age of sixty-five and people with disability
status - has become a cash cow for private health insurers. As small- and
medium-sized employers struggle to keep up with the skyrocketing costs of
health care, private insurers are increasingly expanding into the Medicare
Advantage market to buffer their profits.
A provision being considered as part of the reconciliation bill would add
dental, vision, and hearing benefits to Medicare without including those
benefits in the calculation of the rate at which the federal government
reimburses Medicare Advantage plans. Doing so could cut the cost of
expanding Medicare benefits by 41 percent, according to an analysis by the
Brookings Institution.
The vast majority of Medicare Advantage plans already provide dental,
hearing, and vision benefits. But that hasn't stopped private insurers and
their front group, the Better Medicare Alliance (BMA), from demanding more
money from Congress and spending $3 million on advertising campaigns since
September to try to ensure their reimbursement rates go up if those benefits
are also added to traditional Medicare plans.
Some of the BMA ads misleadingly thank conservative Democratic senators
Kyrsten Sinema of Arizona and Joe Manchin of West Virginia, claiming the two
main opponents to expanding Medicare have actually "fought for seniors." The
Sinema ad says: "We need her now more than ever, because Washington listens
to her."
Meanwhile, BMA sent a letter last month to House Speaker Nancy Pelosi (D-CA)
and Senate Majority Leader Chuck Schumer (D-NY) urging them "to ensure
additional benefits are structured in a way that fully reflect the cost of
adding dental, vision, and hearing to Medicare in the benchmark
calculation."
Increasing that benchmark calculation would mean private insurers get
additional reimbursement for services they already provide - it would amount
to a taxpayer-funded windfall for insurance companies that are already
raking in money off of Medicare Advantage.
"The insurance companies that participate in Medicare Advantage are making
huge, huge profits off of taxpayers in that program, and they absolutely
could afford to give up the overpayments that Congress is making to keep the
program going at its current level," said Wendell Potter, a former Cigna
executive who became a whistleblower and is now a Medicare for All advocate.
Gaming the Medicare Advantage System
While Medicare has contracted with private insurance companies since the
national health insurance program was formed as part of the Social Security
Act in 1965, the current iteration of Medicare Advantage has only existed
since 2003. Similar in policy design to charter schools, Medicare Advantage
offers people the choice of private insurance plans instead of traditional
Medicare. Medicare Advantage plans offer baseline benefits, and insurers are
paid to provide them by the government.
Utilization of Medicare Advantage has grown steadily since it was launched.
According to health policy experts, that's largely because private insurers
invest in marketing tactics to draw people to their plans, highlighting
perks like extra benefits that aren't covered by Medicare and an annual cap
on out-of-pocket costs. More than 40 percent of Medicare recipients now
receive their coverage through Medicare Advantage.
For insurers, meanwhile, the business is increasingly lucrative.
"One of the reasons why they are so focused on Medicare Advantage is they
are finding that the commercial insurance market, private side, is not
growing," said Potter, the former insurance executive. "It hasn't been
growing for years. The unsustainable increase in premiums year after year
and their constant shifting of out-of-pocket costs, is making health
insurance unaffordable for businesses, so there is no growth there."
Ahead of the current open enrollment period for Medicare plans, which began
on October 15, major insurers including UnitedHealth Group, Humana, and
Aetna announced new expansions into the Medicare Advantage space.
Profits come from the generous reimbursement structure for Medicare
Advantage. The federal government calculates a "benchmark" rate for
benefits, based on what it spends on those services under traditional
Medicare coverage.
Private insurers submit estimates as to how much it will cost them to
provide the average Medicare Advantage customer with the benefits of
traditional Medicare, and the federal government reimburses them at a rate
that is slightly higher than that estimate but below the benchmark.
This calculation results in considerable profits. In 2019, when the most
recent data is available, private insurers averaged 4.5 percent profit
margins on their Medicare Advantage plans. Between 2016 and 2018, Medicare
Advantage plans reported nearly double the profit margins per customer
compared to individual and employer plans.
The returns are so high in part because Medicare Advantage providers have
devised ways to spend less on their customers than traditional Medicare.
"They've figured out how to game the system in ways that enable them to make
outsized profits," said Potter.
One stratagem is that Medicare Advantage, unlike traditional Medicare, is
allowed to require prior authorization for procedures. And high denial rates
can deter people from seeking care in the first place, which saves insurers
money. The federal Health and Human Services Department has found that
"there are persistent problems related to denials of care and payment in
Medicare Advantage," and that in most cases when denials are appealed,
insurers overturn their own denials.
At the same time, taxpayers spend more per person for Medicare Advantage
plans than they do on traditional Medicare plans. A recent analysis by the
Kaiser Family Foundation found that in 2019, the federal government spent
$321 more per Medicare Advantage enrollee than traditional Medicare
enrollee.
Another method insurers utilize is a shady practice known as "upcoding," in
which they manipulate the government's system for coding diagnoses in order
to get larger reimbursements from the government. The Department of Justice
has brought lawsuits against multiple insurers in recent months for
upcoding.
In some cases, insurers simply illegally underspend on their customers, for
which they face few consequences. Last month, UnitedHealthcare was penalized
by the Centers for Medicare and Medicaid Services (CMS) for having spent too
small a percentage of premiums on providing benefits for three years in a
row. In response, the company has been banned from enrolling new subscribers
in certain plans in a handful of states, which represent a small fraction of
the insurers' overall enrollment.
Hundreds of Billions in Savings
Adding dental, hearing, and vision benefits to traditional Medicare through
the reconciliation bill could make Medicare Advantage plans less attractive
to consumers, cutting into private insurers' profits. Such an expansion of
the national insurance program would likely cost the federal government more
than $350 billion over the next ten years.
However, a proposal to include those benefits in Medicare without increasing
the rate at which the government reimburses Medicare Advantage plans could
cut that cost by 41 percent, according to a recent analysis by Matthew
Fiedler, an economist at the USC-Brookings Schaeffer Initiative for Health
Policy and former chief economist on President Barack Obama's Council of
Economic Advisors. With corporate Democrats demanding a smaller
reconciliation bill, such a drastic cost savings should, in theory, be a
very attractive move.
"Most of the federal savings from excluding the cost from the benchmark
would be coming out of reduced plan profits," Fiedler told the Daily Poster.
More than 98 percent of Medicare Advantage plans already offer dental,
vision, and hearing benefits. While some of those plans could be required to
improve their dental, vision, and hearing benefits to meet the new proposed
standards for traditional Medicare, and a few would be required to expand
their coverage to include those benefits, the plans can afford to do so
without the government increasing the benchmark, Fiedler explained.
If the new benefits were included in a new Medicare Advantage benchmark
calculation, it would contribute to already high profits for private
insurers - with very little of that funding going to people on the plans.
Past research has found that when Medicare Advantage increases its
reimbursement rate, only one in every eight dollars of reimbursements is
passed along to customers in the form of savings or better coverage. A
larger share is passed to insurers in the form of profits.
On the other hand, said Fiedler, expanding Medicare benefits without
changing the benchmark calculation would only lead to modestly lower profits
for insurance companies.
Misleading Ads and Mounting Industry Opposition
In August, Politico reported that an insurance industry source said
proposals to add benefits to Medicare had insurers "freaking out," because
they "worry that seniors will drop their private plans en masse and migrate
to traditional Medicare once the new benefits are in place." Politico added
that their source "said the industry is mindful of the optics of publicly
opposing coverage of eyeglasses, dental care and hearing aids, and is
largely lobbying behind the scenes."
To do so, the insurance industry has turned to the BMA, a dark money group
representing insurers and business groups. Health insurance giant Humana and
CVS Health, which owns Aetna, each donated $2 million to the organization
last year, according to company disclosures.
The BMA has spent nearly $3 million on TV and radio ads since the beginning
of September, according to data from AdImpact.
Those ads included paid spots on cable news in Arizona this month that
featured the faces of elderly people who, according to a voiceover, are
among the more than 625,000 people in the state who "have come to rely on
something vital: Medicare Advantage."
The raspy masculine voice warns, "Now there's talk in Washington of cutting
Medicare Advantage and raising our premiums." But, the voiceover says,
"Senator Kyrsten Sinema has fought for seniors and Medicare Advantage." The
advertisement ends with an image of the senator's face alongside the phone
number for her office, encouraging viewers to thank Sinema "for fighting for
us."
Since September, BMA has spent $516,000 on ads in Arizona and $266,000 in
West Virginia, as well as nearly $550,000 in the Washington, DC area. They
have also targeted conservative Democrats in the House, including
Representatives Stephanie Murphy (FL), Jared Golden (ME), Kurt Schrader
(OR), and Cindy Axne (IA).
In reality, there is no proposal in Congress to "cut Medicare Advantage" or
raise premiums, and moreover, no evidence that Sinema or Manchin have
"fought for seniors."
Instead, the BMA is running ads thanking Manchin and Sinema because they
have become the most prominent obstacles to passing Democrats' social safety
net legislation - and because they do not support the party's plan to expand
Medicare to cover dental, vision, and hearing benefits.
As a supposed fiscal hawk, Manchin might be expected to welcome the cost
savings that would come with expanding Medicare benefits without changing
the reimbursement rate going to private insurers - but instead, he appears
to be parroting the talking points of his corporate allies, who don't want
the benefits expanded at all, much less without scoring a better
reimbursement rate.
Manchin has said he thinks Democrats need to shore up Medicare's finances
before expanding the program, and he also wants any new benefits to be means
tested and only help poorer Americans - an idea that would undermine
Medicare's draw as a universal program.
Sinema, meanwhile, refuses to say anything about Democrats' plans publicly,
but Axios recently reported that she is "less interested in offering new
dental and vision benefits in Medicare."
Sinema does appear interested in protecting the Medicare Advantage payouts
to private insurers, however. On October 15, she sent a letter, cosigned by
Manchin, to CMS "to express our support for the Medicare Advantage (MA)
program." The letter continued, "To ensure this continuum of care, we stand
ready to protect MA from payments cuts, which could lead to higher costs and
premiums, reduce vital benefits, and undermine advances made to improve
health outcomes and health equity for MA enrollees."
The BMA subsequently issued a press release thanking the signatories for
their "unwavering leadership."
In addition to the BMA advertisements, the health insurance lobbying group
America's Health Insurance Plans (AHIP), the right-wing think tank American
Action Forum, and UnitedHealth Group's employee lobbying arm have been
mobilizing to ensure that taxpayer dollars continue to prop up the Medicare
Advantage program.
AHIP commissioned a study that showed that adding dental, vision, and
hearing to Medicare without including them in the benchmark calculation
would leave Medicare Advantage with fewer rebate dollars to be spent on
supplemental benefits.
The American Action Forum - a think tank affiliated with the American Action
Network, a dark money group that bankrolls House Republicans - has opposed
adding new benefits to Medicare on the grounds that Medicare Advantage
already provides those benefits.
"If Democrats are really looking for pain-free ways to cut back on their
$3.5 trillion spending spree, scrapping the dental, vision, and hearing
additions to Medicare would be a good place to start, because the benefits
are already available through Medicare Advantage. Perhaps advocates for
enhanced Medicare coverage should instead focus on bolstering MA, which
already provides a range of tailored benefits to the Medicare population,"
wrote the organization's health policy analyst in a blog post earlier this
month.
At the same time, UnitedHealth Group has pushed its employees to call
Congress and ask them "not to cut Medicare Advantage" through its internal
political engagement platform, called United For Action.
"While action is entirely voluntary, consider lending your voice to protect
seniors in Medicare Advantage," noted a September 16 email sent to employees
by management of the company, which was found to have been spending too
little on seniors' care for years.
"Policymakers are currently debating and considering proposals that may
impact the Medicare Program and other health policies," the email said. "To
protect Americans enrolled in Medicare Advantage, ask Congress to ensure any
reforms to Medicare maintain stability for the 27 million seniors currently
served by Medicare Advantage."
On an earnings call last week, the company announced that it had surpassed
$4 billion in profits last quarter, $1 billion more than the same quarter
last year. UnitedHealth Group's chief financial officer John Rex pointed to
Medicare Advantage as a source of ongoing growth, and said the company plans
to bring on nine hundred thousand more customers through Medicare Advantage
this upcoming year.
