By John Reichard, CQ HealthBeat Editor
April 4, 2007 – The left-leaning Center on Budget and Policy Priorities issued a report Tuesday challenging insurers' arguments that cuts to Medicare Advantage plans would disproportionately harm minorities.
Among other arguments, the center says overpayments to the plans harm millions of minority beneficiaries by raising their monthly Part B Medicare premiums and otherwise ballooning Medicare expenditures.
Debate over how cuts would affect minorities could be a determining factor in how far congressional Democrats will go toward cutting payments to Medicare Advantage plans over the next five years. Advantage plans include HMOs, PPOs, and other types of private plans.
The powerful insurance lobby America's Health Insurance Plans (AHIP) won an important ally recently when it persuaded the National Association for the Advancement of Colored People to oppose Advantage cuts.
But the 11-page report by center analysts Edwin Park and Robert Greenstein says minority and low-income beneficiaries would be better served by other approaches, noting that overpayments run into tens of billions of dollars.
The report cites an estimate by the Medicare Payment Advisory Commission—the panel Congress relies on for impartial advice on payment policy—that Medicare Advantage plans are paid 12 percent more than traditional Medicare for the cost of treating comparable beneficiaries.
According to the Congressional Budget Office, paying Advantage plans and providers in traditional Medicare the same rates would save $65 billion over five years and $160 billion over 10 years—money Democrats want to spend to increase coverage of uninsured children and to block scheduled payment cuts to physicians.
Health insurance groups have countered the knife-sharpening created by those savings estimates by warning that cuts would disproportionately deny minorities the added benefits and lower out-of-pocket costs available in MA plans.
But the center's report says industry claims are "based on a selective, and distorted, culling of the data."
A key issue in the argument is how best to protect minorities and low-income beneficiaries against the large expenses not covered by the Medicare program.
"Medicaid, not Medicare Advantage, is the main form of supplemental coverage for low-income and minority Medicare beneficiaries," the report says. "The most cost-effective way to help these individuals would be to strengthen the programs within Medicaid on which many of them rely to supplement Medicare coverage and to pay" Medicare premiums.
"It should also be noted that the overpayments are harming millions of beneficiaries—including minority beneficiaries—by raising the Medicare premiums they pay each month," the report continued, with the effect of reducing "the disposable income that tens of millions of seniors and people with disabilities have to live on, including large numbers of minority beneficiaries."
The report also suggested that those overpayments "are deepening Medicare's looming financing shortfalls and creating a need for deeper Medicare cuts (or larger tax increases) than otherwise would be required."
These cuts could increase out-of-pocket costs and cut benefits to low-income and minority beneficiaries, "who can least afford to pay larger amounts for health care out of their own pockets."
The report acknowledges that cutting Advantage payments would lower enrollment projects for the program but says that is "hardly a sound basis for requiring the U.S. Treasury to continue making tens of billions of dollars of excessive payments." According to CBO, equalizing payments would result in Advantage enrollment totaling 6.5 million beneficiaries in 2012, down from 8.2 million now and well below the 12.5 million CBO forecasts for 2012 if the payment law is unchanged.
A more efficient way to assist low-income and minority beneficiaries would be to widen eligibility for the so-called Medicare Savings Programs, which help enrollees pay Medicare premiums and out-of-pocket costs, the center said. Savings also could be used "to expand health insurance coverage more generally."
The Bush administration and many congressional Republicans say the best way to keep Medicare sustainable over the long haul is to encourage the kind of coordinated care offered by Advantage plans, and that current levels of payment are an investment in that type of care that will bring down the Medicare spending curve over the long haul.
Mike Tuffin, AHIP's senior vice president, responded that Medicare beneficiaries with incomes below $20,000 who aren't on Medicaid or don't have employer-provided supplemental coverage are disproportionately reliant on Medicare Advantage. Of minority beneficiaries falling into that category, four of every 10 African American beneficiaries enroll in Medicare Advantage, as do majorities of Latino and Asian American beneficiaries, he said. Tuffin also said that Centers for Medicare and Medicaid Services Administrator Leslie Norwalk testified Feb. 13 that 27 percent of Medicare Advantage enrollees are minorities, compared with 20 percent of the beneficiaries in the traditional Medicare program.
"The data is crystal clear: Low-income minority seniors who are not eligible for Medicaid and don't have employer supplemental coverage are much more likely to choose Medicare Advantage," Tuffin said. " A majority of Latinos, a majority of Asian Americans, and 38 percent of African Americans who fall into this category are enrolled in Medicare health plans."
American Enterprise Institute analyst Joseph Antos said the Center's analysis is "right that the low-income population relies on Medicaid. No one said that's not the case." But he added that low-income beneficiaries who don't qualify for Medicaid or have supplemental employer coverage, "of course" select Medicare Advantage plans. The fair analysis, he said, is to exclude low-income beneficiaries with Medicaid coverage since they already have comprehensive coverage. "If you take duals out . . . the low-income beneficiaries predominantly are the ones who sign up in Medicare Advantage plans."