I have seen many complaints lately that the Affordable Care Act is hurting Medicare.
These include political TV commercials, and they generally apply to a category of health plan known as Medicare Advantage. Medicare Advantage is a subsidy to insurance companies that is so generous they can afford to offer attractive benefits at little or no charge and still make money. Medicare Advantage plans differ from traditional Medicare by offering its enrollees ostensibly better care and sometimes broader services — free eyeglasses, even gym memberships — in return for reimbursements from the government that are 14 percent higher than traditional Medicare reimbursements, or more.
And, yes, the Affordable Care Act aims to pare the government’s reimbursements for Advantage plans by a total of about $200 billion over 10 years.
A recent article in the National Bureau of Economic Research found only about one-fifth of the extra reimbursement to insurance companies gets passed through to patients in the form of lower premiums, better care or more services. Where does the money go? Insurers pocket much of it as pure profit. Some they spend on advertising — to attract more Advantage members, so they can claim more of the enhanced reimbursement.
It’s not surprising that the health insurance industry is leading the charge against Medicare Advantage cuts. It’s important to remember the money comes from taxpayers. Republicans love to portray themselves as guardians of the public purse.
Yet here they are, lining up to protect one of the most wasteful claims on government resources of all.
retired LSU professor