Is There An Advantage to "Medicare Advantage" Private Health Insurance Plans?

Back in 2003 the Republican run Congress created Medicare Advantage, a program that allowed private health insurance providers to get involved in Medicare. A recent review by the Congressional Budget Office however failed to conclude that there was any advantage to seniors who participated in the private healthcare plans as opposed to those who stuck with the government provided benefits.

Medicare Advantage has been popular with some beneficiaries because they have felt that the private insurers who offer the health insurance plans, especially the managed care plans like HMOs, provide more benefits than those included in traditional Medicare, In the past two years about 20% of the beneficiaries have opted for the private plans.

The Bush administration has been pushing the private plans, and extols their virtues in many Government information brochures about Medicare. However the CBO found that the private plans actually cost the system more money. The Government pays about 12% more for a Medicare recipient enrolled in a private health insurance plan than for a typical beneficiary.

Democrats have expressed concern over the cost of Medicare Advantage, and since the CBO has found that in reality it offers very little if any advantage to the recipients, some are calling for a cut in its funding. They suggest that by reducing payments to insurers in the program to match what is paid to traditional Medicare providers could save $54 billion over five years, and $149 billion over 10 years – money that could be better spent on the 47 million American without access to affordable medical insurance or on expanding government-subsidized insurance for children.

Of course the insurance industry has been lobbying strongly to keep the Medicare Advantage system as it is. They feel that Medicare Advantage can be preserved, and other ways can be found to fund current demands to see all children with adequate medical insurance by 2010. The President of America’s Health Insurance Plans, the industries largest trade organization that recently joined a consortium that put together just such a proposal for Washington said, “We’ve always thought that this is a false choice between the two programs. We think what members of Congress are now finding that real people — their constituents — have been significantly helped by these programs.”

However after the hearings that were convened by the CBO, Director Peter R. Orszag told the Senate Finance Committee “private Medicare Advantage plans might not offer beneficiaries any health advantages despite more extensive benefits, and added that lawmakers need more information so they can determine which private plans offer added value to Medicare.”