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MA Windfall Payments: A Source of Help for Low-Income Children
And Seniors?
Presentation to the TriCaucus
Ron PollackFamilies USA
May 11, 2007
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Medicare Advantage Plans
How much do seniors fromcommunities of color
rely on MA plans?
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A Lot, According to Widely Quoted Study
Professors Atherly and Thorpe say past research showed:
“40% of African Americans and 52.9% of Hispanic beneficiaries
enroll in these [MA] plans . . .”
“36% of Medicare eligible beneficiaries with incomes below $10,000 . . .
enrolled” in these private plans
without Medicaid or employer coverage
without Medicaid or employer coverage
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BUT . . . Study Excludes Half of Minority and Low-Income Seniors
Those with Medicaid or employer coverage were left out. How many is that?
45% of Hispanic seniors
54% of African-American seniors
56% of all Medicare beneficiaries with incomes < $10,000
Source: AHIP 2007
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Traditional Medicare: Still the Choice of Seniors
MA Traditional Medicare
Hispanic seniors 25% 75%
Asian seniors 14% 86%
African-American seniors 13% 87%
Low-income seniors 10% 90%
Source: AHIP 2007
3X
6X
8X
9X
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Whose Advantage?
Windfall Payments = Added cost per person, compared to traditional Medicare
MedPAC estimates average windfall payments for all MA plans are 12% For fast growing private FFS plans, average windfall payments are 19%
CBO: Excess payment over 5 years (2009-2013)$54 billion
CBO: Excess payment over 10 years (2009-2018) $149.1 billion
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Do Windfall Payments = Extra Benefits?
Some portion goes to enhance benefits and reduce beneficiaries’ out-of-pocket costs
BUT
Minimal regulation
No oversight
No limits on profiteering
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Where Does the Windfall Go?
“At UnitedHealth, Goldman Sachs estimates Medicare Advantage will account this year for 11 percent of net income.”
“Goldman Sachs estimates that Humana, a leader in the field, will earn 66 percent of its net income from Medicare Advantage this year.”
Michael B. McCallister, President and CEO of Humana, July 31, 2006: “Stronger results in our Medicare Advantage, commercial, and TRICARE businesses combined to produce second-quarter earnings that significantly surpassed our expectations. We’re on track to grow revenues by 50 percent this year . . . and expand our Medicare business into a long-term growth engine.”
Source: Wall Street Journal, April 30, 2007 and Humana 2006.
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What Do Overpayments Mean for Medicare?
Increase premiums for people in traditional Medicare.
Threaten Medicare’s financing, encouraging program cutbacks.
Hasten insolvency of Part A (inpatient) trust fund by 2 years.
Increased annual premiums by $24 this year.
Will have increasing impact on premiums each year.
Source: Richard Foster, CMS 2007
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Bush Administration and Republican Congressional LeadersWhy so intent on protecting windfall overpayments?
Two words . . .
P R I V A T I Z EMedicare
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The Conservative Game Plan
Privatize Social Security – failed (so far)
Privatize Medicare Part D – succeeded: only private plans allowed to run Part D Medicare prohibited from bargaining for better drug prices
Privatize traditional Medicare – outcome unclear
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Think We’re Kidding?
Newt Gingrich:
“Now, we don’t get rid of [traditional Medicare] in Round 1 because we don’t think that’s politically smart. But we believe it’s going to wither on the vine because we think people are voluntarily going to leave it . . . .”
Source: Gingrich 1995
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No, We’re Not Kidding
Ways & Means Chairman Thomas in 2003:
“Some of our friends on the other side of the aisle are saying that if [the MMA] becomes law, it will be the end of Medicare as we know it. Our answer to that is, we certainly hope so.”
Source: New York Times, June 26, 2003
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A Brief History of Medicare Advantage
Early 1980s: Private plans introduced to Medicare to save money.
1983 to 1997: Plans paid at 95% of traditional fee-for-service rate. GAO: plans are overpaid at 95%
1997 to 2003: Congress changes funding formula. MedPAC: payment rate is 103% of traditional Medicare
2003 and on: Congress changes payments to MA plans. 2004-2005. MedPAC (2004-5): payments 107% of traditional fee-for-service MedPAC (2006-7): payments now 112% of traditional fee-for-service
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Why Private MA Plans Cost So Much
Profits to insurance companies
Agents’ fees
Marketing and advertising to lure customers to their plans
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What’s the Alternative?
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Improve Protections for Low-Income Seniors
Improve outreach so more low-income seniors get Medicaid and Medicare Savings Programs (MSPs)
Raise or eliminate assets tests that disqualify low-income seniors from MSPs
Simplify applications and re-enrollment for MSPs
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Percent of Low-Income Seniors, by Race
0 5 10 15 20 25
Hispanic
API
African American
White
19.9%
Source: Kaiser Family Foundation 2007
23.2%
12.6%
7.9%
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Investing in America’s 9 Million Uninsured Children
3/5 are racial and ethnic minorities
2/3 have incomes < 200% of poverty
($34,340 for family of 3)
8 in 10: at least one parent works
Source: Families USA
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0 5 10 15 20 25
Hispanic
API
African American
White
Percent of Children Uninsured, by Race
Source: Census 2005
21.9%
12.5%
12.1%
7.2%
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What Fiscal Commitment Do We Need?
CBC, CHC, and CAPAC request:
House and Senate Budget Resolutions: $50 billion new money But big obstacle: Pay-Go
$60 billion new money over next 5 years for SCHIP
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Meeting Pay-Go Requirements
Finance, Energy & Commerce, and Ways & Means Committee leaders agree:
Can’t reach $50+ billion pay-go amount with only one source
Need combination of sources, such as:
Increased tobacco tax
Improved tax collection measures (e.g. Rep. Emanuel proposal)
Windfall MA overpayments
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Key questions to ponder:
Is it better to overpay MA insurers . . . OR
Is it better to overpay MA insurers . . . OR
Is it better to overpay MA insurers . . . OR
Is it better to overpay MA insurers . . . OR
Stop Medicare’s privatization?
Subsidize poor seniors?
Reduce premiums?
Cover uninsured kids?