Sen. Al Franken didn’t mince words when he accused Medicare Advantage plans of overcharging the federal government — and praised legislation to slash their payments by billions of dollars.
“These insurers were getting much more than they should have based on the benefits they were providing to seniors. So we cut what Medicare gives to these private insurance companies,” the Minnesota Democrat intoned in a Dec. 13, 2012, speech on the Senate floor in praise of the Affordable Care Act.
Franken rebuked Republican Mitt Romney for his 2012 presidential campaign promise to “restore those billions and billions of dollars in overpayments to private insurance companies for no reason, for no good effect, just so that, I guess, these insurance companies could have more profit.”
Yet less than four months later, Franken was in the company of more than 160 lawmakers publicly thanked by industry surrogates for their help in killing some of the same Medicare Advantage cuts he’d previously supported so forcefully.
By most accounts it was a stunning policy reversal for many Democratic members of Congress and the Obama administration, and a forceful flexing of the Medicare Advantage industry’s growing political might in Washington.
John Gorman, a top Medicare Advantage consultant, hailed the lobbying victory in early 2013 as a “direct reflection of muscle this program has obtained.” Gorman noted: “It’s now nearly 30 percent of the [Medicare] program and that gives it a lot of juice.”
Indeed. Congress created Medicare Advantage in 2003 to encourage private insurance companies to jump into the senior care market without hesitation. Since then, the program has hit its stride as a health care colossus that now cares for nearly 16 million elderly and disabled people, nearly a third of those eligible for Medicare, at a cost expected this year to top $150 billion.
Some of the nation’s mightiest insurance carriers — UnitedHealth Group and Humana Inc. are two of the biggest — dominate the market and are deeply invested in keeping Medicare Advantage alive and thriving. The health insurance industry’s main trade group, America’s Health Insurance Plans, or AHIP, funds its own “grassroots” lobbying group and its members dole out millions of dollars in federal campaign contributions.
The top 10 Medicare Advantage companies in terms of enrollment unleashed as many as 145 lobbyists in 2013, according to Senate Office of Public Records data. AHIP spent nearly $2.5 million in the first quarter of 2013 lobbying senators and congressmen on health care issues, according to Senate filings. Ultimately, the group's assertion that cuts to the insurers would harm seniors trumped criticism that the health plans can be a poor value for taxpayers.
The magnitude of Medicare Advantage overcharges is staggering by any measure. An investigation by the Center for Public Integrity found that Medicare paid the health plans nearly $70 billion in “improper” payments — mostly inflated charges from overstating the health risks of patients — from 2008 through 2013 alone.
The health plans, which are paid a varying fee for each person they enroll, also have driven up Medicare costs in many parts of the country. The Center’s analysis of Medicare enrollment data uncovered more than 550 counties where payments to Medicare Advantage plans have been at least 25 percent higher than the average costs of treating seniors who remain on standard Medicare.
But the threat of riling up elderly voting blocs and the sheer complexity of the program’s finances has kept the overpayment controversy largely in the province of academics. Elderly patients have no reason to question how much the government pays their health plan or the fine points of the billing process.
That the industry can enlist seniors’ help in beating back attempted rate cuts comes as no surprise to many supporters of the program. They say many seniors are pleased with their Medicare Advantage plans because they offer extra benefits, such as dental care and hearing aids, which standard Medicare does not cover. Seniors often shell out less in out-of-pocket expenses and some pay no premium at all.