Instead of updating this morning’s link, I’m going to use these two videos to expand on a couple of points made by Senate Financial Committee staffer Shawn Bishop and CBO Director Douglas Elmendorf yesterday in testimony on Capitol Hill. In the second video, Elmendorf quantifies the amount of benefits lost, but I first want to address Ms. Bishop’s argument to Senator Orrin Hatch. Apparently, she didn’t get the “if you like your current coverage” memo from the White House:
No one is saying that the cuts to Medicare Advantage (about $113 billion over ten years) will impact the Medicare program, although other more extensive “savings” certainly will. Medicare Advantage plans are bought by Medicare patients to extend benefits and coordinate with Medicare. The only reason to purchase them in the first place is to get better coverage than what Medicare provides. Arguing that people won’t lose anything because Medicare requires insurers to meet the same requirements as Medicare is a big red herring. MA consumers will lose a significant amount of extended benefits, for which they pay premiums.
Do you recall the many occasions when Barack Obama said, “If you like your current plan, you can keep it”? Why doesn’t that apply to Medicare Advantage consumers?
How much of those extended benefits will they lose? Douglas Elmendorf testifies that it’s about half of the value of Medicare Advantage plans:
In fact, the program will become so unattractive that people will quit buying the policies in the future, although existing consumers may keep them in the short term. Currently, between 20%-25% of all Medicare enrollees buy Medicare Advantage plans, which means that these changes impact a lot of people.
As far as Medicare A & B go, there are another set of spending cuts in store there as well. The Obama administration has proposed $500 billion in overall cuts to Medicare (including Advantage), which leaves roughly $390 billion for A & B over ten years. That’s about 8% of a program that supposedly runs more efficiently than insurers (according to Obama) because it doesn’t have to pay the profit margin in the industry — which runs at 3.3%. If Medicare is truly that efficient and effective, then the 8% cuts will have to result from care rationing or benefit reductions, especially when Obama proposes expanding Medicare and Medicaid to get universal coverage.