Medicare scare headlines about running out of money have been rife in the past few weeks. But what’s really happening?
“Social Security and Medicare will run out of money in just over a decade, a new report warned Monday, putting fresh pressure on Congress to address the nation’s financial health as federal debt rises and the population ages. The Washington Post reported. “The trustees for the massive retirement programs project that Social Security will be insolvent by 2035, and Medicare by 2036, which would force benefit cuts. That’s better than many experts had expected, though — last year, federal actuaries said the programs could go belly-up sooner. The report said the roaring job market and low unemployment rate means more workers are contributing to the programs, shoring up their finances even while record numbers of retirees enroll for benefits.”
But what about headlines saying that the current Medicare program is overcharging the U.S. government by as much as 22 %? The freshest reporting on this topic says clearly that the privatized form of Medicare — Medicare Advantage — is costing the government much more than traditional Medicare, also known as “fee for service” Medicare, the government-run Medicare program.
This is important because the tax dollars supporting privatized Medicare Advantage enrollees have grown exponentially with the surge in Medicare Advantage enrollments, which now are well above half of enrollees. Those tax dollars are swelling the coffers of private insurers, who now make much more money on tax-supported programs than on private insurance like Obamacare or employer-sponsored group health plans. Maybe reducing the Medicare Advantage payout, or the number of insured people on Medicare Advantage, would help.
22 percent more
“When accounting for favorable selection of enrollees in [Medicare Advantage] and higher [Medicare Advantage] coding intensity, we estimate that Medicare spends approximately 22 percent more for [Medicare Advantage] enrollees than it would spend if those beneficiaries were enrolled in [Fee For Service] Medicare, a difference that translates into a projected $83 billion in 2024,” the Medicare Payment Advisory Commission, or MedPac, wrote in a recent report. MedPac is an independent advisory entity that exists to analyze the peerformance of Medicare programs.
“A major overhaul of [Medicare Advantage] policies is urgently needed for several reasons. First, beneficiaries lack meaningful quality information when choosing among [Medicare Advantage] plans. Second, Medicare is paying more for [Medicare Advantage] than for
comparable beneficiaries in [Fee For Service] Medicare. Third, the disparity between [Medicare Advantage] and [Fee For Service] payment disadvantages beneficiaries who — for medical reasons or personal preferences — do not want to enroll in [Medicare Advantage] plans that use tools like provider networks or utilization management
policies and instead want to remain in [Fee For Service] (which includes care provided through alternative payment models).
“Fourth, the lack of information about the use and value of many [Medicare Advantage] supplemental benefits prevents meaningful oversight of the program such that we
cannot ensure that enrollees are getting value fro those benefits. Finally, the continued growth in [Medicare Advantage] will increasingly create challenges for benchmark setting
because beneficiaries remaining in [Fee For Service] may be higher risk (and thus have higher spending) in ways that risk adjustment cannot adequately capture.”
Upcoding for higher pay
Trudy Lieberman, who has written about Medicare for years, writes for HealthCare Uncovered: “I checked in with Fred Schulte, who now writes for KFF Health News, and who over his career has written many prize-winning stories documenting the shenanigans insurers have used to enhance their reimbursements from Medicare, such as upcoding. That’s the practice of billing Medicare for ailments that are more serious than what patients actually have. ‘For example, instead of reporting a patient has diabetes, the insurers would say diabetes with neuropathy or eye problems and receive higher reimbursement,’ he explained.”
“Arends’ story doesn’t sound hopeful about the direction of Medicare. He concludes, “Medicare Advantage isn’t making the rest of Medicare better. It is putting the rest of Medicare out of business. And not by being more efficient, but by being less efficient. It is driving up the overall cost of Medicare by 22%. And not by being more efficient but by being less efficient. The logical outcome is that traditional Medicare ceases to exist and that Medicare dollars pass through the hands of private insurance companies at 122 cents on the dollar.”
Social Security, too, is not about to go belly-up. While there could be a shortfall in about 10 years, experts say, it’s not going to end benefits.
“As the program is now structured, it is projected to face a shortfall beginning in 2035. After that point, if the law is never changed, it can still pay over 80 percent of scheduled benefits,” Dean Baker writes at the Center for Economic and Policy Research. “To be clear, it would be a very bad story if retirees were forced to take a 20 percent cut in benefits. But 80 percent is far more than zero, so the idea that people will receive no benefits after 2035 would require that Congress actually take action to terminate the program. In an electorate that will have an even larger share of retirees than we have today, that seems pretty hard to imagine.”
