Vanessa Fuhrmans’ and Jane Zhang’s Wall Street Journal write-up of the Centers for Medicare and Medicaid Services’ (CMS) decision to reduce subsidies to private insurers participating in the Medicare Advantage (MA) program adopts a decidedly pro-business perspective:
The cuts, announced late Monday by the Centers for Medicare and Medicaid Services, are slightly less severe than the 5% reduction the federal agency signaled in February, but still raise concerns about what has been a critical source of profit growth for many health insurers…The cuts mean beneficiaries enrolled in the private plans could see higher premiums or cost-sharing amounts next year, depending on the extent to which insurers try to preserve the 3% to 5% profit margins they usually make on the plans. The Blue Cross Blue Shield Association, for instance, said it had calculated average monthly premium increases of $50 to $80 if the 2010 cuts were to go through.
A business paper relies on business sources to report on public policy, but this particular article reproduces insurer complaints of lower profit margins without questioning the efficacy of maintaining a policy that forces taxpayers to pay $1.30 to deliver a dollar to a subset 20% of Medicare beneficiaries.
The “profit growth” of private insurers may be the concern of WSJ reporters and the majority of their sources, but it is of little importance to Americans (and, one would hope, honest policy makers). The real question is: do the government’s over payments actually provide better care than traditional Medicare?
The short answer is “no.” A number of government reports and independent estimates have dampened the rationale for subsidizing MA plans. The extra federal dollars don’t improve health outcomes. They pad insurers’ bottom lines, raise costs for beneficiaries in the traditional Medicare program, squeeze both Medicare and the federal budget, and drain resources from more productive uses. Private fee-for-service Medicare Advantage plans, moreover, have exposed beneficiaries to serious financial risks.
It’s also unclear why MA plans that claim to coordinate care and operate efficiently can’t provide services at competitive rates. If they can manage care and the cost of care, why then do they need the extra federal dollars?
And why, more importantly, does a paper that presumably prides itself in preserving the free market place, not question a capitalist system that is funded on higher government subsidies to capitalist firms?