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?

Since Massachusetts enacted comprehensive health care reform in 2006, early data has indicated that reform has successfully reduced the number of uninsured and increased access to coverage. The Massachusetts legislation did not address cost containment, but the popular reform has vindicated proponents of an employer mandate and shared responsibility.

Early analysis of the Massachusetts experience confirms that “firms in Massachusetts have not dropped coverage, restricted eligibility, changed the scope of benefits, limited the range of provider choices, nor undermined the quality of care available under their plans,” and a new report released today reveals that “the spending for expansion has been shared more or less in proportion to how the spending for coverage was distributed prior to reform.”

In other words, while costs increased — as they have nationally — employers, consumers and state government paid the same, proportionately, for health coverage after 2006 as they did the year before the initiative started:

The government contributions, the report notes, “have grown slightly faster than the other two groups largely because of the introduction of a new public program.” “Government payments for uncovered services, however declined sharply. The combined effect was that government’s share of total payments was similar to its share prior to reform.”

From 2005 to 2007, “health insurance premiums rose by 16 percent in Massachusetts,” and overall health care spending increased by $4.7 billion. While an increase in take-up of coverage contributed to the spike, the rise is mainly the result of higher medical costs. In fact, the report concludes that “spending on coverage would have increased by about 60 percent of the $4.7 billion between 2005 and 2007 even if the number of people with insurance had not grown at all because of increases in premiums and per capita health care costs.”

Thus, what conservatives describe as a “government-take over” of health care is actually an arrangement in which all of the different players are helping to finance the system. Half of the newly-insured “are enrolled in private health insurance and employer-sponsored plans” and “the number of businesses offering coverage increased while the number reporting that the reforms are a financial burden fell to 29 percent.” Still, any sustainable health reform must address skyrocketing health care costs, and a health conscious Congress must learn from the victories and difficulties of the Massachusetts example.