By all appearances, UnitedHealth Group is having a stellar year. The mammoth company, which is the largest health insurer in America and the biggest manager of private Medicare Advantage plans, announced on Thursday that despite a 14 percent decline in earnings, it had still made a profit of $2.1 billion — and that was just in the last fiscal quarter. UnitedHealth also won a major policy victory at the beginning of this month when the Obama Administration reversed course on its plan to cut reimbursements to Medicare Advantage plan providers by two percent. In fact, the Administration went the entirely opposite direction and announce it would raise these rates by 3.3 percent — a swing of 5.3 percent in UnitedHealth’s favor. Apparently, that isn’t enough for the insurance company. UnitedHealth is now threatening to reduce its involvement in managing Medicare plans, claiming that its government reimbursements are still too low.

“We did not expect the fastest growing, most popular and most effective Medicare benefit option serving America’s seniors to be underfunded to this extent in 2014,” UnitedHealth Group CEO Stephen Hemsley said on a conference call with investment analysts. He went on to clarify that the company will likely have to pull out of the Medicare market as it “reshape[s] Medicare networks and benefits to respond to the continuing underfunding of this [Medicare Advantage] program.” But Hemsley’s claims conflict with the company’s own earnings report, as well as the questionable performance of private insurance plans that service Medicare beneficiaries.

Conservatives often claim that having private insurers, rather than a public entity, manage programs like Medicare helps cut costs and make care more efficient. That’s why they have held up programs like Medicare Advantage and used it as a model for dismantling traditional Medicare to turn the public entitlement into a private insurance voucher. But as numerous studies and government reports have shown, private insurers game the Medicare Advantage program as much as they can by encouraging seniors to cherry-pick their health plans relative to their health. That allows companies like UnitedHealth to pay out less in benefits by offering healthier seniors alluring rates — but it raises prices for everybody in the traditional Medicare program by siphoning off less costly beneficiaries. And yet, Medicare Advantage still consistently comes in over-budget while regular Medicare manages to save money. Profit-motivated announcements like UnitedHealth Group’s today help explain why that is.

Obamacare contains cuts to these excess payments to private providers, consequently preserving the more generous and efficient traditional Medicare program. While those cuts are likely the source of Hemsley’s ire, he shouldn’t fret too much. Since Obamacare’s began being implemented, enrollment in Medicare Advantage has actually gone up, while seniors’ premiums have gone down.

During an appearance on Fox and Friends Friday morning, Fox News contributor and legal analyst Peter Johnson, Jr. claimed that Medicare beneficiaries who are losing access to critical medical services as a result of sequestration “ain’t seen nothing yet,” as Obamacare will kill off far more Americans in the next ten years.

During a segment discussing how the budget sequester’s two percent cut to Medicare is forcing cancer clinics to deny chemotherapy to thousands of beneficiaries, Johnson told host Steve Doocy that elderly Americans should expect a lot more bad news in the coming decade as a direct consequence of the health care law:

DOOCY: This story is going to disturb you. Cancer clinics across this country are turning away thousands of Medicare patients in need of chemotherapy. You can blame the sequester. Is there more to come? Peter Johnson, Jr. has a prescription for truth. Peter, what is this about?

JOHNSON: This is about people dying as a result of Obamacare and as a result of the sequester. What the oncology association is saying is that thousands of chemotherapy patients who should have received their treatments, their benefits under Medicare, will not based on a 2 percent reduction under the sequester. What they fail to understand — and maybe they do and they don’t want to discuss it at this point — is that over the next ten years, 2013 to 2023, under Obamacare, there will be a $716 billion reduction [to Medicare] in Obamacare. We’re talking about a $3 billion reduction in the sequester now and the $3 billion reduction in Obamacare –

DOOCY: This is a preview of coming awful things.

JOHNSON: You haven’t seen anything yet. You ain’t seen nothing yet.

Johnson’s conflation of the sequester’s ham-fisted spending cuts with Obamacare’s Medicare savings demonstrates a complete misunderstanding of the sequester, Obamacare, and how federal budgeting works. Sequestration is causing cancer clinics to turn people away because they can’t afford to keep providing expensive chemotherapy drugs to patients in the face of a two percent cut to Medicare Part B that has to come entirely out of clinics’ overhead funding — making the sequester cut more akin to a double-digit pay cut. Obamacare’s $716 billion in Medicare savings come from reducing historically excessive payments to providers that service private Medicare Advantage plans, meaning that it doesn’t affect benefits. Conservatives have consistently fear-mongered over those savings despite including them in their budgets.

Later on in the program, Johnson also revived the widely debunked claim that Obamacare has “death panels” — a claim that is so patently false that Politifact named it 2009′s “Lie of the Year.”

Two separate reports by the Centers for Medicare and Medicaid Services (CMS) and Health Affairs builds upon earlier research to conclude that private insurance plans under the Medicare Advantage program drive up Medicare spending. Ultimately, those private plans raise health care costs by encouraging seniors to cherry pick their health plans respective to their health, Kaiser Health News reports.

Private insurance plans under Medicare Advantage are often able to attract healthier Medicare beneficiaries by offering cheap — but bare-bones — health plans. When those healthier seniors encounter a medical problem that’s too extensive for their private coverage, they switch over to the more generous traditional Medicare program in order to take advantage of its more expansive benefits. That in turn, raises spending in the traditional Medicare pool:

A study released Thursday, by Gerald Riley, a researcher at the Centers for Medicare & Medicaid Services (CMS), adds to those concerns. The study looked at more than 240,000 people who dropped out of Medicare Advantage plans in 2007, and compared them with beneficiaries who remained in traditional Medicare the entire time. In the six months after leaving the private plans, the former Medicare Advantage patients used an average of $1,021 in medical services each month, while the patients in the control group cost Medicare $710 a month, the study found.

Another study in the December issue of the journal Health Affairs found that people “disenrolling were much more likely than other beneficiaries to report health declines.” Those researchers, led by J. Michael McWilliams, a Harvard Medical School professor, surmised that beneficiaries who developed serious ailments might leave the plans to get unfettered access to physicians and treatments through traditional Medicare, but neither that study nor Riley’s determined what motivated the changes. [...]

McWilliams’ study, along with other analyses in the same issue of Health Affairs, found that generally, Medicare has succeeded in reducing cherry-picking by Medicare Advantage plans by changes in how the program worked, including restrictions in the time periods that people could switch from a private plan back to traditional Medicare. In 2006, Medicare tried to crack down on switches by limiting them to once a year rather than monthly.

While the Health Affairs study notes that there have been some protective measures instituted to prevent this cherry-picking, it still occurs in considerable volume. The findings underscore the reality that adverse selection remains a costly problem in private insurance markets.

While some critics might claim that reductions to Medicare Advantage payments under Obamacare could encourage seniors to continue disenrolling from private Medicare Advantage plans, that hasn’t borne out in reality. In fact, since Obamacare’s cuts to overpayments in Medicare Advantage began to be phased in, enrollment in the program is up while premiums are down.

Furthermore, increased enrollment into traditional Medicare might actually be a desirable outcome — the traditional Medicare program costs less per capita than the private Advantage program. And as these recent studies show, Advantage plans tend to fall short — and cost more — once beneficiaries get sick. As Center for Medicare Advocacy executive director Judith Stein put it, “Private Medicare Advantage plans work for people when they are relatively well, but fall short of traditional Medicare when they are sick or disabled.”

Last week, the Center for American Progress (CAP) released a report titled “The Senior Protection Plan” that outlined serious ways to cut U.S. health care spending without shifting the burden onto sick, poor, and elderly Americans. This past weekend, a misleading editorial in the Minot Daily News falsely claimed that such a proposal would lower seniors’ care quality and raid the Medicare entitlement.

But the claims about the Senior Protection Plan’s allegedly negative effect on seniors’ health coverage don’t consider the fact that many conservative Medicare “reform” plans would actually cripple the safety-net program by turning it into a voucher system and shifting costs squarely onto seniors’ premiums. Here’s what the Minot Daily News got wrong about the Senior Protection Plan:

1) “President Barack Obama’s health care law will slash $716 billion in funding for the Medicare program.” This was one of the 2012 presidential campaign’s most repeated lies, but it was untrue then, and it is untrue now. Obamacare does not “cut” Medicare funding — in fact, it slows the growth of Medicare spending by eliminating wasteful overpayments to private insurers, incentivizing better performance by providers, and cracking down on fraud and abuse in the Medicare system. These reductions will actually result in Medicare being solvent for an additional eight years, as well as more affordable care for seniors.

2) “[Obamacare] and the federal-state Medicaid system were not targeted by the CAP for cuts to help lessen the seemingly ever-expanding United States spending deficit.” The CAP plan specifically calls for $10 billion in savings from Medicaid. But unlike conservative proposals to throttle federal spending on the program and throw millions of low-income Americans off their insurance rolls, the Senior Protection Plan encourages savings by making sure that Medicaid does not have to overpay relative to third-party insurers and decreasing future payments to safety-net hospitals that will become unnecessary as more states implement Obamacare’s Medicaid expansion. CAP also does not score multiple proposals in its plan — such as better care coordination and case management between Medicare and Medicaid, bundled payments, and competitive bidding — that have the potential to further reduce medical spending while simultaneously improving care quality.

3) “The CAP insists the only Medicare cuts would be in reimbursements to health care providers. Give us a break. That would lessen the quality of care for senior citizens. And the CAP plan calls for very real cuts in funding for Medicare beneficiaries, too.” The Senior Protection Plan is centered precisely on the belief that American seniors should not have to sacrifice their benefits in exchange for nominally reducing the deficit. This is in stark contrast to conservative proposals that aim to voucherize Medicare, transforming it from a “defined benefit” program into a “defined contribution” program without actually stemming the long-term upward trend in health care spending. Much of CAP’s proposed $385 billion in savings result from requiring drug companies to pay higher rebates for medications prescribed to “dual eligible” seniors who are on both Medicare and Medicaid. Furthermore, its proposed reductions to providers are precisely that — reductions in historical overpayments for certain type of care facilities and services — and the plan may actually result in significantly higher savings by moving towards more consumer-friendly, efficient practices such as prospective bundled payments, pay-for-performance measures, competitive bidding, and fraud prevention.

All told, the Senior Protection Plan is a serious proposal to reduce national health spending by addressing the actual factors driving costs — overpayments to providers and pharmaceutical companies, a poorly-coordinated system of care management, and inefficient modes of care delivery — rather than balancing the budget on the backs of sick, elderly, and poor Americans without even addressing the concerning trajectory of U.S. health care costs. By transforming the health care payment and delivery structure to be more logical and efficient, CAP’s proposal would lead to genuine savings by actually improving the way American health care works — without pushing costs onto Americans.

A new Urban Institute Health Policy Center study finds that premium support models, such as the proposed Romney/Ryan Medicare plan, are more likely to increase excess costs in the program.

According to the report, turning Medicare into a “premium support” program would encourage private insurers to draw less costly beneficiaries from traditional Medicare, leading to bloated per-beneficiary reimbursements. The study arrives at this conclusion by extrapolating existing trends in Medicare Advantage (MA), which has appreciably higher per-capita costs than traditional Medicare in 75 percent of counties serviced:

The debate around premium support misses the potential within Medicare’s existing structure to harness the market to promote efficiency and to do so on terms that do not put beneficiaries at risk for escalating costs…By design, MA plans have been paid above per capita costs for equivalent beneficiaries in traditional Medicare, and have used these payments to provide extra benefits that have successfully attracted more than a quarter of Medicare beneficiaries into private health plans.

Measures taken by the Affordable Care Act significantly reduce these extra payments. But they do not eliminate the long-standing bias favoring payment policies designed to attract private plans rather than to encourage lower costs. Our analysis of recent MA experience shows that most private plans are more, not less, costly than traditional Medicare. In fact, MA plans with the lowest costs have been found to serve only 10 percent of MA enrollees, despite their attractiveness in the current market, and they do not reflect the typical MA experience. Only in the highest cost areas for traditional Medicare do typical MA plans deliver care at lower costs than the public program. Even this difference is likely exaggerated, given continuing evidence of favorable risk selection (that is, disproportionate enrollment of low cost enrollees) in private plans. In short, overpayment, not lower costs, drives most of MA plans’ success in competing with the public program for enrollees.

The GOP defends premium support models like the Romney/Ryan plan by claiming that they will exert downward pressure on providers and encourage competitive bidding in the insurance industry. The logic is that seniors, whose Medicare subsidies would stagnate relative to the rising cost of health care, will look for the best deals on the market and thus force insurers to compete, lowering overall health care costs.

But as the Urban Institute report demonstrates, private insurance competition is unlikely to yield much in the way of savings since providers would simply adapt their business models to pick up the least costly beneficiaries. Studies have repeatedly shown that this is the exact kind of adverse selection and cost-shifting that occurs in Medicare Advantage plans. Transitioning traditional Medicare away from its current defined-benefit model into a premium support one would exacerbate the problem, leading to increased premiums, more overpayments to private insurers, and even higher costs in the health care industry.

In a Medicare Advantage hearing before the House Ways and Means Health Subcommittee on Friday, America’s Health Insurance Plans (AHIP) President Karen Ignagni confirmed that Obamacare is encouraging health care providers and private insurers to adjust their business models, just as the law was intended to do.

Although Ignagni noted that some of Obamacare’s provisions — such as its modifications to Medicare Advantage’s repayment structure — concern the insurance industry, she nonetheless acknowledged that the law has prompted health care providers, government agencies, and insurance companies to coordinate their care strategies while reexamining payment models:

REP. RON KIND (D-WI): Miss Ignagni, I know you and the plans that you represent in that, have been at the forefront when it comes to a lot of these changes and reforms. I think we need to be doing it on a parallel path between Medicare and the private plans out there. I don’t think doing it in isolation is going to work. Could you give us a quick update on what you’re seeing happening, especially in the private sector right now,with these types of delivery and payment reforms that are happening?

IGNAGNI: [...] There are very significant changes going on all across the country. [...] The story is about collaboration, health plans and clinicians collaborating inpatient-centered medical homes to bring more value to, and case management to, those with chronic illnesses, and taking those strategies into Medicare Advantage, Medicaid plans, SNIPS, and so on and so forth. [...] What is very significant now as a result of these strategies, health plans are showing in peer reviewed journal data that they’re working, with respect to re-admissions, emergency rooms, so we’re not finished by any means…but we have taken a major step and it clearly has to be the future, more coordinated care, more prospective payment, and partnerships between plans and clinicians and hospitals.

Watch it:

Coordinated case management is essential to providing patients with more efficient care. The more that hospitals, insurance providers, and clinicians cooperate and bundle their services and payments, the easier it becomes for American consumers to seek out flat-rate, quality care. As Ignagni mentions, there has been evidence in states such as Massachusetts that coordinated-care facilities treating dedicated patient pools for prospective, bundled fees (pre-determined flat rates) are accruing savings while maintaining high Medicare quality-metrics.

The Department of Health and Human Services (HHS) issued a news release today announcing that President Obama’s health reform law has successfully increased enrollment and decreased premiums in Medicare Advantage over the last two years. HHS Secretary Kathleen Sebelius noted that the program has seen a nearly 30 percent increase in enrollment and a 10 percent decrease in premiums since Obamacare’s passage, and projected that the positive trends will continue over the next year:

“Thanks to the Affordable Care Act, the Medicare Advantage and Prescription Drug programs have been strengthened and continue to improve for beneficiaries,” said Secretary Sebelius. “Since the law was enacted in 2010, average premiums have gone down, enrollment has gone up, and new benefits and lower drug costs continue to help millions of seniors and people with disabilities.”

For the third year in a row, the Centers for Medicare & Medicaid Services (CMS) used authority provided by the Affordable Care Act to protect beneficiaries from significant increases in costs or cuts in benefits. Access to supplemental benefits remains steady and beneficiaries’ average out-of-pocket spending remains constant.

Obamacare’s cost-containment provisions include phased payment cuts to providers in Medicare Advantage, part of a cost-saving strategy that Republicans mischaracterize as “robbing Medicare” despite the fact that it is intended to slow the program’s growth to prolong its solvency. Since the landmark health reform law’s passage, increased enrollment in Medicare Advantage and Administration officials’ stronger bargaining position with insurance providers have also helped lower the program’s costs.

HHS’s assessment of Obamacare’s impact on Medicare Advantage is confimed by health policy organizations like the Kaiser Family Foundation, whose June report found that the program’s enrollment rate rose by 10 percent while the average premium dropped by $4 during the first half of this year. Thanks to the ongoing implementation of the health reform law, low-income Americans should continue to see their Medicare Advantage premiums decrease over time, and they will soon have a wider array of quality-rated plans to choose from.

Mitt Romney and his running mate Paul Ryan continue to attack President Obama for “stealing” $716 billion from Medicare. The GOP presidential candidate says he will restore the cuts, despite the fact that Ryan included the savings in his FY 2013 budget.

But if Romney did stick to his plan to undo the billions cut from Medicare reimbursements to hospitals and insurers, it would make Medicare insolvent eight years sooner, from 2024 to 2016, and increase premiums for the program’s beneficiaries. And according to the New York Times, that goes against Romney’s promise that current beneficiaries or Americans within 10 years of eligibility would be affected by his plan to turn Medicare into a voucher system:

For those reasons, Henry J. Aaron, an economist and a longtime health policy analyst at the Brookings Institution and the Institute of Medicine, called Mr. Romney’s vow to repeal the savings “both puzzling and bogus at the same time.”

Marilyn Moon, vice president and director of the health program at the American Institutes for Research, calculated that restoring the $716 billion in Medicare savings would increase premiums and co-payments for beneficiaries by $342 a year on average over the next decade; in 2022, the average increase would be $577. [...]

“One can only wonder what’s going on inside their headquarters in Boston and among their policy people,” said John McDonough, the director of the Center for Public Health Leadership at Harvard. “But there are only two explanations: Either they don’t understand how the program works, which is hard to imagine, or there is some deliberate misrepresentation here because they know how politically potent this charge is.”

The Romney campaign disputes these facts, though. “The idea that restoring funding to Medicare could somehow hasten its bankruptcy is on its face absurd,” said Andrea Saul, a spokeswoman for the Romney campaign, according to the New York Times. And Romney has been particularly critical of cuts to Medicare Advantage, a private-policy alternative to Medicare that has consistently cost more. He claimed that Obama’s plan is “four million people losing Medicare Advantage” within the $716 billion of cuts.

But since Obamacare became law, Medicare Advantage enrollment has increased. Under his plan, Medicare would go back to paying for higher payments to hospitals and insurers. Romney claims that Obama “robbed” Medicare, but his plan would do more to harm seniors who depend on it for health care.