GNH Lumber February 2024

EDITORIAL: What’s special about Medicare Advantage?

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HOW’RE YOU FEELING? The question matters in Columbia County, which has one of the oldest populations in the state. Local officials say with a tinge of pride that the county is the oldest based on the percentage of people over age 60.

But what do those 60-year old whippersnappers know? Just wait till they’re 65 and enjoy the warm embrace of Medicare. Then they’ll know what old means. The Medicare program, introduced in the mid-1960s, permanently changed for the better what it means to get old or have a serious disability. Though far from ideal, Medicare has meant that all older citizens have help meeting medical expenses in their later years. Today Medicare is a much bigger, more comprehensive national health insurance program, not least because there are more older people living than ever before and because so many of us vote.

So it didn’t come as welcome news this week when MVP Health Care, a regional, not-for-profit health insurance company headquartered in Schenectady, announced it was ending several of its Medicare Advantage plans. Its cuts will affect over 19,000 of its customers–one in every four of those who have MVP Medicare Advantage policies. Those 19,000 MVP customers will have to find new plans to supplement their basic Medicare benefits. The new plans will cost more if customers want to stay with MVP.

In a release issued Tuesday, September 16 CEO Denise Gonick said the MVP cuts were “not fair to our seniors” and went on to blame federal government for a reduction in Medicare Advantage plan payments along with the government’s “sequestration” of funds (remember that term from when Congress played fiscal chicken with President Obama?) and other government cuts and taxes. She also said that “the cost of medical care continues to spiral upward.”

MVP has 700,000 members in New York and Vermont, so whatever is ailing the company might also affect other parts of the health insurance industry and perhaps healthcare overall. The release says MVP expects to operate at a deficit next year. That prospect begs the question: Is this a taste of what we can all expect as Obamacare takes effect?
Yes and No.

Oddly Obamacare, also known as the Affordable Care Act (ACA), is singled out just once in the MVP release, and then only in a brief statement that MVP “supports the goal of the ACA.” It’s not a mere oversight.

MVP is right that there have been cuts in federal payments to Medicare Advantage plans under Obamacare, but the cuts were needed because Medicare Advantage plans were being reimbursed by the federal government at 114% of the rate the government was paying for the other common type of insurance plan, fee for service. The difference is now down to about 106% in favor of Medicare Advantage plans. That undoubtedly hurts the bottom line of MVP and other insurers, but it’s hard to cast the government as the bad guy when the law is just trying to make sure the formula treats everyone equally.

MVP also says that Medicare Advantage plans keep seniors healthier. That may be the case since Obamacare took effect, but prior to that there was no evidence of better health outcomes from Medicare Advantage plans compared to fee for service. Now, with millions more people insured under the ACA, the statistics on the health of the whole U.S. are bound to improve and the market will decide.

But what about those “soaring” medical costs? Who among seniors doesn’t know a horror story about the cost of a prescription drug or a medical procedure? But it turns out that spending on healthcare nationwide has grown at a slower rate than the economy as a whole. Far from spiraling upward, the annual increase in healthcare spending–at 3.7%–is at a historical low and has been in that slow-growth pattern for four years. Sorry, there are no soaring cost increases.

MVP is right to cut programs that have become too expensive. That’s what businesses must do in competitive markets–even non-profits. It’s a sign of good management that the company is adapting to a changing insurance market by trimming some of its programs. And don’t worry about for-profit insurers; they’re turning a profit these days.

Obamacare critics miss the point when they blame government for the disruptions of insurance industry reform. The Affordable Care Act has created tremendous opportunities while improving the delivery of healthcare services. It’s a success and where it’s flawed, what we need are practical ideas to fix it.

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