MA Windfall Payments: A Source of Help for Low-Income Children
And Seniors?
Presentation to the TriCaucus
Ron PollackFamilies USA
May 11, 2007
Medicare Advantage Plans
How much do seniors fromcommunities of color
rely on MA plans?
A Lot, According to Widely Quoted Study
Professors Atherly and Thorpe say past research showed:
“40% of African Americans and 52.9% of Hispanic beneficiaries
enroll in these [MA] plans . . .”
“36% of Medicare eligible beneficiaries with incomes below $10,000 . . .
enrolled” in these private plans
without Medicaid or employer coverage
without Medicaid or employer coverage
BUT . . . Study Excludes Half of Minority and Low-Income Seniors
Those with Medicaid or employer coverage were left out. How many is that?
45% of Hispanic seniors
54% of African-American seniors
56% of all Medicare beneficiaries with incomes < $10,000
Source: AHIP 2007
Traditional Medicare: Still the Choice of Seniors
MA Traditional Medicare
Hispanic seniors 25% 75%
Asian seniors 14% 86%
African-American seniors 13% 87%
Low-income seniors 10% 90%
Source: AHIP 2007
3X
6X
8X
9X
Whose Advantage?
Windfall Payments = Added cost per person, compared to traditional Medicare
MedPAC estimates average windfall payments for all MA plans are 12% For fast growing private FFS plans, average windfall payments are 19%
CBO: Excess payment over 5 years (2009-2013)$54 billion
CBO: Excess payment over 10 years (2009-2018) $149.1 billion
Do Windfall Payments = Extra Benefits?
Some portion goes to enhance benefits and reduce beneficiaries’ out-of-pocket costs
BUT
Minimal regulation
No oversight
No limits on profiteering
Where Does the Windfall Go?
“At UnitedHealth, Goldman Sachs estimates Medicare Advantage will account this year for 11 percent of net income.”
“Goldman Sachs estimates that Humana, a leader in the field, will earn 66 percent of its net income from Medicare Advantage this year.”
Michael B. McCallister, President and CEO of Humana, July 31, 2006: “Stronger results in our Medicare Advantage, commercial, and TRICARE businesses combined to produce second-quarter earnings that significantly surpassed our expectations. We’re on track to grow revenues by 50 percent this year . . . and expand our Medicare business into a long-term growth engine.”
Source: Wall Street Journal, April 30, 2007 and Humana 2006.
What Do Overpayments Mean for Medicare?
Increase premiums for people in traditional Medicare.
Threaten Medicare’s financing, encouraging program cutbacks.
Hasten insolvency of Part A (inpatient) trust fund by 2 years.
Increased annual premiums by $24 this year.
Will have increasing impact on premiums each year.
Source: Richard Foster, CMS 2007
Bush Administration and Republican Congressional Leaders
Why so intent on protecting windfall overpayments?
Two words . . .
P R I V A T I Z EMedicare
The Conservative Game Plan
Privatize Social Security – failed (so far)
Privatize Medicare Part D – succeeded: only private plans allowed to run Part D Medicare prohibited from bargaining for better drug prices
Privatize traditional Medicare – outcome unclear
Think We’re Kidding?
Newt Gingrich:
“Now, we don’t get rid of [traditional Medicare] in Round 1 because we don’t think that’s politically smart. But we believe it’s going to wither on the vine because we think people are voluntarily going to leave it . . . .”
Source: Gingrich 1995
No, We’re Not Kidding
Ways & Means Chairman Thomas in 2003:
“Some of our friends on the other side of the aisle are saying that if [the MMA] becomes law, it will be the end of Medicare as we know it. Our answer to that is, we certainly hope so.”
Source: New York Times, June 26, 2003
A Brief History of Medicare Advantage
Early 1980s: Private plans introduced to Medicare to save money.
1983 to 1997: Plans paid at 95% of traditional fee-for-service rate.
GAO: plans are overpaid at 95%
1997 to 2003: Congress changes funding formula.
MedPAC: payment rate is 103% of traditional Medicare
2003 and on: Congress changes payments to MA plans. 2004-2005.
MedPAC (2004-5): payments 107% of traditional fee-for-service MedPAC (2006-7): payments now 112% of traditional fee-for-service
Why Private MA Plans Cost So Much
Profits to insurance companies
Agents’ fees
Marketing and advertising to lure customers to their plans
What’s the Alternative?
Improve Protections for Low-Income Seniors
Improve outreach so more low-income seniors get Medicaid and Medicare Savings Programs (MSPs)
Raise or eliminate assets tests that disqualify low-income seniors from MSPs
Simplify applications and re-enrollment for MSPs
Percent of Low-Income Seniors, by Race
0 5 10 15 20 25
Hispanic
API
African American
White
19.9%
Source: Kaiser Family Foundation 2007
23.2%
12.6%
7.9%
Investing in America’s 9 Million Uninsured Children
3/5 are racial and ethnic minorities
2/3 have incomes < 200% of poverty ($34,340 for family of 3)
8 in 10: at least one parent works
Source: Families USA
0 5 10 15 20 25
Hispanic
API
African American
White
Percent of Children Uninsured, by Race
Source: Census 2005
21.9%
12.5%
12.1%
7.2%
What Fiscal Commitment Do We Need?
CBC, CHC, and CAPAC request:
House and Senate Budget Resolutions: $50 billion new money But big obstacle: Pay-Go
$60 billion new money over next 5 years for SCHIP
Meeting Pay-Go Requirements
Finance, Energy & Commerce, and Ways & Means Committee leaders agree:
Can’t reach $50+ billion pay-go amount with only one source
Need combination of sources, such as:
Increased tobacco tax
Improved tax collection measures (e.g. Rep. Emanuel proposal)
Windfall MA overpayments
Key questions to ponder:
Is it better to overpay MA insurers . . . OR
Is it better to overpay MA insurers . . . OR
Is it better to overpay MA insurers . . . OR
Is it better to overpay MA insurers . . . OR
Stop Medicare’s privatization?
Subsidize poor seniors?
Reduce premiums?
Cover uninsured kids?