Politics & Policy

Squeezing Medicare Advantage

Obama slashes a private-sector approach while decrying cuts everywhere else.

The Obama administration is sparing no effort to scare people about the automatic spending cuts that are scheduled to hit this Friday. 

But the Obama administration doesn’t want to talk about its own devastating cuts in Medicare. On Friday, February 15, the Centers for Medicare and Medicaid Services (CMS) announced $716 billion in cuts over the next ten years. Instead of being put toward the debt, most of the money will go toward a new entitlement: Obamacare’s vast expansion of coverage for the uninsured. 

Where Obama is cutting is telling. At least half of the savings will come out of Medicare Advantage, under which a full 28 percent of seniors buy privately managed health insurance that often includes added benefits such as vision and dental care or chronic-illness management. In exchange, patients agree to stay within a medical network, which helps insurance companies manage their costs. The program is most popular with Hispanics and African Americans. A study by CMS found that 38 percent of Hispanics and 31 percent of African Americans on Medicare were enrolled in Medicare Advantage, compared with 27 percent of whites.

Despite the fact that the program reports high levels of consumer satisfaction, liberals are determined to cut it, even if it means driving millions of seniors back into traditional, one-size-fits-all Medicare. “The administration really has it in for Medicare Advantage plans,” says Tevi Troy, who was a deputy secretary of the Department of Health and Human Services under George W. Bush. “Democrats won’t even consider relatively modest reforms of Medicare, such as raising the eligibility age from 65 to 67. But they do want to restrict seniors’ choices by curtailing private plans competing in Medicare.”

To add cynicism to injury, the Obama administration postponed the Medicare Advantage cuts until after the 2012 election, using a slush fund to tide the program over and conceal the true costs of Obamacare to seniors.

The cuts are so much larger than expected that health-care stocks tanked across the board after they were announced. Managed-care analyst Carl McDonald told clients in an e-mail that Obamacare’s reducing payments to private-plan providers “would turn almost every plan in the industry unprofitable.” The Congressional Budget Office projects that the payment cuts will result in an enrollment drop of 3 million for Medicare Advantage.

CMS will come under pressure to revise or reverse the cuts before they are made final on April 1. Some adjustments are possible, but the law will continue to mandate a squeeze on Medicare Advantage. President Obama promised Americans in 2009 that “if you like your health-care plan, you can keep your health-care plan.” The reality is that not only are millions of Americans likely to lose health-care coverage from their employers, but millions more will lose the Medicare Advantage plans they’ve grown used to. 

Some Democratic politicians worry privately about the impact Medicare Advantage cuts will have on their senior constituents. In 2009, then-governor of Oregon Ted Kulongoski went public with his concerns, writing to the Obama administration to protest its plans to “scale back Medicare Advantage.” In Oregon, 42 percent of all seniors are enrolled in private Medicare plans, and Kulongoski noted that “they play an important role in providing affordable health coverage.” He emphasized that the plans have significantly reduced hospital-admission rates for patients with chronic diseases.

Seniors are now going to confront a new chronic condition — politics. Unless it is changed, Obamacare will relentlessly restrict the choices seniors have by forcing them into traditional Medicare with all of its attendant contradictions, restrictions, and waste. Medicare Advantage has its problems, but they could be surgically addressed. Instead, the bureaucrats running Obamacare are set on slowly starving the program. By focusing solely on the politics of the sequester, the media are ignoring the Obama administration’s bigger, more brazen threat to vulnerable American seniors.

— John Fund is a national-affairs columnist for NRO.


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