Critical Condition

New York Times Reluctantly Notes Seniors Losing Medicare Benefits, Denies It’s a Problem

This morning’s editorial in the New York Times notes that “some of the private health plans that participate in Medicare will be dropping out next year, but don’t blame health reform.” Indeed, according to the Times, “the Medicare Advantage market remains strong.” Well, maybe — but that’s only for 2011.

What the Times avoids is the fact that Obamacare’s Medicare Advantage cuts don’t start until 2012, after which time private plans will be collapsing left, right, and center. A recent analysis by Robert A. Book and James C. Capretta forecasts that 7.4 million seniors will lose their benefits by 2017.

Obamacare froze Medicare Advantage benchmarks for 2011 at the 2010 level, which invites the question of why some plans are already bailing out. At a conference a few days ago, an employee of the Center for Medicare & Medicaid Services (CMS) recently wagged a finger at me for trafficking the news that Massachusetts’s second-largest carrier, Harvard Pilgrim, was dropping out of Medicare Advantage.

The finger-wagging Obamacrat noted that Harvard Pilgrim’s First Senior Freedom Plan is a Private Fee-For-Service (PFFS) Medicare Advantage plan. Such plans are suffering from changes enacted before Obamacare, and I myself have criticized them a study published last year.

As that study noted, the most important advantage of Medicare Advantage is that insurers negotiate their own networks with providers, instead of using the government’s Soviet-style fixed-price schedules, which have led a number of providers to cut back or cease providing care to seniors. The so-called “unjustified subsidies,” which the Times and the Obama administration attack, actually reduce the “hidden tax” (or cost shift) that Medicare imposes on the privately insured. This hidden tax results from providers increasing their fees to private payers to cover underpayment from traditional Medicare.

Medicare Advantage PFFS plans, however, did not have to negotiate networks with providers, but “free rode” on the government’s fee-schedule, so they do not provide as great a benefit as other Medicare Advantage plans. Nevertheless, they protected seniors from Medicare’s unlimited out-of-pocket costs, so nobody should look at their disappearance with satisfaction.

Seniors who retain Medicare Advantage plans in 2011 should not be fooled into thinking that they have dodged Obamacare’s cuts to Medicare. Unless Obamacare is repealed, their time will come.

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