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MA Windfall Payments: A Source of Help for Low-Income Children And Seniors? Presentation to the TriCaucus Ron Pollack Families USA May 11, 2007

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Page 1: Medicare Advantage Plans

MA Windfall Payments: A Source of Help for Low-Income Children

And Seniors?

Presentation to the TriCaucus

Ron PollackFamilies USA

May 11, 2007

Page 2: Medicare Advantage Plans

Medicare Advantage Plans

How much do seniors fromcommunities of color

rely on MA plans?

Page 3: Medicare Advantage 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

Page 4: Medicare Advantage Plans

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

Page 5: Medicare Advantage Plans

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

Page 6: Medicare Advantage Plans

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

Page 7: Medicare Advantage Plans

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

Page 8: Medicare Advantage Plans

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.

Page 9: Medicare Advantage Plans

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

Page 10: Medicare Advantage Plans

Bush Administration and Republican Congressional Leaders

Why so intent on protecting windfall overpayments?

Two words . . .

P R I V A T I Z EMedicare

Page 11: Medicare Advantage Plans

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

Page 12: Medicare Advantage Plans

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

Page 13: Medicare Advantage Plans

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

Page 14: Medicare Advantage Plans

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

Page 15: Medicare Advantage Plans

Why Private MA Plans Cost So Much

Profits to insurance companies

Agents’ fees

Marketing and advertising to lure customers to their plans

Page 16: Medicare Advantage Plans

What’s the Alternative?

Page 17: Medicare Advantage Plans

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

Page 18: Medicare Advantage Plans

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%

Page 19: Medicare Advantage Plans

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

Page 20: Medicare Advantage Plans

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%

Page 21: Medicare Advantage Plans

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

Page 22: Medicare Advantage Plans

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

Page 23: Medicare Advantage Plans

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?