The Medicare Gravy Train

The Medicare Gravy Train

Humana and other insurance industry giants have been fomenting a scare campaign among seniors to keep the industry’s wasteful taxpayer subsidy going.

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All the talk about Medicare cuts for seniors obscures what’s really at stake in the Medicare fight: whether 10 million beneficiaries should continue to get gym memberships, eyeglasses and other goodies from Medicare Advantage plans, which are being richly subsidized by the government and helping to put the entire Medicare system at risk. President Obama has been consistent in his message that he wants to cut some $113 billion in overpayments to Medicare Advantage plans, private market options that let beneficiaries get their Medicare benefits from private carriers instead of the federal government. Those plans cost the government on average 14 percent more than it costs to provide the same benefits to the other 35 million Medicare beneficiaries, speeding up the day that the Medicare hospital trust fund will run out of money. This wasteful government subsidy of the private health insurance industry threatens the viability of Medicare for everyone–current beneficiaries and those almost reaching Medicare age.

Sellers of Medicare Advantage plans that have ridden the government gravy train for the last few years are waging a battle royal to persuade members of Congress the gravy should continue flowing their way. One of the chief beneficiaries of government generosity is Humana, which has grown a huge Medicare Advantage market for itself. Humana and other sellers have begun to tap their grassroots: the members who have these plans. A few weeks ago Humana sent a letter to members claiming that bills moving through Congress would hurt them and urged them to contact their Congressional representatives. The Centers for Medicare and Medicaid Services (CMS) cried foul and asked Humana to stop sending such letters. It’s a good bet, though, that Humana and others will find other ways to keep Medicare Advantage plans around.

For more background, see Trudy Lieberman’s 2007 article, “The Medicare Privatization Scam“.

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