NCPA - National Center for Policy Analysis


July 26, 2007

Some critics of privately run care have never been happy with a program within Medicare -- called Medicare Advantage -- that allows patients in the system to receive care through privately administered health insurance.  Now, the goal seems to be to turn public sentiment against it, says Leslie V. Norwalk, former acting administrator of the Centers for Medicare and Medicaid Services.

The main criticism brought up is that Medicare Advantage "overpays" private insurance plans for the same or fewer benefits to other Medicare beneficiaries. The implication is that Medicare Advantage sponsors line their pockets with federal funds and beneficiaries are duped into signing up for the program.

This is an incendiary charge that can be disproved, says Norwalk:

  • Payments at current levels are critical to providing needed health-care benefits for millions of elderly, rural and disabled Medicare beneficiaries who depend on this program.
  • A combination of competitive bidding and federal incentives makes it possible to provide care at lower cost to beneficiaries.
  • Private plans that successfully bid to be part of the Medicare Advantage are required by law to use the savings they create to cut costs for patients, including reducing premiums and paying for additional covered services not available in the basic Medicare program.

These aren't lavish subsidies -- they pay for real benefits for real people, says Norwalk. And they are especially important for people who have incomes higher than typically allowed under Medicaid, but not high enough to afford a "Medigap" policy -- insurance that pays for what Medicare doesn't.

Source: Leslie V. Norwalk, "Advantage: Patients," Wall Street Journal, July 26, 2007.

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