Medicare Cuts
There has been lots of talk lately about Medicare cuts in the health reform proposals and not a lot of explanation for what is going on. Wonks Anonymous is a bit sympathetic because the situation is a little complex and needs a paragraph or two of explanation. But then that is what you, dear reader come to Wonks Anonymous for.
The issue is almost all summed up in two words Medicare Advantage. From the beginning, Medicare allowed its beneficiaries to choose coverage from a private insurer or health maintenance organization. Medicare pays private insurer/provider groups an annual fee for each enrollee. Until recently the fee was equal to the average cost that Medicare paid to provide health care in the area.
Private insurers could make money on this if they negotiated favorable contracts or provided more effective and less costly care. Cost control is helped along by the fact that they can pay emergency claims from non contracted providers at Medicare rates. They can't get away with too much because people who enroll in their plans can change plans or opt for no plan once a year.
When the prescription drug bill was passed in the early naughties the Bush administration insisted on a major change in payments for Medicare Advantage plans. Instead paying average cost, Medicare was instructed to pay private insurers a 15% bonus for each enrollee.
Obama and the Congressional Democrats want to go back to the old system.
O.K. that was four paragraphs but they were short.
What is up? Our friends in the free market camp are fond of explaining that the government cannot run anything because it is too inefficient and too costly. At the same time they have arranged to transfer business that Medicare was doing perfectly well to the private sector and to pay the private sector a 15% markup, just for being private.
Which is not really surprising, considering that the Bush Administration also privatized a great part of the Iraq war and got worse results at higher costs. This is Blackwater/Bechtel budgeting at its best.
The only seniors who will suffer from these cuts are the senior managers of the major insurance companies.
The issue is almost all summed up in two words Medicare Advantage. From the beginning, Medicare allowed its beneficiaries to choose coverage from a private insurer or health maintenance organization. Medicare pays private insurer/provider groups an annual fee for each enrollee. Until recently the fee was equal to the average cost that Medicare paid to provide health care in the area.
Private insurers could make money on this if they negotiated favorable contracts or provided more effective and less costly care. Cost control is helped along by the fact that they can pay emergency claims from non contracted providers at Medicare rates. They can't get away with too much because people who enroll in their plans can change plans or opt for no plan once a year.
When the prescription drug bill was passed in the early naughties the Bush administration insisted on a major change in payments for Medicare Advantage plans. Instead paying average cost, Medicare was instructed to pay private insurers a 15% bonus for each enrollee.
Obama and the Congressional Democrats want to go back to the old system.
O.K. that was four paragraphs but they were short.
What is up? Our friends in the free market camp are fond of explaining that the government cannot run anything because it is too inefficient and too costly. At the same time they have arranged to transfer business that Medicare was doing perfectly well to the private sector and to pay the private sector a 15% markup, just for being private.
Which is not really surprising, considering that the Bush Administration also privatized a great part of the Iraq war and got worse results at higher costs. This is Blackwater/Bechtel budgeting at its best.
The only seniors who will suffer from these cuts are the senior managers of the major insurance companies.
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